During a short vacation in London in March 2009, I came across a book, The Tao of Warren Buffett, the Oracle of Omaha, written by Mary Buffett and David Clark. It’s a small pocket book, but I felt I needed it. I started reading the first few pages on the flight back to Cleveland, then left it in my library for a while. A long while.
21 months later, I found myself in need to read something else besides The World of Words and God is not Great. Perhaps I could find something that would help me understand better the mind of the businessman. I am no stranger to the concept of business, since I went to a business high school. I know the basics of reading balance sheets, understanding return on investment and keeping low debt.
I resumed my reading at Rule 23 (“Anything that can’t go on forever will end”). On Rule 25, Buffett says that accounting is the language of business. One of the variables in any business is cost, which has to be a small percentage of your revenue to make any type of profit. Cash flow is another variable to keep an eye on. Perhaps your costs are low but if you have a cash flow problem (ie, your sales are mainly seasonal, such as snow removal), then the business will not survive unless you increase sales or leverage it heavily.
I kept this point, that accounting is the language of business, in the back of my head as I continued reading tonight. In Rule (or Chapter) 33, Buffett talks about how corporations grow by buying other companies and he sees such companies in two categories. The first one includes companies that have what he calls a durable competitive advantage. The second category includes what he calls commodity-type businesses, which he characterizes as companies “with low return on equity and erratic earnings.” I will attempt to translate into layman’s terms these two categories: category 1 is comprised of companies that have a high-value product or service, thus standing out from the competition in the long term; category 2 is comprised of companies that offer low-price products or services and get a very thin margin of profitability. They make money by selling in bulk.
Now, allow me to extrapolate these two categories to translation companies. Category 1 language service providers offer a high-value, high-priced service. This high price is due to the fact that their service is a durable competitive advantage, it adds value to your own product or service. This value is high because it can generate a durable business relationship or partnership, regardless of the economic or industry ups and downs in America or elsewhere.
Category 2 language service providers, on the other hand, offer a low-priced product or service because it does not add value. It is predicated on high volumes and low returns for the provider. The provider’s relationship with you is only as durable as its margin of return, which is razor thin due to the highly competitive nature of today’s translation market. Because this provider knows you can replace him with another low-cost provider at any time, there is no built-in loyalty in their relationship or partnership with you and he or she will try to lock you in with an upsell, such as a proprietary project management tool or CAT tool.
Compared to most translators that you can find on auction-style portals such as Proz, Translators’ Café, ODesk or Elance, I am expensive. The values I offer you are trust in your company, a durable partnership and enthusiasm for your product or service. My excellent writing skills are the frosting on the proverbial cake.