| Pages in topic: < [1 2 3] > | Clients asking for an annual commission? Thread poster: Rebecca Reid
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Dan Lucas 
United Kingdom
Local time: 07:56
Member (2014)
Japanese to English
| The underlying logic for giving volume discounts is seldom relevant to translation | Mar 10, 2020 |
Chris S wrote:
It just seems to be a form of volume discount which is pretty standard in any business
Not at all - that depends on the business! In many industries, a significant percentage of the total cost is fixed, let's say 40% for a typical manufacturer. These are costs associated with rents, utilities, salaries and so on. These costs change little, if at all, whatever the level of business. Variable costs are associated with raw materials or hourly labour and so on. They go up when volumes rise.
What this means is that when the manufacturer sells more widgets, only the variable costs rise, so total costs (the sum of fixed and variable costs) do not increase as rapidly as the increase in volumes.
Let's assume you have revenue, AKA the value of sales, of 100 dollars / pounds / yen / euro, whatever, and total costs of 90. Your profit is 100-90=10, so you have a margin of 10%. Of that 90 in costs, 36 (40% of 90) are fixed, and 54 (60% of 90) are variable.
If volumes (and thus revenue) increase by 20% to 120, then fixed costs remain unchanged at 36, and variable costs increase by 20% to 64.8. Total costs are now 100.8, so profit is 120-100.8=19.2, rising by 9.2 over the previous level of 10. That's almost a doubling of profit on only a 20% increase in sales. To put it another way, your marginal profitability on those additional 20 in sales is a thumping 9.2/20=46%.
This mechanism - in many different guises - is why some customers expect and are given volume discounts. It's because they understand that in many industries costs do not rise linearly with sales, and that higher volumes drive significant improvements in profit for the supplier. If you order 5 units from a manufacturer, the price you pay will be very different to the price you pay for 5,000 units, and that is how it should be.
However, translation is not one of these high-fixed-cost businesses - it's an overwhelmingly variable-cost business. Most of the fixed costs of a freelance translator, such as rent, internet, and utilities are things that would be paid even if the typical "work from home" freelancer had no orders at all, so we can exclude those from consideration.
By far and away the largest cost is the time and expertise of the translator, and that's very much a variable cost: it must be committed in direct proportion to the volume to be translated. If the client gives you twice the work then (excluding CAT tools from consideration) you work twice the hours, and so you have twice the costs. It's basically a 95% or 99% variable-cost base.
It has been argued in another thread that volume discounts should be given because they cut project setup time, and reduce cognitive switching costs that are incurred when a translator moves from one project to another. I can see this might be an issue in cases where the translator is dealing with many small, heterogeneous projects that take minutes rather than hours. Rapidly flipping from one to another could be very inefficient. In my case, most projects take several hours or more, and are in the same field, so the mental cost of switching from one job to another is not high. It's not a compelling reason for me to offer a volume discount.
Others argue that large volumes provide security, and winning such jobs is worth a discount. I can understand that too, but it is only relevant if you lack consistent flows of work. I don't like jobs with very high volumes, because I have a number of regular clients who expect me to be available. Huge jobs reduce my capacity to alarmingly low levels over the medium term, potentially endangering my relationship with these regulars. So "security" is not a compelling reason for me to offer a volume discount either. I'd much prefer several medium-sized jobs to one enormous job.
Only you, the OP, can decide whether a discount makes sense. I wouldn't do it, not least because it suggests that the client takes a fairly exploitative approach to dealing with its suppliers, and I'm a sort of "let's benefit together" person.
Regards,
Dan
[Edited at 2020-03-11 07:17 GMT]
| | | | Sheila Wilson
Spain
Local time: 07:56
Member (2007)
English
+ ...
Rebecca Reid wrote:
Has anyone come across this type of "commission" system before and what do you think of it?
I simply can't get my head around it. No, it's certainly not common, thank heavens. However, I hear others saying it's a form of volume discount, and I do understand those. I would never agree to award one until after the volume had been paid for, e.g. if it's for "over 20k words" then the best I'd do would be to charge full rate for 20k words and then reduce my rate (by a very small percentage) for subsequent words. I'm not generally known for giving any volume discounts though -- they're more suited to widget production lines.
