World’s Largest LSPs Report a Strong 2018
CSA Research periodically queries language service providers to determine the balance of opinion on profitability and growth, the two most referenced benchmarks for this market. We periodically ask them for their results − up, down, or unchanged − to three economic questions on growth, profitability, and rates.
Our preliminary review of the survey responses to CSA Research’s annual Global Market Study focused on the 195 largest companies in our Top LSPs™ rankings. The results show that a majority of these market leaders increased their revenue over the previous year with the same or higher profit margins.
- Revenue increased for the majority of companies. Seventy percent of survey respondents reported that their turnover rose in 2018. Based on a follow-up survey we did with these companies in September, we learned that the most shared paths to LSPs growing revenue, besides acquisition, were a strong focus on one or more means of organic growth: 1) sales to existing clients (most popular); 2) new business initiatives; 3) operational improvements; 4) changes to sales model, staffing, or methodology. The CSA Research report, “The Fastest-Growing LSPs: 2018,” analyzes the 22 specific activities that affect these four growth factors.
- Profits were mostly unchanged or higher. Forty-five percent of respondents said their profit margins were stable year-over-year, while 38% said their profitability rose over their previous year’s results. The formula for this benchmark is simple: profit equals revenue minus cost, while profitability is profit measured against the size of the business. Thus, successful LSPs strive for efficiency in delivering projects for the lowest cost while reducing operating costs with more efficient resources and eliminating waste and other inefficiencies in their processes (“How LSPs Can Remove Waste in the Process”).
- Rates remained stable. Seventy-two percent achieved this revenue growth and profitability without raising the prices that they charge to clients. This indicates they had achieved some equilibrium of revenue and cost. However, other factors such as machine translation, long-term contracts, intense competition, and client pushback put an external damper on the LSPs’ ability to raise prices.
These results align with the outlook from our January 2018 confidence survey and a follow-up survey conducted in August and September 2018 among CEOs of LSPs in our list of the Top 100 LSPs™, 85% of whom projected growth for their 2018 revenue while 90% saw volumes continue to rise.
How does this basic data apply to LSPs, large and small? One recommendation from our report on the fastest-growing LSPs of 2018 was to follow the practices of these leaders: build a strong sales organization and review sales to existing clients; expand your portfolio of business into other sectors, geographies, and products; and develop new initiatives to win clients that will drive future growth. These initiatives will generate new pressures that drive operational improvements in marketing, selling, producing, and supporting business. Finally, review on a regular and annual basis potential changes to your sales model, staffing, or methodology to create conditions that can fuel your growth.
As soon as we complete our verification of the 2019 survey responses and validate the representative sample, CSA Research will produce comprehensive data and insights on the outlook for the language services industry.
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