The ATA Chronicle � September 200822

Freelance translators andinterpreters need to start thinking ofthemselves as business owners as wellas professional language serviceproviders. Many times, however, trans-lators and interpreters only considerthemselves business owners when theyoperate an agency or employ otherindividuals. As a result, freelancers canfind themselves in a competitive busi-ness environment without havinglearned the proper mindset to be assuccessful as possible. As you willlearn from this article, thinking like abusiness owner requires skills that arequite separate from those necessary totranslate or interpret.

First, the owner of any companyshould place the interests of the busi-ness above everything else. This canbe difficult, however, when the busi-ness owner also serves as the com

pany’s sole employee, responsible forall the translation or interpreting. It isin these situations that the rules ofbusiness can get blurred or may noteven get defined. It is imperative thatwe recognize that as freelance transla-tors or interpreters, we still must disci-pline ourselves to behave as a smallbusiness and to attend to the details ofdaily operation.

The Need for a PlanThere are certain fundamental prin-

ciples of small businesses that can andshould be applied for practical, eco-nomic, and legal reasons, even by free-lancers. These principles can be woventogether into what is commonlyreferred to as a business plan. Manybelieve a business plan is reserved forlarger entities or different types ofbusinesses that require such plans inorder to secure financing or capital. In

Thinking like a business owner requires skills that are quite separate from those required

to translate or interpret.

By Rob Cruz

The “Business” of Freelancing

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23The ATA Chronicle � September 2008

my experience, successful businessesof any size, even those with “singleoperators,” usually have some type ofconcrete plan. It is precisely while cre-ating this plan that one begins todevelop the insight crucial to

becoming an effective business owner. Some of the topics discussed in

this article should be a part of everybusiness plan, but remember that aplan need not be lengthy or compli-cated. It is simply where questionsthat are critical to the viability of yourendeavor are posed and answered.

Is This the Right Type of Venture for Me?

This is usually viewed as a finan-cial question, but it also has severalother implications. From a financialstandpoint, it is imperative that one’simmediate and long-term incomeneeds be compared to the forecastedrevenue that can and will be gener-ated. For example, the first thing I didwhen contemplating the field of judi-ciary interpreting was to determinethe supply and demand of court inter-preters within my own market and toexamine the other possible revenuestreams associated with the professionbased on my qualifications. I thencompared that forecasted possiblerevenue to my long-term incomeneeds, weighing my immediateincome needs against the fact that

every business takes time to “ramp-up” to peak cash flow. Truly ana-lyzing this issue will allow for aprojection of just how the “ends” will meet. Everyone’s situation is different, but the conclusions reached

will help with the decision of howbest to develop the business to be asprofitable as possible. Be mindful thata lack of immediate profitability orpositive cash flow need not be a deter-rent. In certain circumstances, such aswhen equipment must be bought for aparticular project or when a signifi-cant period of time will pass beforeinvoicing is completed and collected,instruments like a line of credit or apurchase order loan can be obtainedfrom financial institutions. Suchissues can be discussed with anaccountant or banker.

Apart from financial viability, it isimportant to know what other skillswill be needed to build the business,especially since one must wear manyhats. Usually, single operators alsofind themselves functioning as thesales, marketing, accounting, humanresources, legal, and collectionsdepartments, in addition to doing theactual work (what I call functioningas the “talented professional,” or justthe “talent” for short). Giving seriousthought to the nature of the businesswe are creating allows us to examinethe characteristics required of suc-

cessful small-business owners. Forinstance, the interests of these dif-ferent “departments” may be at oddswith those of the “talent.” The suc-cessful business owner will know theproper hat to wear for every decision.Although at times it is a tough lessonto learn, the “talent” should not makeall the decisions. Certain decisionsshould be made through the eyes ofthe owner, not the individual ren-dering the services.

How Should I Organize My Business?

Creating a business entity is oftenreferred to as “organizing,” since onemust choose what type of organiza-tion that entity will be. All individualswho work as a subcontractor shouldconsider organizing themselves as acorporation (usually a Subchapter S),a limited liability corporation, or alimited partnership. When one oper-ates simply as a subcontractor, theInternal Revenue Service considers ita sole proprietorship. Sole proprietor-ships offer no legal separationbetween the business and the indi-vidual. In matters of liability, thisplaces every personal asset at risk forlegal remedy should somethingunforeseen happen through some typeof litigation. The cost of organizingcan range between $500 and $1,500for a basic entity, and do-it-yourselfwebsites such as Legalzoom.com orLegalresourceonline.com offer thisservice for under $200. Everyone isurged to either talk to a lawyer, anaccountant, or otherwise carry outextensive research to determine whichstructure best meets his or her needs.

