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The Basic Principle of My Rate Structure: One rule in economics is that a producer's unit cost will normally fall as output rises. This gives producers an incentive to provide customers with a discount on large orders, and customers often expect such discounts. This rule may apply for large, full-service translation companies, but it does not apply for individual or boutique translators, whose translation supply capacity is much more limited. Boutique translators compete using a strategy which differs from that of translation agencies. We can not provide translation services in every field and language and routinely deliver large assignments of all types under pressing deadlines. Rather, as the expression "boutique" implies, we leverage our unique strengths and specialized experience by focusing on a particular market niche, within which we aspire to provide the best translation services available in the market. In short, we compete on quality, not on quantity, unlimited availability or ancillary services. Unlike large, full-service translation agencies, boutique translators are more inclined to offer lower rates not in response to the size of individual translation assignments but to the consistency or regularity of those assignments. This is the basic principle underlying my rate structure and policies.
Overview: I offer my translation services under a Monthly Translation Agreement or a Freelance Translation Agreement. The Monthly Agreement is intended for clients who assign translation work every month. The Freelance Agreement is intended for clients who do not assign translation work every month. Translation rates under each type of agreement are summarized in the table on the right. As shown in the table, the charge for translation of text is calculated on a per-character basis. Hourly work (translation of text in .xls and .ppt files) is calculated by regarding 15 minutes (0.25) as 140 characters under the Monthly Agreement and as 195 characters under the Freelance Agreement. Under a Freelance Agreement, the charge for translation of text is calculated at a flat rate of 20 yen per character. Under a Monthly Agreement it is calculated according to the formula A=14b+17(t-b). This formula is explained in much further detail below. Although the rate structure of the Freelance Agreement is substantially in line with conventional billing methods in the translation industry, the rate structure of the Monthly Agreement is unique in the translation industry and may therefore seem somewhat puzzling at first sight. However, it is actually much simpler than it may appear at first sight, and its logic and rationale will become clear from a careful reading of the explanation given below. The unconventional rate structure of the Monthly Agreement is designed with two main goals in mind, namely: (1) to provide an incentive and reward to clients who make translation assignments on a consistent basis each month, and (2) to give clients as much freedom and control as possible over their own translation costs.
Rate Structure of the Monthly Agreement: As noted in the above table of rates, the per-character rate under the Monthly Translation Agreement is calculated according to the formula A=14b+17(t-b), where A = the gross amount of the monthly invoice, b = the base volume of Japanese characters (kana plus kanji) which the client wishes to assign each month (set freely by the client within the range >=1,000<=10,000), t = the total characters in all assignments delivered within the month. (The total number of characters t includes (1) the number of characters in text plus (2) the number of "hour-equivalent characters," or the number of hours in hourly work (if any) multiplied by 560 (in increments of 0.25). In this way, hourly work is converted into an equivalent number of characters and added to the text character count.) Likewise, t-b represents any extra volume over and above b which the client might wish to assign from time to time. The figure on the right plots the average per-character translation rates resulting from the formula A=14b+17(t-b) when b (base volume) equals 2,000 characters and t-b (extra volume) equals values from zero up to 8,000. The curve intersects the horizontal axis at 2,000, where Extra Volume = zero (t-b=0). (Data points are shown in increments of 500.) If a client wanted to have a monthly report of about 2,000 characters translated each month, and if the client were to set b at 2,000 and assigned no other extra translation exceeding b, then the per-character rate would be 14 yen per-character. In this case, there would be no extra translation (t-b=0), so the total average per-character rate would be the same as the per-character rate for the base volume (14 yen). If the same client were to assign an extra 500 characters one month so that b=2,000 and t-b=500, then the average overall per-character rate for that month would rise to 14.60 yen (14*2000 + 17*[2,500-2,000] = (28,000+8,500)/2,500 = 14.60).
Freedom to Reset the Base Volume b: If the increase in Total Volume t were permanent, a client could just reset b to 2,500. The per-character rate would then fall back to 14 yen. The lower figure shows that raising b in this way has the effect of shifting the per-character rate curve down. Thus, the rate structure ensures that clients can enjoy the lowest rates by minimizing t-b, or by minimizing short-term variations in the flow of extra volume (t-b). Variations in base volume need not result in a higher rate since b may be adjusted. Clients who are most able to regulate the flow of assignments in this way will benefit most from my rate structure. However, even if extra volume is assigned from time to time, the per-character rate will rise only marginally and never approach the freelance rate of 20 yen. Please note that my ability to accommodate steep increases in b is subject to my prevailing workload. I may not be able to accommodate large, sudden increases in b. Also, any change in b becomes effective from the following month. In principle, clients may change b up to twice a year.
