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Ask HN: I cannot afford to scale…
53 points by roblobue on Nov 1, 2011 | hide | past | web | favorite | 44 comments
… but I cannot afford not to.

Almost a year ago I decided to quit my job and start 2011 doing something I've always wanted to do: start my own company. I started with two primary aims: 1) to provide the best, most accessible app translation service and 2) learn as much as I can about running a business as possible. I decided from the very start it was ok if there were a few mistakes along the way, just learn from them for the future.

Now I'm at a point where my knowledge escapes me and I'm looking for some advice as I'm beginning to turn away customers.

My revenue is client based. A small iOS or Mac OS app can take me around 4-5 hours of my time in a week. A medium sized app 8-10 hours. A big app or a technical app takes me much much longer. And that's only if things go well. You all know client work involves last minute changes and lengthy email discussions.

As you can see with those times, there's only so much I can do.

I don't charge enough. Revenue minus costs is healthy, until you factor in my own time. When we're talking pennies per word ($0.14 USD per word) you can see how a small project (250 words) costs me money and a big project (4000 words) costs me a lot of time (which means I have to refuse other projects). I can't increase costs because of competition, even though I am sure my service provides a much higher quality translation.

I can't afford to take a second person on. We will be able to take on more work, sure, but I can't guarantee someone a full-time position. Maybe I could use a vWorker, but I want a relationship with my colleagues. I need to know we're on the same page.

So as you can see, I need a bit of advice. I love my clients and the rapport I have with them. But I need to expand and move this away from a life-style business into something a bit more automated (while maintaining quality).

Hi! This is the Market Economics Fairy! I help supply and demand equilibrate everywhere! If you're turning away customers it means you've set your prices too low! Raise your prices until you have exactly as many customers as you can handle!

Sincerely, the Market Economics Fairy!

I also recommend playing a game like lemonade tycoon, it pretty much explains stuff like this.

I think you have an 'easy' choice here.

1. Like other people have said, increase your price and fewer people remain. It is polite self selection

2. Outsource the actual job. make your job relating with the customer and pay people to do the translation (per job). your work will be to review what they have done and interact with the customer.

3. Focus on the one that had higher money/time ratio. So if it is the highly technical jobs or the phone apps, you chose.

Congratulations, you have a good problem :).

PS: NEVER reduce your quality.

There's always the possibility you increase your price and no one leaves. Companies do this all the time.

Again, a great problem to have. More cost effective to hire help if you want to expand. Or repeat increases to diminish demand. Profit!

Hi Guys,

Thanks for all the answers so far - much much appreciated. A few points I should clear up.

1) I do outsource translation. I work closely with a group of freelance translators who I interviewed back in January when I started up. I wish I could speak 20 languages, but I don't ;-)

2) Running a business unfortunately isn't just Project Management and Project QA. There's also finances, marketing, the website to maintain. Certain things can be outsourced, and I have for the smaller jobs.

3) I am happy to make some investments to improve long term returns. Indeed, I didn't pay myself last month to pay for a few improvements. Not ideal when you have rent, but sometimes sacrifices have to be made and I'm ok with that.

4) After reading your comments I'm a little less nervous about increasing prices. I worry, of course I do, that'll I'll be too expensive. Pricing is definitely something I am learning, it isn't easy.

What do you guys think about partnering with someone? Perhaps taking on a junior partner so we can work together towards common aim of Applingua… Is this ever a good idea?

If you are really concerned about raising prices (I wouldn't be; I think you should raise them across the board), you could try just charging new clients/users the higher rate. Adds complexity to your system, however.

Edit - just saw the question. The problem right now is not that you don't have a partner; it's that you don't charge enough for the work you're doing. Adding a partner is going to create another set of distractions and issues.

Charge more. You seem to be stuck with the idea that if you charge more you will lose clients. Do you have any evidence that this is true? Have you talked to existing clients and said "I'm pretty busy, but if you pay X I can fit you in this week?" What did they say to that? Did you try putting out a new ad with higher rates? Do you get lower feedback? Or the same feedback.