Will I Need Licenses or Permits? Apart from any possible profes-

sional licensing by individual states ortrade organizations, every business,including sole proprietorships, �

As freelance translators or interpreters, we still mustdiscipline ourselves to behave as a small business and

to attend to the details of daily operation.

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must have a business license. Therules will vary according to the juris-diction. A business license is usuallyrequired by the county and by the citywhen one operates within the city’slimits. The cost is typically nominal,but it will vary. Some municipalitiesalso require an occupational license orpermit. This is done to regulate thetypes of commercial and home busi-nesses that can operate within thecity’s limits and to comply withzoning laws where applicable.

How Will the Business Affect My Taxes?

It is highly recommended thateveryone use an accountant’s servicesto answer questions related to taxes. Itis worth mentioning that Subchapter SCorporations, limited liability corpo-rations, and partnerships usually filetaxes on an attachment to an indi-vidual taxpayer’s form, and thereforebenefit from the lower individual taxrates. Again, you will need to consultwith an accountant.

The other tax issue is whether ornot to pay the “talent” as an employeeor as a contractor. Although it is not abusiness’s choice but the nature of thework that ultimately determines this,our profession lends itself to thisoption. In most cases, the benefits tothe business of considering the“talent” as a contractor far outweighthe benefits of being an employee.However, this option should also bediscussed with an accountant.

Although the above questionsshould be addressed in every plan,there are many other questions thatthe business plan can address, andthey will vary with every individualsituation. Some examples of questionsto ask include:

• What financial institution will beused and what types of accountswill be needed?

• Will office space be needed? • Will location be important?• Will startup capital be needed?

Additionally, there are several con-cepts and factors that can be problematicfor the fledgling business owner in

general and for translation and inter-preting services in particular. The fol-lowing may also prove helpful.

Understand the Concept of Profit Margin

Profit margin is an indicator of acompany’s pricing policies and itsability to control costs. Because trans-lators and interpreters in essence arecharging for time, either by the houror by the word, it is easy to forget toperform this elemental business task.To calculate profit margin, first sub-tract expenses from revenue (sales) todetermine net income. That number isthen divided by the revenue. It isexpressed as a percentage using thesimple formula:

PM= Net Income/Revenue

This calculation can be done forindividual projects as well as for thebusiness as a whole on a monthly orquarterly basis. Things that can

impact margins can be fixed expensessuch as rent, telephone service, andInternet access, or variable like pay-ments to contractors or purchases ofsoftware or equipment for a particularproject. Revenue, income, and profitmargin are all different concepts thatare interconnected, but are not inter-changeable. Translation and inter-preting businesses have the potential

for a very high profit margin in com-parison to other industries that oftenoperate with margin percentages inthe single digits. Knowing thismeasure allows for concessions thatcan be chalked up as a marketing orpublic relations expense in highmargin situations. This measure canalso help to determine whether theproject, contract, or client is reallyworth having. It is a fundamentalmetric that should play a role in prac-tically all decisions. For more infor-mation, see the entry on Wikipedia athttp://en.wikipedia.org/wiki/Profit_margin.

Productivity is Key As simple and basic as this may

sound, time management is quite oftenone of the greatest obstacles to a suc-cessful business. When one is chargingfor time, nothing can be more impor-tant than managing that time wisely.Successful planning and forecasting ofa project’s duration allow for maxi-

The “Business” of Freelancing Continued

Giving serious thought to the nature of the business weare creating allows us to examine the characteristics

required of successful small-business owners.