Two Additional Modifications Enhance Client Flexibility and Control: The above model of my rate structure is somewhat simplified because it is intended to introduce the basic formula used in computing the total cost of translation assignments under the Monthly Agreement. As explained below, however, I introduce flexibility into the system in two ways in order to give clients as much control as possible over their own translation costs. In reading the following explanation, please note that any and all the necessary calculations are performed automatically on each monthly invoice, which contains an "Assignment Management Indicators" section updated each month. As noted below, these indicators make it easy to monitor and manage the flow of translation assignments with a view to minimizing translation costs.
(1) The 15 Percent Margin: The first modification is the 15% margin. Under the Monthly Agreement, the total number of characters assigned each month t may fall up to 15% below b. This creates a 15% margin within which t may fluctuate while the per-character rate remains unchanged at 14 yen. When setting b, clients can make use of this margin to minimize the per-character translation rate. The box on the right provides an example to show how the 15% margin works. In this case, a client wishes to have a monthly report of about 2,000 characters regularly translated each month. The client also wishes to assign translation of other extra materials from time to time and expects the average number of characters in these materials to be about 1,000. Since the number of characters in the regular report will probably vary somewhat and the number of characters in the other materials will as well, the best strategy will be to split the 15% margin above and below the total average number of characters which the client expects to assign each month, or in this example, 3,000. This will be the client's "target value" for t from month to month. As explained in the box, b can then be easily calculated such that this target value falls at the median (m) between the top and bottom of the 15% range. As shown in the box, the formula is b=2m/1.85. If m=3,000, then b will be 3,243. The bottom of the 15% margin will then be 0.85b, or 2,756. This level (0.85b) represents the Monthly Agreement Qualifying Value (q), or the number of characters to be assigned by a client in order to qualify for the lower rates under the Monthly Agreement. (This is explained in more detail below. Also, if the client should wish to set b at the very minimum of 1,000, then b=1,000, q=850, and m=925.) These values, then, mark the top and bottom boundaries of the 15% margin within which t can fluctuate. If b is set to 3,243, the number of characters the client assigns each month (t) can vary up to 486 characters with the per-character rate remaining unchanged at the lowest rate of 14 yen. In the figure on the lower right, the median (m) of the 15% margin is indicated by the light green line, the top of the margin is indicated by the blue line, and the bottom of the margin by the red line. The blue line represents the value at which the client has set b, calculated as indicated above. The red line indicates the Monthly Agreement Qualifying Value (q). So long as the client ensures that the number of characters assigned for translation each month (t) falls within this range, translation will always be charged at the lowest rate of 14 yen and the client will continue to qualify for the lower Monthly Agreement rates. If t sometimes exceeds b (meaning that t-b is greater than 0), only the excess portion or Extra Volume exceeding b will be charged at the higher rate of 17 yen. In the histogram on the right, the total number of characters assigned in the month (t) is indicated by the height of the columns, Base Volume (or b) is indicated by the dark blue portion of the columns, and Extra Volume (t-b) is indicated by the light blue portion. The heights of the columns vary. However, so long as the top of the columns (which indicates the level of t for the month) remains below the blue line (b), the per-character rate is always the lowest rate of 14 yen. Thus, t may be as many as 3,243 characters before any excess is charged at 17 yen. As long as the value of t remains above the red line, t is above the Qualifying Value of t (i.e., not more than 15% below b). Another benefit of the 15 percent margin is that clients can use it to reduce the cost of any extra work. If, as in this example, the regularly assigned materials amounted exactly to 3,000 characters as expected and the client wished to assign an extra report of 1,000 characters, 243 characters of the extra report would fall below b (3,243-3,000=243). Thus instead of costing 17,000 yen (1,000 x 17), the extra report would cost 16,271 yen (243*14) + (757*17) = 3,402+12,869=16,271. Incidentally, the total charge for the month in this example before tax would be 58,271 yen (45,402+12,869=58,271) and after tax would be 52,322 yen (58,271-5,949=52,322). But under a freelance contract (or average translation market rates), the charge would be 80,000 yen. Organizations which issue regular materials such as monthly, biweekly or weekly reports, bulletins or articles can very easily keep t-b to a minimum or even at zero, thus minimizing their translation costs. Setting b at the best level will be more of a challenge for clients wishing to use b to cover translation assignments issued on an irregular basis. As explained below, however, I have designed my rate structure to help such clients overcome this problem.
