Translation business profitability was, arguably, the most appealing topic of ATC 2016 Language Industry Summit discussions.
From size to essence
Growth for traditional translation services slows down year to year. It’s getting increasingly difficult for LSPs to win new customers and increase revenue, and marketing is getting more competitive. According to the 2016 bench marking survey and accounts for the latest financial year, at least five out of 20 if the UK’s largest translation companies did less business in 2015 than in 2014, or stayed flat. The number one company based in the UK, SDL, stayed on more or less the same level of revenue since 2012. RWS, the second largest LSP, grew 2% organically last year, but added about 25% via an acquisition of another organisation, CTi in the United States.
In a few years organic growth might grind to a halt.
Some managers of mature companies have already switched the focal point of their efforts to cost control and profitability. They are looking for ways to make their businesses more profitable, rather than just bigger.
How translation business owners control and optimise costs
Topics concerning profitability permeated a few key speeches at ATC Summit.
Roberto Ganzerli, the founder of one of the top Italian LSPs, Arancho Doc, presented a set of metrics his company uses to make costs transparent, expose hidden expenses, and track EBITDA. Roberto outlined how planning, metrics and procedures help AD become more efficient.
Ruth Partington of RP Translate spoke about communicating value to customers and maintaining margins. She called business owners to deconstruct their offers and identify individual services involved in making content multilingual, for example document engineering and file preparation. She advocated creating a pyramid-like hierarchy, with the highest-value added services on top, and communicating the value to customers this way, service-by-service, according to the value they represent. This solution approach is more rewarding.
Andrzej Nedoma of XTRF advocated process automation. His presentation suggested that margin erosion is a problem for 80% LSPs. To fight it, he suggested replacing manual project management with automated workflows, which would reduce in-costs and make the business more efficient.