Well, one month ago they bounced back wanting me to send them $550 euros that I "owed" them for 2019. I got up the courage to write back and say no
I'll be happy for you if they accept that and don't sue you, but a debt is a debt to be paid for most companies.
This is my biggest and oldest client (it's not a translation agency, it's a well-known international marketing research company). The idea was that they would give their preferred service providers more work, so the commission would be covered. That hasn't happened (notably due to a switch from translation to "please proofread my terrible English and make it sound like it was written by an English speaker, for 1/10 of the cost of a translation").
So they've effectively scammed you, but within the terms of the contract unless it specifically promises particular volumes of work. Does it? There seems little chance they'll be in the wrong as they must have a whole legal department full of lawyers behind them.
I do hope this story has a not-too-unhappy ending.
| | | | Gareth Callagy
United Kingdom
Local time: 07:56
Member (2018)
French to English
+ ...
| Vendor rebate agreement? | Mar 11, 2020 |
Sounds like you agreed to a (volume-driven) vendor rebate agreement.
Vendors sometimes offer these to buyers to encourage them to stick around. i.e. if the buyer buys $X worth of services within a certain period the vendor can offer to then send them Y% back as a rebate. A discount of Y% on each order, on the other hand, doesn't provide an incentive to stick around.
I believe there are tax savings for the buyer as well - the vendor's invoices can be accounted for at "f... See more Sounds like you agreed to a (volume-driven) vendor rebate agreement.
Vendors sometimes offer these to buyers to encourage them to stick around. i.e. if the buyer buys $X worth of services within a certain period the vendor can offer to then send them Y% back as a rebate. A discount of Y% on each order, on the other hand, doesn't provide an incentive to stick around.
I believe there are tax savings for the buyer as well - the vendor's invoices can be accounted for at "full" price when purchased, but when and if a rebate comes around it is not considered/accounted for as taxable income. ▲ Collapse
| | | | Michael Newton
United States
Local time: 02:56
Japanese to English
+ ...
| annual commission | Mar 11, 2020 |
"One of my best clients but..." Oh, how many times have we heard this?!
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DZiW (X)
Ukraine
English to Russian
+ ...
| What the contract reads: Paying for a special status? | Mar 11, 2020 |
As far as most translators are rather poor businesspersons, in case of any doubts—especially before signing an important paper, one literally must consult a profile specialist, checking for second opinion too!
Now it depends on the accepted terms and lawyers. However, if they want you to (1) pay your taxes and (2) then deduct 1%-2% from your jobs as “laundered” rebates, then, at least at some countries, it might be re/classed as a fr... See more As far as most translators are rather poor businesspersons, in case of any doubts—especially before signing an important paper, one literally must consult a profile specialist, checking for second opinion too!
Now it depends on the accepted terms and lawyers. However, if they want you to (1) pay your taxes and (2) then deduct 1%-2% from your jobs as “laundered” rebates, then, at least at some countries, it might be re/classed as a fraudulent scheme—with possible deleterious consequences for the parties.
Rebecca, while it took you awhile to reconsider this quitrent, get ready with Plan B, C, D, and E: do take your contract to a decent lawyer.
Good luck ▲ Collapse
| | | | Lincoln Hui
Hong Kong
Local time: 14:56
Member
Chinese to English
+ ...
Rebecca Reid wrote:
OK hold on... It wasn't "absurd" for the reasons expounded below.
Thomas, I think it's a bit facile to mock, thank you for comparing me to the subjects in the Milgrom Experiment. Lucky you, if you can refuse any "deal" that isn't 100%. Fact is, I really struggled over signing the thing and it took weeks of "relances" from them for me to send it back in.
This is my biggest and oldest client (it's not a translation agency, it's a well-known international marketing research company). The idea was that they would give their preferred service providers more work, so the commission would be covered. That hasn't happened (notably due to a switch from translation to "please proofread my terrible English and make it sound like it was written by an English speaker, for 1/10 of the cost of a translation"). Maybe some of you are able to brush off your biggest client and tell them to get lost (which I finally did last week and I'm not sure how this is going to impact my income, but yes the "tumor" analogy is spot on), but it's a huge hit for me if they stop giving me business. There are several other translators on their "preferred" list, for English and the various other languages they work with, who also agreed to sign it, probably for similar reasons. The fact is, now that I dropped out, they're still there. I wish I knew who they were because I would have reached out directly years ago and we could possibly have blocked the whole thing. And not just translators either. ALL their service providers (graphic artists, freelance interviewers, etc.) had to sign this thing.