You sound like your working in the apple software space. This is good for you, since mac app developers are more likely to be small, indie and not bigco enterprise shops. They are more likely to want to "be cool" and not want to be greedy uncle scrooge.

So that's the story you tell them when you want to raise your prices.

Tell them that you're a small indie shop, that you love working for other small indie developers working with teams that "get it" and love to produce beautiful apps. Tell them you're glad you're not working for soulless megacorporations who want to turn software into Walmart. Then tell them that you'd love to keep working with cool people like them, but you're running out of money, and would they mind paying more. Hopefully they will want to not be seen as heartless corporations like Microsoft that peddle cheap junk, and will agree to a rise.

> I can't increase costs because of competition, even though I am sure my service provides a much higher quality translation.

Self-limiting belief. Self-fulfilling prophecy. Whatever you want to call it, this one single sentence will kill your business.

If you are providing a higher quality service than the competition, then guess what? You should be charging more.

If you're not getting the clients you need when charging more ... well, your marketing sucks. Position yourself as a premium service. Provide a better experience and charge for it. Get customers by encouraging referrals, etc, etc.

Look at Apple. They charge twice as much as their competitors for the same hardware. Why? They provide a premium experience and they charge extra for it.

Why are you competing on cost?

You say you cannot increase costs because of competition? Are you sure about this? I understand its scary to price yourself above competitors, but that doesn't mean you can't do it.

For example, the software I sell is more expensive than all of the competing products. However, I know that as we have similar fixed costs, I only need to sell around 1/3 the volume that they do in order to make a similar profit. People don't always go for the cheapest option- indeed most people avoid it.

Until you've tried raising your price you really don't know what you can get away with (and I think you may be surprised, especially if you're getting people coming to you via personal recommmendations). Companies like Apple have made enormous amounts of money selling products which are more expensive than the competition.

This doesn't address your scaling concern though. Are there parts of the process that are automatable? For example- could clients preprepare their app in a certain way that makes it easy to extract and translate all the data.

A good strategy for pricing in this situation is with an "express service." This allows you to keep your existing "list price" but of course the delivery time for that will go up by days/weeks/etc. Your express service has a guaranteed quick delivery at a much higher price. You now have a way to capture a premium for customers that are in a rush. It's a win-win with no risk of downside due to a complete price change.

The big issue is not that you cannot afford to scale.

It is that your business model cannot scale - effectively, you are hand crafting widgets, not leveraging technology to increase productivity.

Adding another translator, adds approximately one unit of capacity. Another document, well, that adds approximately one unit of work. Sure, growth can occur arithmetically, but there is no possibility of exponential or even geometric growth.

To make the issue more intractable, the iOS ecosystem provides less opportunity to acquire and apply more efficient tools - there is a significant degree of rigidity in the technology stack (i.e. you can't employ a tool written in LISP easily in order to improve throughput).

What you have is ownership of a small business - which is entirely consistent with your initial goal of owning a company. And you are facing the same issues all small businesses face - the problem of hiring people who might not do things exactly the same way you would.

Good luck.

  Sure, growth can occur arithmetically, but there is no possibility of exponential or even geometric growth.
nitpick: "exponential" and "geometric" refer to the same quality (there are minor mathematical differences, irrelevant in this context).

Speaking as someone going through the process of commoditising at a fixed price what is traditionally a very variable price service business, my biggest piece of advice is figure out how to be profitable at one type of job in this space, systemise and do only that, and say not to everything else.

Once you're profitable at that one type of job ("type" here could be size of app, type of client, whatever) you can repeat the process. Rome wasn't built in a day and you don't have to cater to everyone immediately.

Work out how you can automate each step, but most importantly the qualification step that will tell you if the client is a profitable one for your process or not.

Once you've done this, you'll find it easier to outsource each part of the process.

Don't assume that you cannot charge more than the competition. If your service is better / faster / higher quality / more personal and so on, customers will be willing to pay a premium. Perhaps not all of them, but some.

You can always quote a higher initial price, and if the potential customer makes it clear that it is more than he's willing to pay, you give him a "new customer discount". Then, once he knows how great your service is, he might become a return customer and then pay the full price.

