Archaeology as a Business

[drpeterwardle]

Archaeology as a Business.

As the thread on BAJR/IFA/Prospect etc has evolved into a discussion about the nature of archaeology as a business and what the costs are, I thought I would start up a thread to discuss some of these issues that those of us who run businesses and others etc might like to discuss.

I actually take heart at the business things being discussed ? even if I disagree with them. Just 10 years ago to talk about archaeology as a business was just not acceptable.

In answer to the question of how much PI insurance is ? outrageous is my answer.

Similarly we could discuss if a hard hat given to a client is a legitimate extra, marketing, or is it a general overhead? (It affects which tax category you put the item in).

Peter Wardle

[drpeterwardle]

In response to Peter Muckle. see below

I actually work on 33% depreciation for computer kit. I am a consultant and so I dont need a total station. The figures I am using are based upon my own personal overhead not with staff.

I rarely employ staff who I charge out as I generally use sub-contractors. In the main I charge a management fee rather than a per centage. (I know this does make business sense). When I do 3% goes straight to the insurance man next year. I may be charging out an employee soon so I am currently doing all the calculations and monitoring the increase in my overheads. In my case as I rarely bid for anything competatively it will be what my clients think is reasonable (what I can get away with).

The figure you quote of 25k for kit is what I would expect a small team to have (5 people including a vehicle). As insurance is done or mine is on a % of turnever 2-3k does not sound too bad for that cover for a small contracting team.

The bill of quantities approach I mention is a good half way house between a day rate basis and a fixed price contract. It is at least a mechanism for calculating costs etc for extra. Charging by the post hole who be daft!

There is also the point I have to know on what basis a costs is calculated in order to stay within IFA regs.

I know it is not a popular method of costing things.

Best wishes

Peter

Maybe you don't include asset depreciation at 25%, or your needs are modest. We nearly ?25,000 of equipment (computers, printers, camera, surveying equipment etc), which account for ?5-6,000 of overheads before anything else is taken into account. So it does depend on the type of work you do. We've also got to extend PL and PI insurance to cover a minimum of 10 million for my next job, which will probably be 2-3K. There's 9K gone already.

We are not extravagent - my wife cuts my hair and I wear my brother's wedding suit, when needed, therefore saving nearly ?700 per year. We even swapped the Doberman watchdog for a couple of Jack Russels to reduce the feeding and vets bill.

As a matter of interest, what is your hire-out/wage ratio for employees, after you have costed it up?

I don't agree with costing excavations on a piece-work basis - does this earn you pay your diggers according to how many postholes they get through? There's probably a good reason why units struggle to quote on this basis.

I was not being cruel and inhumane when I suggested employees are a commodity - this was probably the wrong phrase (confusing with Marx as well). But they are contracted to supply labour/skills, to produce 'things' which are then exchanged for money.

Pete Muckle

Only joking about the dog.

[Pete M]

quote:Originally posted by drpeterwardle

Archaeology as a Business.
Similarly we could discuss if a hard hat given to a client is a legitimate extra, marketing, or is it a general overhead? (It affects which tax category you put the item in).

It depends - if the hardhat carries your logo and phone number, and you don't get it back, it is marketing.

How do you get away with 33% on computers? Last year it was 100%, but I thought the chancellor moved it back again - I could be wrong.

Other things abour wages - employees can 'cost' up to 70% of their wages, when training etc is taken into account (ie if they are going to be employed professionally). So to offer a 20K wages could cost the business 30K or more. I think the leap from consultant to contractor can be tricky!

I've seen building contractors who divide 10 million annual turnover using a simple 50% labour, 30% materials and 20% overheads and 20% profit.

A chartered surveyor I worked with simply added 15% for profit to his hourly fee, but didn't charge for milage. He was ?50 per hour, ?150 for verbal advice and ?450 for written, because of the PI. He also had a ICS list of recommended prices for different types of work, which he used as a guide. I'm not sure if he had to follow them, but it meant you would select a surveyor on quality as the prices would be similar. Recommended minumums aren't a bad idea.

As you said, income-cost=profit whatever the division.

I don't tender competively much either. If I'm not already working to a sum fixed by the client (off the top of their heads), I first think of a figure off the top of my head according to what I reckon. Then I work it out top-down, breaking the project into phases, labour, materials, travel etc and estimate number of days/miles, calculated against rates. Then I estimate how many units of work I have to complete (eg survey records/ponts), and how long each unit will take. This gives me three different types of figures, which I then compare and mess around with further on the spreadsheet.

Some clients want a breakdown, others a single figure. One had a fixed sum but wouldn't tell me what is was, and I had to play quotation battleships with him by sending 6 different submissions until I sunk him.

