Breakeven Calculator for LSPs
LSP Costing Calculator
Getting the numbers right in an LSP matters. This tool helps you plan your budget and shows how many words a year you need to translate to break even. Work through it in order and add your costs for the year.
Then keep that number in your head. Under pressure it is easy to give things away: a discount to win the deal, a free test piece, a quick job done as a favour. It is just as easy to let costs creep up. Each one pushes your breakeven further out of reach. Know your number before the client asks.
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1Money out this year
This is what you plan to spend. Staff costs are the total cost of employment: salary plus employer taxes, pension and benefits. Leave out your linguists if you pay them per word: they come in step 2. In-house linguists on a salary belong here.
Total fixed costs $110,000
2What each word earns you
The price you charge the client, and what you pay the translator and reviewer for the same word.
Left over from each word, after paying the linguist $0.060
That left-over amount is called the contribution. It is the only money that pays your fixed costs.
3Your breakeven
To cover every fixed cost, and make no profit and no loss, you need to sell
1,833,333
words a year
That is 152,778 a month, 35,256 a week, or 7,333 every working day.
4Add the profit you want
$You need 2,666,667 words a year, or 10,667 every working day.
5Check it against what you really sell
Profit at your volume
$40,000
27% above breakeven
How far sales can fall
666,667
words a year you could lose before you start making a loss
How breakeven works
Some costs stay the same however many words you sell: the team, the office, the software. Others rise with every word: what you pay the linguist. The difference between the price and the linguist cost is what each word contributes, and the fixed costs divided by that contribution is the number of words you need to sell before you make a penny.
Breaking that down to a working day is where it gets real. A year's target sounds abstract; a number of words every day, every week, all year, does not.
Simplified on purpose: one price, one linguist rate, fixed costs flat for the year, 250 working days. Real companies have tiers, rush rates and minimum fees, and project management time does grow with the number of jobs. The shape of the answer does not change. Changing the currency changes the symbol, not the numbers. See also The Four Levers and The Discount Machine.