For Technical Communications and Marketing teams, translating diverse content is an important responsibility that supports critical business activities. Consequently, translations routinely appear on many project schedules as a key deliverable. Although most people have a general idea about budgeting, preparing reliable budgets for specific deliverables can be challenging. This is especially true if deliverables involve external parties that provide a variable service such as translations.
Likewise, unless you are a project manager by trade, most professionals never receive formal budgeting training. In fact, budgeting often emerges out of necessity because we and other stakeholders need to understand anticipated costs for our deliverables. As a result, we tend to acquire and hone our budgeting skills as we go along. Or we might be lucky and learn from the experience of team members who have already taken this journey.
Overall, though, knowing how to effectively budget translation projects is a valuable skill. It supports timely decision making and enables a smoother project execution.
At the Mercy of Time
Budgeting activities usually start early—often months before any actual project work begins. For example, you might have to estimate your team’s translation budget prior to the start of a new fiscal year, or you are asked to prepare a translation budget for an upcoming product release.
In either case, these first ballpark estimates can be close to actual numbers or they might be off. The reason is that information changes or is not available yet when you start your budget planning. Hence, initial project budgets often require adjustment as the full project scope emerges over time. So, the first challenge is to decide when to start your budget planning.
On the one hand, early budgeting helps secure funding and budget approval ahead of time. On the other hand, starting too early could expose your budget to greater scope creep. Additionally, you might have to make several assumptions to compensate for missing information. This also determines the reliability and accuracy of your initial budget.
Moreover, many cross-departmental activities precede translation activities. That is, translation work is one of the last activities to start and is greatly affected by delays from preceding activities. To avoid pushing out timelines, many companies simply compress the allotted time for translation activities. This compression can trigger changes to the project scope, which in turn can require last-minute adjustments to an already approved budget. This is one of the main reasons why content teams frequently experience scope creep and time pressures.
Understanding Cost Drivers and Pricing Models
But even if you have gathered all necessary information and finalized your source content, you might still struggle with your budget’s accuracy. In many cases, the effectiveness of a budget mirrors your knowledge of underlying cost drivers and pricing models. Having such insights allows you to break down a translation project into meaningful cost components that align with the services of your language service provider.
Of course, you could ask your Language Service Providers (LSPs) to prepare estimates for you instead. After all, your LSPs have the expertise to scope and price translation work. However, there are good reasons why you should not exclusively rely on your LSPs to enable your budget planning.
First off, you should always understand what you are buying from your LSPs. For example, pricing sheets for translation services normally only list the unit costs by service type. The pricing does not indicate what costs and how many “units” apply to produce a specific deliverable. And quite frankly, it would be impossible to cover all possible variations even for a specific document format and information type.
Therefore, translation services are flexible by design to accommodate common and unique requirements. This allows LSPs to package their offerings and customize workflows as they see fit for a given project. Sometimes rates include bundled or blended services, which can differ from LSP to LSP.
Effective budgeting is closely tied to properly defining the underlying activities and deliverables. Although you might be familiar with common budgeting concepts, the challenge is not to know what to do but rather how to apply them to your specific situation. That is, you might make it out of the driveway, but once you hit the freeway, your engine starts to sputter.
The main difficulty of translation projects is their fluidity. Plus, the work involves external parties (LSPs) and flexible services. Both varying project types and the flexibility of translation services can make assessing effort tricky. This is a challenge that LSPs face as well.
Therefore, most LSPs develop proprietary metrics to ensure repeatability and consistency for their quotations. Typically, the metrics combine an LSP’s experience and established localization industry practices to derive calculation formulas for different content types and activities. And sometimes LSPs utilize variations of their metrics and formulas to distinguish the required effort by client.
If you work with more than one LSP, their quotes can vary significantly despite having negotiated similar pricing. This could be the result of using different metrics for the same type of work, lack of experience with certain types of work, or simply a different interpretation of the project scope. In other words, assessing the effort for a defined deliverable is not simple. It might be the primary reason for you to shy away from preparing your own budget estimates.
Fortunately, there are several budgeting approaches you can use to prepare your own estimates depending on your situation. Each approach has its pros and cons as well as intended focus.
These approaches include:
- Empirical costing
- Extrapolatory costing
- Deliverable-oriented costing
As the name implies, this approach relies on practical assumptions derived from experience over time. Most outsourced translation projects involve three effort categories: (1) the actual translation effort, (2) any content pre/post-processing effort, and (3) project management effort.
You start with an initial formula that uses the combined word count for all your project deliverables and an assumed average per-word rate. In addition, you factor in the effort for project management and pre/post-processing activities as a multiplier (percentage) of the translation cost.
The empirical estimation approach allows you to quickly calculate the cost for a deliverable or your entire project without the detail complexity that other approaches might involve. Moreover, this approach works well for initial budgeting (ballpark estimates) and when minimal information is available to prepare a more detailed estimate.
This approach relies on the project history of similar types of documents to extrapolate anticipated cost. It further assumes minimal process variance and consistent project scopes to make reliable cost predictions. Overall, the premise is that future work is reflective of past work. This notion, however, also reveals the weak point of this estimation approach: If project scopes for a deliverable change and your project activity is too infrequent, your results will be mixed.
Still, it is a good and easy to use approach if you routinely use translation services and your needs are consistent. The key input for the calculation is the loaded average per-word rate and the word count of the source content. The loaded average per-word rate is determined by dividing the average cost of a deliverable (document type) by its average word count.
In general, this approach works well for basic budget scenarios where project history is a viable source for deriving metrics for your budget calculations.
This third approach offers the most accuracy and flexibility, but it also involves greater complexity and experience. One critical concept of deliverable-oriented budgeting is a logical breakdown of the work into self-contained cost components.
For translation projects, it means that you need to understand how your LSP’s service offerings map to the specific activities you identify for each deliverable. This will then tell you which cost components define the combined cost for your deliverables. Once you assess the effort for a cost component, you can apply the correct pricing model to calculate the cost. After that, you simply add up the subtotals for each deliverable to determine the total cost for your translation project.
A drawback of this approach is that it requires more input, which may not be available in the early phase during budget planning. It can also be time-consuming if done manually for larger projects. However, if you automate the estimation process, you can perform calculations as soon as missing input becomes available. Alternatively, you can use assumptions for missing input or resort to one of the other estimation approaches as appropriate.
Preparing your own estimates for translation projects helps you capture key activities and relevant cost components. As you obtain a better understanding of your needs, you will also improve your understanding of required translation services and their pricing models. This in turn will give you better control of underlying processes and cost drivers.