Two things I would recommend:

1) Charge more. Lots of other people have said that too. If you have to turn away customers, then you know you can raise your rates. You need to do a/b testing on this (i.e. high-low) until you find the proper rate at which the number of customers is balanced by the price you charge.

2) You need to automate some stuff. If I were you, I would invest a little time into writing a simple tool where you can enter the corpus of text and translate it via Google Translate. If you set up your tool to allow multiple inputs, you can easily start a project by filling in all the text to be translated and hit "Go". Afterwords, you just go through each translated entry and correct things. This should be significantly easier than doing every single thing by hand, over and over.

Also consider "small scale automation". Maybe you can't automate a process or even part of a process and maintain the level of quality you're looking for, but take a look at the individual tools you're using and whether or not you're using them efficiently when performing specific steps. Is switching back and forth between apps too slow? Are there keyboard shortcuts you should become familiar with? Are there plug-ins/extensions that can automate something simple (in the .Net space, something that might help an app translation process is a refactoring macro that will "extract selected string to resource file".

And as others have said... if you're product is better, raise your price. Just be ready to explain WHY you're better to your customers. :)

Firstly, set a minimum per project. There is a overhead to every project and that needs to be accounted for. Each project needs to make enough profit to buy you lunch.

Secondly, look at any non-key functions that you are performing and see if a Virtual Assistant can help you with.

Thirdly, you have to believe this: people are not that price sensitive. You might be $50 more expensive than other people, but most don't care about that $50, especially if it is paid for by the company, and there are other factors - deadlines, professionalism, etc.

Fourthly, try hard to increase your quotes until 20% of people reject you for being too expensive. If you are in a price competition, you will always invariaribly feel stuck in the future just like you are now.

Unfortunately the vast majority of iOS/Mac OS developers are individuals/small teams. Prices do matter to them, especially if they are taking a chance with localization.

The 20% rule is interesting. And I'll definitely consider this. Thanks.

Also provide the developers with a stats plugin that can collect usages based on languages. Tell them it will help you and them figure out which languages are worthwhile targetting and which aren't.

Later, use this data as a differentiator since you have a lot of aggregate behavior.

This post piqued my interest because I've been working for one of the bigger players in the translation industry, and I have a lot of thoughts about your predicament.

You are a commodity. That's the reason why it's difficult to raise your prices. App developers could easily find alternatives to your service quite easily... they can go to myGengo or tens of other services (including the company I work for), and they could probably get it at a cheaper price. When you have a situation like that, then you have no leverage.

You need to find your differentiation. For example, a good niche some translation companies we work with specialize in medical translation. You can't easily substitute translators with medical expertise... They have more price leverage than your regular run-of-the-mill translator. I'm not sure what specialties you have in your skillset, but you need to find a niche that you can serve.

Another differentiator is speed. The translation industry is changing rapidly. In the past, most translation jobs were completed in the order of months (think documentation for Microsoft). Nowadays, most jobs require translations to be done in less than a few days (think blog posts). Running an efficient and scalable operation is quite difficult.

I have much more to say, but I'm at work, so I'll reply later.

Hi Peter, great comment. Thanks. I'd love to hear more from you and you can add me to Skype on "robertlobue" or "applingua" if you want. Or rlobue at gmail . com

Raise your rates. It is simple. If you provide a higher quality service then you will continue to do well. As you said you are turning away potential clients at this point. That means you have very little to lose by raising your rates a bit. You are already losing business, might as well turn a better profit while you do it.

1. Raise your prices 2. Find someone locally to help part time with translation. In this economy, there have gotta be some good bi-lingual people who need some extra cash irregularly to do translation. 3. Create a system to make the process more scalable, so that the person doing the translation doesn't need to know anything about programming. 4. Find more hours in the day and push yourself until you do have enough fulltime work for a second person. 5. Setup good relations with app developers that you've already worked with. They are going to keep creating apps, and their new apps, updates, etc... will all need translation. This can help make work more steady.