(2) Use of Moving Average to Measure t: If the total number of characters (t) falls below q (i.e., more than 15 percent below b) in a given month, the per-character rate will remain 14 yen. I do not charge any minimum fee if t falls below q from time to time. One reason flexibility is required is that some months are shorter than others, and the distribution of business days on which certain regular reports can be assigned and delivered may result in assignments being greater in one month and correspondingly fewer in the next. Accordingly, in determining when t has fallen below q, I use the 3-month moving average of t (3MMA[t], or (tM1+tM2+tM3)/3). As noted above, it is natural to assume that t may fall below q from time to time, and even for two consecutive months. Monthly Agreement clients will continue to enjoy the lower rates under the Monthly Agreement so long as the 3MMA[t] does not fall below q for three consecutive months, or so long as (tM1+tM2+tM3)/3=>q. As noted below, this is a qualifying condition for use of the Monthly Agreement. As noted above, the lower rates under the Monthly Agreement are available only to clients who make translation assignments every month on a regular basis. Since 3MMA[t] is a moving average, t will have to decline substantially for several months before this happens. But if the 3MMA[t] does fall below q for two consecutive months, it will be necessary to either lower b or raise t in order to prevent it from doing so for a third month. This will be necessary to continue using the Monthly Agreement. As noted below, my monthly invoices provide numerical guidelines which enable clients to easily monitor the flow of assignments and use my rate structure to minimize their translation cost.
Easy Workflow Management: Please note that conforming to the requirements of the Monthly Agreement rate structure does not require clients to make any calculations whatever, nor to engage in any tedious monitoring work. As noted below, my monthly invoices perform all the necessary calculations and provide simple numerical and graphical guidelines which make it very easy for clients to follow the Monthly Agreement rate structure and use it to minimize their translation costs from month to month. Once clients understand how these simple guidelines work, they will easily be able to:
Table and Graph of Assignment Management Indicators: A set of Assignment Management Indicators in the form of the table and graph set forth below is sent to clients together with monthly invoices at the close of each month. The data is updated each month through and including the invoiced month. A few of these have been introduced above and will therefore be familiar. The purpose here is to show how these and the other measures given below may be used as indicators to monitor and manage the flow of translation assignments and to minimize translation cost.
Indicator 1. The Median (m of the 15% Range): As noted above, m indicates the median of the 15% margin between b and q. On the figure below, it is shown by the light green line. A client should set the median of the 15% margin based on the average number of characters which the client expects to assign each month. This value can then be used as explained above to set the values of b and q. The median of the 15% margin is an indicator in the sense that it represents the average number of characters t that a client expects to assign for translation each month.
Indicator 2. The Base Volume Level (b): The Base Volume level (b) represents the top of the 15% margin. On the diagram below, b is indicated by the blue line. Values of t from month to month which exceed b constitute Extra Volume and are charged at 17 yen per character. If the 3MMA[t] is consistently above b, then the client's per-character translation rate from month to month will be above 14 yen. Thus, if the client expects the trend to continue, the client should consider raising b in order to reduce the per-character rate. The level at which b is set also determines the level of q (which is 0.85b). Thus if a client does not assign as much translation work as expected, the 3MMAt may begin to fall below q. As noted below, if it does so for two months, a client may need to lower b in order to prevent it from doing so for a third month, in which case it may be impossible to continue using the Monthly Agreement.
Indicator 3. The Monthly Agreement Qualifying Value: The Monthly Agreement Qualifying Value (q) represents the bottom of the 15% margin. On the figure below, q is shown by the red line. As noted already, I do not impose any minimum charge if t falls below q from time to time or if the 3MMAt falls below q for one or even two months. However, the lower rates under the Monthly Agreement are available only when the 3MMA[t] does not fall below q for three consecutive months, or so long as (tM1+tM2+tM3)/3=>q. This is the qualifying condition for use of the Monthly Agreement.
