Knowing how to value your time during working hours can make certain decisions easier and increase productivity in your working routines. But how do you put a figure on the value of a human's work, and could blindly factoring this into decision-making have the opposite effect?
Say, for instance, that you receive a small translation of 25 words to be delivered the same day. Normally, in order to offset the time it will take to set up, discuss and account for the project, you would charge a minimum-fee for the work. This is typically based on one working hour. Calculating these working hours can be done either via the traditional method (target words per day x target price/hours worked per day) or via the value method (what is this project worth to the client/how much time would it take me to do a good job = day rate). Both of these methods would yield justifiable rates for the client, but do the hourly value figures truly represent your value as a manager of a freelance business?
They would certainly cover the costs and overheads incurred in the operations themselves, but what of the opportunity cost? There are indeed other factors to consider in calculating the true value of your time.
Not doing sales work actually costs you money
Instead of taking on this small job, you could forego it in order to market your business to higher-paying clients. The value of using that hour to create a mailshot and target 50 local businesses could far exceed the minimum-fee you would charge for the small job by an order of magnitude. By accepting the small job, then, you effectively work against the best interests of your business, unless the smaller job leads directly to larger ones. In monetary terms, you could make €5000 in orders from a mailshot to new clients, opening the doors to another €10-30,000 throughout the coming year. Or you could take on the €30 job in the hope of receiving an offer of a larger, say €500, project in the coming weeks.
Your hourly value in the 'sales and business development' role is something in the region of €500 when you factor in the potential results in that month of 8 hours of business development. If we then average the results of these 8 hours of sales (say €5000) over the 20 days of the month and factor in your standard 'translation only' monthly value (say €6000) you get a monthly potential of €11,000, which is €550 per day, or €70 per hour. Compare this to your value if you spend zero time marketing; you can clearly see the advantage of valuing your time appropriately, and then acting accordingly. You obviously don't immediately start to charge clients this rate, but understanding its true value can help you to decide when to translate and when to market, depending on the jobs offered.
Your business, as a living entity, would want you to market at every available spare opportunity, as this would help to ensure its survival by building up the cash pile and jobs pipeline. You, as a person, would perhaps want to enjoy your life in the gaps between projects. Your best course of action, therefore, is to balance these two. Accepting smaller jobs only does this if they lead on to larger projects with the client. This is wholly possible, but if you find the client only provides small jobs, consider how else you could be using your time. You could be slowing the growth of your business, and losing out on new sales.
Risk of low sales
We should also consider the risk of not securing new clients, and of not receiving projects for days on end. To factor this in we must basically charge more per-project to cover for these fallow days. If your monthly target is €3000, and you only expect (based on past results) to translate for 15 days out of 20 per month, then you should charge €200 per day, or €25 per hour as a minimum.
But this doesn't work when you're starting out and have only 5 days of work per month, for example, as charging 3x as much to account for 3x less work will not be supported by the market. Your best bet here is to charge your future target rate (the €25 per hour) and spend as much time selling your services in the first few months as possible to bring your earnings up to where you wish them to be. Another sustainable solution to this problem is to start working part-time, alongside another job. Just remember to leave time for sales!
Established translators can sometimes be even more susceptible to dips in workflow if, for example, marketing ceased in a previously over-worked year. They should check that this risk of sales slow-down is accounted for in their target/day/hourly/minimum/per-unit rates and remember to clear time for new sales in order to keep the business healthy.
So how is your value calculated?
- Work out your potential new-sales revenue from prospecting (from old figures or guesstimates)
- Add that to your monthly 'translation only' target revenue
- Divide by 20 for a new daily value of your time
- Divide that by 8 to benchmark your hourly value, for comparison against small tasks
How can you ensure you're working towards your value?
- Tend to accept larger projects for the most part, if you have that option
- Make sure you market and sell during any down-time
- Charge new clients a rate that is truly reflective of the risks and expertise you bear
A word of warning: blindly evaluating everything you do with your newly calculated daily value may lead to a refusal to do anything that does not yield a good probability of future profits. You still of course need to do such things as keep a clean living/working environment and feed/rest yourself, or else your productivity will suffer, but considering the opportunity cost of doing such things may help you to better plan your working day.
Your thoughts, as ever, are welcome.