Just thought I'd point out that you're running a service business not a product business, there is plenty written on this topic, there's nothing inherently wrong with running a service business but they are known to be harder to scale, for example VC's also tend to shy away from investing in service businesses. I'd recommend reading up on other service business and how they have dealt with the challenges you're facing as the challenges are bound to be different from a product business (which is what most web startups are aiming to be)

You answered your own question.

"I don't charge enough."

Tada. Fix that.

Don't be afraid of charging for something the brings value to the table. I see a little bit of both, crappy apps charging huge amounts of $ and awesome apps almost for free. It amazes me how can companies or developers put so lower prices and something that probably took them a lot of time to create. So, if your app is awesome, users recommend it, charge it for the right price. You might loose cheap clients, but you highlight yourself from the competition.

You could follow the advice of many commenters here and increase prices. I recommend you increase prices on new customers, but maintain similar prices for current customers, since they've been early adopters of your service. The danger of suddenly raising prices on existing customers (or radically changing the service) is that you might lose them (see Netflix).

If your level of service is better than your competition, you should charge more. Price is of course a parameter to compete on, but it is not the most important one.

The cheaper competition no doubt have much more work, and many more customers. Even so, they will be much less profitable.

oh yeah, and find some real companies as clients, by this I mean companies that have like 50+ employees, that have budgets and established products etc. I work for a company with 100, or so, employees that has an established web app product and I have heard our CTO talk on more than one occassion about the difficulty in finding a good English to Japanese translator for the web app.. If you find the right clients (and a lot of web app companies nowadays are "going global") then charging more shouldn't be an issue as, with bigger companies, cost isn't usually the main issue so much as quality of work. Limiting yourself to just doing Apple phone apps is going to put a major constraint on your growth.

outsource it.

http://mygengo.com should sort you out.

you still take on clients, you just won't be the one doing all the translation yourself. your role will be more of a project manager / QA role. should be easier to scale.

MyGengo doesn't scale very well when you have large catalogs of strings. Their frontend interface is nice but is missing a useful search and it has lots of little bugs.

If anyone has an alternative for a translations editor that works well with PO files, let me know.

Outsource the writing, then spend time doing the quality checking rather than the hard yards. That should allow you to scale 2-3x faster & take on more work.

The downside is trying to find good contractors who can translate to a standard that you set.

Good luck!

That's exactly what I am doing. Translation agencies nearly always operate by employing freelance translators. All of my translators are freelance (though have all gone through my trainings and we enjoy a very close relationship during the work day via Skype). My job is business (and everything that goes with it), project management, development (xib customization), QA and proof reader. I'm "doing" too much, but like I said, can't afford the time / money at the moment to get someone else on board.

You could try outsourcing to Language Students at a local University. They are probably cheaper than other local translators (don't take the piss) and could become employees as you scale.

We did exactly this last time we needed translation work to be done.

Put up flyers in the local universities offering part time work to students with good english and fluent in one of various other languages.

We had litterly HUNDREDS of applicants even though the pay was only marginally above minimum wage and some very good candidates to choose from. Of course there is a big imbalance for different languages depending on the ethnic makeup of your local universities.

Many of the foreign students are quite well off financially anyway and don't care about the money, they just want the opportunity to improve their english and add to their resume, of course you have to be wary of visa issues.

Look for free ways to scale before you pay for them.

Aim to get to the point where it takes you the same amount of time to deal with 1 customer or 100. What would that process look like?

Maybe something like...The client hires you, you assess the requirements, send details to the translator and then all future project messages go straight to the translator (or a virtual assistant), you fix unusual/unique issues and issue the invoice. Rinse & repeat.

If you're entering into lengthy e-mail discussions try to find recurring topics/issues across all of your clients. Can you refine the requirements gathering process at the beginning of a project to save you time at the end?

Anticipate the standard number of hours needed for support and add a percentage onto your prices for "support issues". You can happily say this price also includes x amount of after-care.

If your client chooses not to have this added on up front you can say that unplanned support hours cost $xx. Knowing that your time is a premium ensures they are clear and concise with you from the start. Fixed price jobs are prone to requirements creep.

You're paying in so much time by reading long client e-mails, replying to them and then forwarding important info onto your translators. Maybe by discussing with a client on a recorded Skype call instead of e-mail you cut time needed down to 1/3.