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25The ATA Chronicle � September 2008

mization of earnings and can bothcreate and maintain a healthy profitmargin. Utilization of basic technologycan be one way to streamline theprocess. E-mail and calendar programslike Outlook or Lotus Notes can helpwith communication and schedulemanagement. Blackberry devices,iPhones, or a Pocket PC can allow you

to check and answer e-mails remotelyat any time. Simple accounting soft-ware such as Microsoft Money or abasic edition of QuickBooks can sim-plify your finances tremendously. Allof these programs are relatively inex-pensive and quite intuitive. With plentyof tutorial software and instructionalbooks on the market from sources like

www.videoprofessor.com and www.dummies.com, learning how to usethese tools should require no more thana basic understanding of a computer.

Additionally, sophisticated transla-tion software like Déjà Vu or Trados,for instance, can truly maximize yourefficiency and consistency throughoutall of your projects. Keep in

More on what you need to know to start a business

ATA Business Practices Education CommitteeBusiness Smarts Online

www.atanet.org/business_ practices/index.php(Compilation of the popular column inThe ATA Chronicle)

Business.govwww.business.gov(Official business link to the U.S. government managed by the Small Business Administration)

BusinessWeekSmall Business News

www.businessweek.com/smallbiz

BusinessWeek BizCenterSmall Business Tools

http://bw.smartonline.com/syndication/ marketing.do?method=biztools

Déjà Vuwww.atril.com

Do-it-yourself Legal SitesLegalzoom.com Legalresourceonline.com

Inc.comwww.inc.com/resources/solo(Daily resource for entrepreneurs)

Internal Revenue Servicewww.irs.gov

IRS Publication 1779 “Contractor or Employee”

www.irs.gov/pub/irs-pdf/p1779.pdf

Microsoft Moneyhttp://www.microsoft.com/money/default.mspx

Profit Marginshttp://en.wikipedia.org/wiki/Profit_margin

QuickBooks http://quickbooks.intuit.com

Small Business Administrationwww.sba.gov/smallbusinessplanner/plan/writeabusinessplan/serv_bp_markanal.html

Tradoswww.translationzone.com

�

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The “Business” of Freelancing Continued

mind, however, that there will be alearning curve, and since these pro-grams are not inexpensive, one shouldexamine whether or not the type ofwork that is being done merits theinvestment of money and time. In anyevent, the key to productivity is timemanagement and maximization.

Whether one uses the tried and trueDay Runner or the latest cutting-edgedigital gadget, focusing on this con-cept is vital to any business’s success.

Be Preemptive in Order to Avoid Collection Issues

Although payment delinquency isa fact of life in almost every industry,there are steps that one can take in ourindustry to head off possible prob-lems. Entering into contracts withclients can offer some semblance of

protection, but for all practical pur-poses, contracts require litigation to beenforced. In an industry where timeliterally is money, these types of situa-tions are time consuming and can takea bite out of productivity as well as thebottom line. One may be better servedby borrowing common practices from

other industries when requiring partialpayment to begin large projects orwhen dealing with individuals ratherthan with companies. The concept of aretainer is one that can also be imple-mented. To use a retainer properly, oneshould bill the client once the billableservices have reached approximately70% of the retainer amount. In thisway, should the bill not be paid, theretainer would cover the time alreadyspent plus any billable services ren-dered after submitting the bill. This

may not work in very competitivemarkets, and these strategies are notnecessary in every case. Experienceshould teach when these types of pre-emptive tactics will be useful. No onewants to scare off the client with cum-bersome prerequisites, but that shouldbe balanced against one’s billing his-tory and delinquency rates.

You Are Responsible for Your SuccessAlthough there is no one simple

recipe for success in business, havinga plan and understanding some basicconcepts will greatly improve theodds. Always remember that whetheryou own a translation or interpretingagency or you are a freelancerworking alone out of your home, youare a business owner. When makingdecisions, it is important to beinformed about the fundamentals ofthe business as well to be flexible andpatient in order to adapt to differentsituations. If possible, attend presenta-tions or workshops like the one thisarticle is based on that are interactiveand teach basic business and entrepre-neurial skills. It will be these skillsthat give us the proper mindset to benot just talented professionals, but alsosuccessful and savvy business owners.

There are certain fundamental principles of smallbusinesses that can and should be applied for practical,

economic, and legal reasons, even by freelancers.

Federal Bureau ofInvestigation/National White Collar Crime CenterThe Internet Crime Complaint Center www.ic3.gov

Security FixBrian Krebs on Computer Securityhttp://blog.washingtonpost.com/securityfix

Scam Alert

Websites

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