For every dollar you spend on translation, how much can you expect to get back? How can you calculate the return on your investment (ROI) on translation? This question is at the crux of the decision on the minds of many business people, weighing whether or not to translate their web site or communication materials for international markets.

If the answer isn’t obvious by doing some simple math, here is a more complex formula you can use:

ROI  =  P ( S x C ) / N² – T

ROI = Purpose for Market Entry ( Size of Market X Customer Need of Product ) / Number of Markets²  – Translation Cost

I’ve devised this fancy formula by combining Einsteinian physics with years of my own experience working with hundreds of companies, both large and small – summed up just yesterday at lunch – which, by the way, I scribbled on the back of a receipt for Cheese Quesadilla from Harry’s Burritos.

This formula has yet to stand up against the rigors of scientific review, but by George, I think it can actually work! It was put together with roughly the same precision that my Quesadilla was prepared at Harry’s, by their skilled chef (which provided me with a tremendous return on investment – I might add) but precise enough to summarize the key things for you to consider when coming up with a return on investment calculation for translations.

Here are the definitions:

P = Purpose for Market Entry – Why are you translating? There are typically three camps here;

A. Those Who Have to – in this camp, your not translating completely can result in massive fines imposed by government bodies. (For example, Clinical Trials, or Instructions For Use communications for medical devices. Non-compliance = heavy fines)

B. Those Who Need to – for the businesses in this camp, you need to translate because you already have customers waiting for product to be delivered with accompanying communication material, and if you don’t translate on time, you won’t receive revenues on time. If the translations aren’t there – the customers will go to the nearest competitor, which may be locally based.

C. Those Who Want to – these businesses see the opportunity to gain market share in locales where their prospects are or where their competitors aren’t and take full advantage of it.

S = Size of Market – An estimate of the number of your prospects.

C = Customer Need of Product – An outline of your customer profile in that locale, and a positive answer to the question of whether or not they need (or can use) your product in that locale? (Are you selling ice to Eskimos?)

N = Number of Markets – Here you are simply counting how many locales you are thinking of going into. (Locale is defined as ‘Country + Language’)

T = Cost of Translation – This is the total cost of translation services, which is typically calculated by multiplying the total number of words that need to be translated by the word rates associated with your target markets.

The bottom line? Translations are cheap. Loosing market share is expensive. Consider the impact of not translating and see where that takes you. Or consider how much revenue can be gained by simply providing information in local languages. Granted that translation is only a piece of the cost of doing business internationally, but it is an essential piece. Taken by itself, the cost should be negligible. To this point, I’ve heard of a statistic recently that found most Fortune 2000 companies spend more money on toilet paper than they do on translations, and many of those companies do not even budget for translations since the cost is so low.

The ROI answer will be different for each company depending on what values they put into this. But in most of the business cases I’ve seen my customers create, the answer was overwhelmingly “YES!”, it makes sense to translate and doing so opens markets and retains global customers.

In 2010, The Localization Industry Standards Association (Lisa), showed a calculation which gave an average of $25 return on $1 invested in translation.

If you’re having problems figuring out how this formula can work for your business, feel free to contact me. I am happy to discuss it.