I'm not a member of the ATA. Maybe I need to be though?
Anyway, I really wanted to know if anyone had ever even heard of this before. Now that I've said my piece to the admin department, I plan to reach out to my individual contacts within the company and try and undercut it.
But this is apparently a "thing" so it might be useful to know.
Certainly it's absurd; you didn't add anything that could not be inferred from your first post.
It's absurd in many ways, not least because they manage to create a very bad look while not getting that much in actual benefit. They even have to collect from you, and by your description it seems they are having problems managing such a policy. It ends up being an "everybody loses" deal because they are incurring invisible administration costs, plus the chance of someone bristling at this is (should have been) quite high. One of the ways in which this amazes me is that they didn't simply come up with a way to deduct it on their end, and instead have to go to the effort to collect that money. Don't give them ideas, I guess.
Of course, if people agreed to accept it, then I suppose their plan is working just fine. I guess it's what happens when your leverage is insufficient.
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Rebecca, what I really not understand in that process is why the whole thing is called a "commission". I could understand it if it indeed were a "discount", i. e. if you would reduce the rate or invoice when a certain volume of work materialises. (The merit of this kind of discounts is debatable, as Dan said.)
But why a "commission"? Are you sure you pay (paid) back the commission to the entity that paid your invoice? Or is there a third party involved? Maybe the money actually wand... See more Rebecca, what I really not understand in that process is why the whole thing is called a "commission". I could understand it if it indeed were a "discount", i. e. if you would reduce the rate or invoice when a certain volume of work materialises. (The merit of this kind of discounts is debatable, as Dan said.)
But why a "commission"? Are you sure you pay (paid) back the commission to the entity that paid your invoice? Or is there a third party involved? Maybe the money actually wanders into some private pockets. And this would be most probably illegal. ▲ Collapse
| | | | | Bribing for work? | Mar 11, 2020 |
10 years ago I was approached by a text broker with the (Dutch) words "Translators do pay me to make me provide them with work". (Name upon request by private email.) I worked for him one year (without paying him), before the always lurking tension between us finally exploded by raising my rates. Some protagonists on the other side of the wall (mainly the male one) seem to need a feeling of superior power about you, above the margin they "earn" from your work anyway.
[Bearbeitet am 2020-0... See more 10 years ago I was approached by a text broker with the (Dutch) words "Translators do pay me to make me provide them with work". (Name upon request by private email.) I worked for him one year (without paying him), before the always lurking tension between us finally exploded by raising my rates. Some protagonists on the other side of the wall (mainly the male one) seem to need a feeling of superior power about you, above the margin they "earn" from your work anyway.
[Bearbeitet am 2020-03-11 08:34 GMT] ▲ Collapse
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Rebecca Reid wrote: Chris S wrote:
It just seems to be a form of volume discount which is pretty standard in any business? Right, and then the volume never happened, LOL.
Now I’m confused. They didn’t commit to sending you X amount of work before the percentages kick in?
In that case they’ve just got you to drop your price by 2-3%. Solution is to raise it?
But if they want 550 euros as 2pc of what you did for them in 2018 they must have sent you quite a lot?
But, whatever, it’s a strange practice rather akin to a certain major agency demanding profit contributions from translators a couple of decades ago. Good luck!
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Dan Lucas ... gave us an entire economics lesson 
Everything you say is true, Dan, but I think you are looking at it too much from your own comfortable position (which is very much like mine).
For the typical translator, the biggest “cost” by a country mile is downtime. So volume discounts to secure a good flow of work make a lot of sense.
Even as an established translator, my biggest “cost” is those little dead spots between jobs. The only difference is that they make up a smaller percentage of my time so I don’t have to worry about them.
| | | | | volume discounts 2 | Mar 11, 2020 |
Nothing new under the sun, every attempt to decrease costs is to be expected.
