Helping Translation Companies Grow 2008 Conference Doug Lawrence [email protected] Tel: +44 (0) 1562 74 66 32 Mob: +44 (0) 77 11 555 602 [email protected]

Helping Translation Companies Grow

2008 Conference

Doug [email protected]: +44 (0) 1562 74 66 32Mob: +44 (0) 77 11 555 602 Preferred Training

PartnerSelling Translations and the arrow on target device are is Trade Marks of Amicus TransTec Limited

Inflation everywhere – except in our pricing.Does it matter and what can we do about it?

ATC annual conference 2008

Survive and prosper in the tough times strategies for the translation industry

Confederation of British Industry Headquarters London, 25th September 2008

Our Knowledge, Your Control


2008 Conference

Overview

• Inflation– general rise in the level of prices of goods and

services over a period of time (price inflation)– Our industry has only seen cost inflation

• Translation industry pricing inflation• What can we do about downward pricing

pressures?• What ‘high’ pricing translation and interpreting

companies do

Copyright © Amicus TransTec Limited 2008 2


2008 Conference

Cumulative inflation*

Year UK Inflation* Cumulative

2000 Baseline Baseline

2001 0.7% 0.7%

2002 2.9% 3.6%

2003 2.8% 6.5%

2004 3.5% 10.2%

2005 2.2% 12.7%

2006 4.4% 17.6%

2007 4.0% 22.3%

2008 4.1% 27.4%


Average 3.4%

*”Headline” Inflation figures from http://www.moneyextra.com/dictionary/uk-inflation-history-003663.html


2008 Conference

Services Producer Price Index Growth*


*http://www.statistics.gov.uk/statbase/product.asp?vlnk=7351 Office of National Statistics

32 sectors average contribution of

3.13, Translation & Interpretation 0.04


2008 Conference

Services Producer Price Index Growth*


*http://www.statistics.gov.uk/statbase/product.asp?vlnk=735T & I = Translation and Interpreting

Inflation figures from http://www.moneyextra.com/dictionary/uk-inflation-history-003663.html

UK Inflation 2007 1.9%, Growth 2.2% (Economist World in

Figures 2008)

27.4%

15.2%

3.1%

22.3%


2008 Conference

Office of National Statistics Source Document



2008 Conference

Figures on which the chart was based


Inflation Average T&I SPPI

1996 -1 -51997 -0.5 -1.81998 0 -0.81999 0.5 0.32000 0.0 0 02001 0.7 2.1 -0.62002 3.6 4.2 0.32003 6.5 6.5 1.72004 10.2 8.5 2.42005 12.7 11.6 2.12006 17.6 14.4 2.92007 22.3 15.2 3.12008 27.4


2008 Conference

What does this mean?

• We are approximately 25% cheaper than we were 8 years ago

• Our costs however should have risen in line with inflation

• The industry cannot raise its prices so– individual companies will also find it difficult– companies will be unable to raise prices paid to

Freelancers• Freelance utilisation becomes more important• Some will seek direct clients

• Technology can make you more efficient– There are hidden costs with technology



2008 Conference

Translation Price Inflation Forces



2008 Conference

What can we do about downward pricing pressure?

Cause Minimisation suggestions

Competition Go niche, compete harder

Commoditisation Client self interest, negotiation, testimonials

Technology Embrace or ignore (compromise is not a strategy)

Clients’ efficiencies Understand clients’ efficiency measures

Growth (winning business) Lower ‘price’ business is easier to acquire

Client Retention Raise prices slowly, use tools/memories selectively, active account management

Client Acquisition Targeted rather than ad-hoc

Lack of differentiation Managing client’s perception

Remuneration of sales people Profit rather than revenue?



2008 Conference

What can we do about downward pricing pressure?

Cause Minimisation suggestions

Client understanding of ‘quality’ Client self interest, negotiation, testimonials

Difficulty of scoping Negotiation

Nibbling / unwillingness to increase project price

Negotiation, scoping

Negotiation skills Training, self development

Unit rounding resistance Set prices on larger units, raising prices a little at a time

Profit is a key performance indicator for production

Measure sales on profit – develop ratios / rules of thumb – do you want to grow revenue/profit/market share?



2008 Conference

Translation industry competitive positioning*


Threat of new market entrants

•Low barrier to entry•International•Clients can switch easily•New entrants can see market as ‘ripe’•Supplier maturation, e.g. Freelance to single language vendor

Power of suppliers

•Skills vs. availability

Existing competitive rivalry between suppliers

•Many competitors, mostly small•Steady growth industry•Common services•Low differentiation

Bargaining power of buyers

•Wide buyer choice•Concentrated power with large buyers•Can specify time and sometimes price•Translation is often ancillary to main revenue earners

Threat of substitute products

•Machine translation perception•Matching technology e.g. content management systems•Strategic e.g. Google•Process automation and simplifying technologies reducing need for added value services

*Porter’s 5 Forces http://en.wikipedia.org/wiki/Porter_5_forces_analysis


2008 Conference

Is there any good news?

• Gross profit margins seem to be maintained at just over 50%*

• Net profit over 13%*• There has been real inflation in the last 8

years, despite ‘published’ figures, can we now increase our prices as inflation is out in the open?


*Source Merlin Scott


2008 Conference

What do higher pricing translation companies do?

• They– refuse low margin work– provide more in-house added value services– compete for more complex projects– sacrifice revenue growth for profit– have long term clients and organic growth– can be niche suppliers highly integrated into client industry– successfully automate and invest in technology for their own

as well as clients’ efficiencies– understand their costs– avoid tenders

• They also tend to be older companies with high staff benefits … but even they have not managed to raise their prices in line with inflation



2008 Conference

Without conferring, where would each of you place your company on the orientation spectrum?

1 2 3 4 5 6 7 8 9 10

SalesProduction

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2008 Conference

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References / bibliography• Office of National Statistics

http://www.statistics.gov.uk/statbase/product.asp?vlnk=7351 • Inflation figures from http://www.moneyextra.com/dictionary/uk-

inflation-history-003663.html• Rates Surveys:

– ITI (http://www.iti.org.uk/indexMain.html )

– CIoL (http://www.iol.org.uk/membership/merchandise.asp#publications )

• Source Merlin Scott Associates Limited• Economist World in Figures 2008• Porter’s 5 Forces

http://en.wikipedia.org/wiki/Porter_5_forces_analysis



2008 Conference

Questions?

Doug [email protected]: +44 (0) 1562 74 66 32 Mob: +44 (0) 7711 555 602

18Copyright © Amicus TransTec Limited 2008

Documents

Helping Translation Companies Grow 2008 Conference Doug Lawrence [email protected] Tel: +44 (0) 1562 74 66 32 Mob: +44 (0) 77 11 555 602 [email protected]