Indicator 4. The Total Volume (t): Total Volume t, represented on the graph by the green columns, is the total number of characters translated and delivered within a given month. On the table below, values for t which are below q are shown in red. It is not unusual for t to fall below q or rise above b for one or even two months from time to time. Please bear in mind that, when t rises or falls, it will pull the 3MMA[t] in the same direction, although with a slight time lag. Repeated moves in one direction without offsetting moves in the opposite direction will have an even greater effect in dragging the 3MMA[t] in the same direction. Moves in t can therefore be seen as indicating a subsequent move by the 3MMA[t].
Indicator 5. The 3-month moving average of t (3MMA[t]) The 3MMA[t] is shown in the fifth row of the above table and is indicated by the black line on the graph. It is based on the values of t for the past three months through the invoiced month. Values for 3MMA[t] below q are shown in red. Since 3MMA[t] is a moving average, moves in t lead moves in 3MMA[t]. Trends in 3MMA[t] are therefore much more significant than moves in t because they represent a longer trend. If the 3MMA[t] falls below q, it may be a warning sign that b may be set too high. If it falls below q and is shown in red for two consecutive months, the client will need to either lower b or to assign a value of t in the current month not less than the Guideline Value for t (G[t]) as explained below in order to continue using the Monthly Agreement. On the other hand, if the black line representing 3MMA[t] is consistently above the blue line representing b, the client should consider whether b has been set too low.
Indicator 6. The Guideline Value for t (G[t]): The G[t] is given in the sixth and last row on the table and shown on the graph by the yellow line. A moving average, including a 3-month moving average, can be used in a predictive way. For example, if we want the moving average in (5+6+1)/3=4 to remain unchanged at 4 in the next month, we know intuitively that the value for next month to be included in the calculation of the moving average must be 5 because 5 will be dropped from the calculation of the moving average next month and all the other numbers will remain the same. That number, must therefore be 5. Since 3MMA[t] is a moving average, we can use this principle to predict what the value of t must be in the next month in order to cause 3MMAt to equal a certain number of any value. Based on this principle, G[t] can be used to calculate the number of characters to assign in the coming month which will ensure that 3MMA[t] does not to fall below q, as indicated in the figure at right. (Values of G[t] exceeding q are shown in red.) As noted above, the qualifying condition of the Monthly Agreement is: (tM1+tM2+tM3)/3=>q. G[t] is thus an important leading indicator that can be used to ensure that 3MMA[t] does not fall below q. If the total characters assigned in a month is exactly equal to the value of G[t] shown on the most recent invoice, then the 3MMA[t] will exactly equal q at the close of the month. As shown in the figure at right, the total characters assigned in July (as shown in the fourth row of the July column) is exactly equal to the value of G[t] shown on the invoice for June (sixth row, June column). As a result, the 3MMA[t] for July (fifth row, July column) exactly equals the value of q (2,756) and the black line indicating 3MMA[t] on the graph comes into line exactly with the red line for q (as shown by the orange circle). Thus, 3MMA[t] has been prevented from falling below q for a third month. Incidentally, the invoice for the invoiced month is sent via email not later than the first few days of the immediately following month, meaning that clients are informed of the most recent value of 3MMA[t] almost a month in advance of the close of the following month.
Using these Indicators: The example illustrated in the above table and chart is very unusual. Normally, the volume of translation assigned from month to month (t) will trend closer to the middle or the higher end of the 15% margin range. This will ensure that the greatest possible share of total characters each month is charged at the lowest rate of 14 yen per character. Indeed, clients who understand and use these indicators wisely may be able to ensure that nearly all translation is charged at the lowest rate. If 3MMA[t] is consistently above b, it indicates that the 15% margin may be set too low. If it is consistently close to or falling below q, it indicates that the range may be set too high. Meanwhile, the G[t] indicator can always be used to ensure that 3MMA[t] never falls below q for a third month. These judgments can be made quickly and easily without any computations merely by glancing quickly at the guidelines section of the monthly invoice, which is updated each month. For a sample and a detailed explanation of the monthly invoice, please refer to the Accounting and Tax page of the Policies section of this website.