Challenges in the interpreting field
There are two primary groups that create the interpreting industry: agencies and interpreters. The sign language interpreting field is not sustainable. I have identified three areas that need to be addressed; each presents new challenges and new opportunities.
Disclaimer: the interpreting field is made up of largely private businesses that do not report their internal data. My work has provided me opportunities to see trends and challenges across small to large agencies, over several states. I am unable to cite some of these statistics because of the proprietary nature of the data.
Here are the three issues that need to be addressed:
- An interpreting agency as a profitable business
A) Fixing the profit margin
B) Trying to scale
- Interpreters as a commodity
- Interpreters in leadership (to come in a future post)
A) The Peter Principle
An interpreting agency as a profitable business
Many people have had a lot to say about how referral service agencies (including the new Uber-style of agencies, like
Vineya and  Linguabee) have influenced the interpreting profession. Interpreters have soapboxes upon soapboxes to stand on. This might not be what you're expecting to read. The core issue for agencies is very simple; they do not make enough money to satisfy investors and owners. Interpreters might imagine luxurious owners of for-profit agencies, or see the budgets of larger non-profit agencies, and see dollar signs. But the truth is, the profit margin for sign language interpreting services is similar or less than the average service business or what businesses, in general, should aim to achieve. In a service industry, around 25%-30% is the typical profit margin that still maintains a low price-point that is appealing to buyers. In the interpreting field, “healthy” agencies fluctuate between 12–18% EBITDA, or "Earnings Before Interest, Taxes, Deductions, and Amortization."
Fixing the profit margin
The next logical question is, “well, how can I fix it?” There are two simple ways to change your profit margin: charge more or spend less on overhead costs. Unsurprisingly, interpreters (both, employee and independent contractors) are the single most expensive piece of overhead that an agency absorbs into their costs. And, unlike in manufacturing where bulk sales can result in savings through economies of scale, an interpreter costs the same per hour for 2 billable hours or 10 hours. Here are some simple, ballpark numbers (in an ideal situation):
|ACME Agency charges||$65.00 per hour|
|Spends||$40.00 per hour to interpreters|
|Spends||$1.00 to $4.00 for the scheduling platform & software|
|Spends||$14.00 or more for staff, rent, utilities, insurance, etc.|
|ACME Agency nets||around $9 per hour and about a 14% profit margin|
But, what if ACME only needed to pay an interpreter $25.00 an hour? In the simplest sense, the agency is still providing the same service with significant savings. Instantly (and, short-sightedly) this company goes from a 14% margin to a 37% margin, and the profitability picture is dramatically different. How does ACME cut $15.00 of overhead per hour? Primarily by using non-certified interpreters.
Even if ACME doesn’t exclusively move to non-certified interpreters, if they can have a bulk of their work performed by newly certified and non-certified interpreters, they could achieve a 20+% EBITDA margin. Intentional or not, interpreters have set themselves up to be undercut by cheaper interpreters.
As I've said many times,
being a freelance interpreter is a practice in pure capitalism: you are your own business, your own brand, you have no safety net, and you have no protection.
Instead of taking those savings as profit, the other outcome could be that ACME takes half of that $15.00 per hour savings, and now they only bid at $57.50 per hour to undercut the competition. We have a new rate that other agencies will try to scramble to meet, and experienced interpreters simply cannot participate in that work. Seasoned, quality interpreters frequently request a contracted compensation rate of $50.00-$60.00 per hour (in metro areas, averaged nation-wide). Even with a $65 bid rate, the agency would break even, or more likely lose money in that situation. So, less work goes to those interpreters, or agencies choose not to contract with the so-called “expensive” interpreters.
Check out the rest of the State of Interpreting series to read more.
And the opportunities these challenges present.