For us lovers of languages and words, numbers aren’t always our best friends. But, like it or lump it, budgeting is essential. And that’s true for everyone, from freelancers through to global conglomerates. In fact, budget planning for the localization industry is perhaps even more important than in other sectors, given the many moving parts involved, like exchange rates and changing international trade and taxation arrangements. And we also need to budget not only for the business as a whole but also on an individual project basis.
Why is budget planning important?
On a very basic level, having an organizational budget in place helps you make sure you have the funds needed to cover your costs – both your regular operational costs such as vendor payments, in-house salaries, and rent and ad-hoc investments such as upgrading equipment.
The process of planning your budget also makes you prioritize your expenditure, separating the must-haves from the nice-to-haves. If you budget sensibly, you’ll have a rainy day fund that can cover costs that take you by surprise. You’ll account for potential losses caused by currency fluctuations or an unexpected downturn in work. And all this helps ensure your business’ financial stability, giving you the best possible chance of being around for many years to come.
Budgeting can also help you set goals and work towards them. This is true both of financial goals, like “increase profits by 20%” and other goals, like “diversify our income stream by offering video game localization”, because budgetary decisions can help achieve these goals.
On the individual localization project level, it’s essential your budget covers the cost of the vendors you outsource to, your project managers’ time, and your organization’s operating costs while leaving you with a respectable margin. Because, at the end of the day, if you’re not making money on each and every project, you can’t survive, let alone thrive. Make sure your localization program management team understands this. And that they understand how to do it. It might be worth thinking about upskilling them in this area.
How to plan your localization budget
A basic business budget needs to include some key elements: your average income; your fixed costs; your variable expenses; and an emergency fund. Forbes has some great tips on putting together general business budgets – our favorite three are: be realistic, be conservative, and be flexible. Watchwords for any budget planning we think.
But the localization industry is quite specific and may require a different approach. For this reason, many LSPs delve further into the detail, looking at things like margin on a per client or per project basis, or client dependency. We agree that it’s incredibly helpful to look at these aspects of your business. But we’d actually encourage you to go further and look at overall trends in these numbers. Has profitability from client X dropped dramatically in the last month? Maybe there’s been an increased demand for EN>PT translation over the last three months. Or perhaps you’ve become more dependent on client Z. By regularly analyzing trends in your business, you can maximize opportunities and resolve issues quickly. For instance, you might decide you need to increase the number of EN>PT translators on your books or boost account management for client X.
And when we’re talking trends, we need to talk Business Barometer. This incredibly useful tool has been designed to help organizations in the localization industry analyze trends in their business. It’s intuitive and user-friendly, which means you’ll not only be able to – but maybe even be inspired to – check your trends regularly. Your dashboard gives you top-level stats on your business. Meanwhile, the Quotes, Projects, and Clients tabs give you overviews of trends in each of those areas. It’s the perfect tool to help with budget planning.