In the past 20 years, I have been "offered" to:
* redeem a few percent of all business done with a European translation agency, on the lines of 2% on the first EUR5-10,000, 3% on subsequent EUR10-20,000, etc. I don't remember exact terms. They didn't call it commission.
* redeem a few percent to get my money within 15 days instead of 2 months
* redeem a few percent on... See more Nothing new under the sun, every attempt to decrease costs is to be expected.
In the past 20 years, I have been "offered" to:
* redeem a few percent of all business done with a European translation agency, on the lines of 2% on the first EUR5-10,000, 3% on subsequent EUR10-20,000, etc. I don't remember exact terms. They didn't call it commission.
* redeem a few percent to get my money within 15 days instead of 2 months
* redeem a few percent on single large orders (volume discount)
* decrease my base rate to get more work
* wait to increase my base rate until the translation agency allows me to
* invoice multiple micro-orders over a month at word rates instead of a min fee for EACH
I've also heard people paying a subscription to their client to use a proprietary CAT tool in order to complete assignments. And this is not a joke.
By default, I say no to all this. I have rates that make my business sustainable, and I happily let others decide what they want to do with theirs.
Philippe ▲ Collapse
| | | | Dan Lucas
United Kingdom
Local time: 07:56
Member (2014)
Japanese to English
| Microeconomics lesson... | Mar 11, 2020 |
Chris S wrote: Dan Lucas ... gave us an entire economics lesson
... given because few people on here seem to understand how companies generate profits! (Tongue-in-cheek smiley was noted, BTW)
Everything you say is true, Dan, but I think you are looking at it too much from your own comfortable position (which is very much like mine).
Agreed. If you haven't got a steady flow of orders coming in, then working to reduce significant patches of downtime makes perfect sense. It's effectively a rate cut, but that is, I would imagine, preferable to starving.
Dan
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DZiW (X)
Ukraine
English to Russian
+ ...
| Expected outcome: Needs must when the devil drives | Mar 11, 2020 |
As far as cashflow enables me to tell Buyer from Seller, I believe every translator who is so needy or naive to accept low rates, 'fuzzy/repetition/volume discounts', and other unfavorable terms does ALREADY pay such 5%-70% 'success tax'. No prob (for me).
Although they keep incanting about a bird in the hand and imposed 'standards/practices',
(1) sensible and educated adults mostly act in good faith on arm's length terms;
(2) they call it co... See more As far as cashflow enables me to tell Buyer from Seller, I believe every translator who is so needy or naive to accept low rates, 'fuzzy/repetition/volume discounts', and other unfavorable terms does ALREADY pay such 5%-70% 'success tax'. No prob (for me).
Although they keep incanting about a bird in the hand and imposed 'standards/practices',
(1) sensible and educated adults mostly act in good faith on arm's length terms;
(2) they call it contractual law in action, somehow considering it a good deal; and--
(3) the fear, ignorance, and arrogance have already paralyzed their common sense and critical thinking.
So be it. That's also pretty ok rather many shy and hungry non-businesspersons prefer bowing and scraping to starving for they just want to go and learn it their own way, taking awhile... or going under. Work Life in progress. Besides, we can change and answer for ourselves only.
Therefore, I do hope Rebecca is more cautious now and she is ready to consult a lawyer to resolve the [possible] issue(s).
By the way: Don't translation vicars pray about tithe for believing in success or CAT? ▲ Collapse
| | | | | Let's say... | Mar 11, 2020 |
you have a very good client and you charge them a very good rate... let's say you make £100,000/year out of them. Let's say one day they decide they want 2% of the money you make from the work they give you, would you turn down the offer and lose the client?
| | | | DZiW (X)
Ukraine
English to Russian
+ ...
| Keanu "Nelson" Reeves says it all | Mar 11, 2020 |
Giovanni, considering their special treatment of the best translators, I really doubt they provide even $20,000 a year gross. Furthermore, a win-win deal is an agreement between/among the parties with a veto right. That's why my answer would surely be: NO!
Have you seen Sweet November? Perhaps, you could tell us why the bid was rejected, nope?
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