Analyse your working day. Any repetitive task can be automated/outsourced made quicker or eliminated completely.

What types of task take up your day?

How long does it take to get your computer ready in the morning? Add programs to start-up, get frequently used websites saved to permanent tabs. Is filing paperwork/accounts simple? Any task over 10mins needs to be considered.

I know it sounds wrong but you've got to work yourself out of the business as a critical cog. You (i.e your time) are the bottleneck stopping you making more money.

Maybe having a virtual assistant for a few hours per day would be a low cost way of helping with communication back log. They could take info out of mails and forward to the translator working on it in a template. Or they could read mails and highlight the critical info for you consider.

It sounds as though your business is at a turning point where your job role needs to change to progress, move away from day to day work and more towards finding new clients and streamlining.

Your overall job is to remove obstacles for yourself and those that you employ.

Best of luck!!

Do you get much repeat business? Can you speak to old/previous clients and find out what they would be willing to pay?

Can you improve your own productivity, what takes up most of your time when managing the translation?

Many services are very hard to pin a price on.

Raise yours. Find new people willing to pay the increased rates.

Oddly enough, I've found raising prices to make people MORE DETERMINED to get you sometimes.

If you can't charge more then you need to spend less time doing the work. Is there a way you can automate your process more?

Thats what I was thinking... rather than translating from scratch perhaps put it out to Mechanical Turk or another automated translator, than refine manually using your expertise?

> You all know client work involves last minute changes and lengthy email discussions.

For which they should be billed. By the hour.

If they want a fixed price contract, they can go elsewhere and find a job shop that will never go the extra mile when the time runs out. Emphasize the value proposition you bring by providing in-depth professional services. Emphasize the fact that your extra billable hours are pay-as-you-go: every time something gets worked out, they are getting proof of just how much you are worth.

The problem isn't that you can't scale, the issue is that you can't scale with the current business model.

Looking at your website (Applingua), I have noticed a few things which can be done to solve this.

First of all, your pricing strategy is wrong and part of the reason is what, you yourself admit that you don't charge enough as a small project is costing you money and a large project costs you time.

To fix your pricing strategy, I would implement the following changes:

First of all, I would implement a set fee for a certain amount of words and then $0.xx per word afterwards. This would instantly prevent "small projects" costing you money as for example you can decide upto 500 words = $xx then $0.xx per word after so words under this amount would be "profitable" for you so to speak since you're getting paid for more words than you are actually translating.

Additionally, I would also offer an "express" service like PSD to HTML services offer with premiums being charged on delivery times. Many small teams/single devs use these and pay for the "premium" feature of express service - you definitely should implement this into your service.

For example, turnaround time would be offered to all customers for instance at 5 working days, and then they can pay an additional fee for the express service i.e. $10+ for 3 days, $20+ for 48 hours , $35+ for 24 hours and even $50+ for the same day (providing it is before a certain time) - Obviously, these are example express pricing fees and turnaround times so you can edit these to suit your needs.

Upon, doing all of this I would also slightly increase your prices slightly by a couple of pennies on each of your offerings.

This would mean that you would have a new pricing structure, that would give you an inital set fee for your work and even more money for certain jobs than you would initally receive as well as, additional revenue from your express service. Likewise, the slight increase will also help your profitability and help solve the fact that you don't charge enough.

With regards to being able to take on more work via employing someone then, there are a few methods and options available to you for this.

First of all, you could employ a student on a part-time basis (since you can't guarantee a full time position) meaning you could take in more work as well as, provide them with relevant work experience especially if they are a language student.

Secondly, you should focus on automating as much of your service as you can - even more than you are already doing. This may mean having to refer to vWorker or Automated tools etc for various aspects and using your language/freelancers language skills to "tidy" up the work so to speak whilst, maintaining the quality.

Moreover, you could also employ a Virtual Assistant as well to automate/scale-up some of aspects of your work. You can hire some VA's for $250/month and they'll work pretty much full-time for you - and you can "train" them to do various tasks for you - whether thats focusing on the marketing etc to take some burden off your shoulders and automate/scale up other aspects of your business.

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