It can be hard to get a client to pay for 'extras' (another common builders invoice item), and I also try to give a price menu based on units, if I can - so the client can work out for themselves how many units thet can afford.

Archaeologists often seem to work to fixed prices whatever the circumstances - this is one thing that we need to change. How do the prices of construction projects manage to spiral (Say the Scottish parliament) when they at least have the luxury of defining a finished job. Maybe this is for the curators to work on.

I don't see the IFA being able to handle all this stuff and would like to see an institute of chartered archaeologists, for independant professionals with high entrance qualifications, close accountability and annual review. I think I'm rambling now.

All the best

Pete Muckle

[voice of reason]

From recent (and bitter) experience if you really want to know what increasingly and depressingly prevents the charging of decent rates and hence ultimately salary increase for all levels within contracting units, is the growth of archaeological consultants as the procurers of archaeological fieldwork. Maybe not you, but certainly your compadres in this area, are in a situation where the only justification for taking the clients' cash is to push down costs by allocating projects wholly on price competition (often in less than transparent processes and with a lack of understanding of what digging a site actually involves) by yoofs in sharp suits who have never got their hands dirty.

Rant over. For the time being.

[voice of reason]

You said:

"My point in a nutshell is this. Where does the money go - is it due to the inefficiency of the business, the liability of the employer or profit. We have agreed it is not the third possibility which of the other two is it.

There are overheads, there is a cost to employing them other than the wages.."

Well recognised - but have you ever run (I mean run, not worked for) a business with more than one man and his dog? I don't want to re-enumerate the list but businesses of the scale I work in have considerable overheads which have to be allocated to everybody's day rates, mine included - how's about several 10s of ?k in rent per annum? business rates for that sort of scale of operation?

To continue to bore you if you want, can I add other things to the list previously supplied like the books for our library, subcriptions to societies etc, marketing and promotion (or should we just sit and wait for clients to realise how god we are?). Then there is the sub for being an RAO each year - do you know how much that is and how much non fee-earning time is spent in servicing that? paying for the disposal of your waste rather than leaving it out for the binman? what about the annual cost of having all two hundred or more of your electrical appliances tested for safety as required by law? servicing fire extinguishers to make sure people don't die? fire and intruder alarm costs - not capital installation but subsciption to monioring and call-out services to make sure your premises don't burn down and everything doesn't get nicked? office cleaning (H & S requirement, don't you know). Time doing staff appraisals and trying to match up their aspirations with business aims. Oh, and maybe dead time spent talking to the staff in idle conversation and treating them as human beings.

Should I go on? We have dozens more things I could list but, fundamentally, you are talking nonsense.

Now then, where did I put all that wasted cash?

ps we do make surplus, all of which is reivetsed in the business.

[Pete M]

Sounds a bad situation.

If the consultant was being paid a fixed percentage of the final cost then the opposite charge could be laid by the client.

Lots of large consultancies now have their own management staff who manage the contracts. These are the ones I suggest are watched.

Pete

[drpeterwardle]

I will respond in detail in due course.

I cannot get away with a 33% right off on kit - I distinguish between what it costs and what the revenue allow.

I will however comment on the phrase ...
"by yoofs in sharp suits who have never got their hands dirty."
I would state I am time served on getting my hands and everything else dirty. I will mention, therefore, a few sites Thwing Hazleton Avebury Caerleon Usk Abergavenny Coppergate Trondheim. On saturday I even used a trowel on an ameteur dig for a few minutes!

Have I run a large organisation - formally yes - for a short period of time before I fell out with them on how projects should be costed. I have also had none archaeology management jobs and I have employed upto 17 sub contractors in a year. I have also had one of those jobs on the city that everybody talks about but why should I even bother defending myself?

Voice of reason have you? who are you: keep on boring me. At least identify yourself. As you say (or should we just sit and wait for clients to realise how god we are?). Marketing is key.

As to the hard hat question I posed which cost ?4 from Jewsons over the road - it is marketing - as the client said the ******* builders have never thought to give me one. The client has my wife's hard hat - ?4 on the fee I am getting it is nickel and dime stuff. The client on earth is pretty close to god - ?4 to kept him within H&S regulations is something I would pay out of my own pocket! I know how much repeat business is involved and how much heritage he is responcible for.

Peter

(expecting to be barred for being too flippant)

[Pete M]

quote:Originally posted by Pete MI've seen building contractors who divide 10 million annual turnover using a simple 50% labour, 30% materials and 20% overheads and 20% profit.

and get 120%! I meant to combine the last two. Not that it matters - the point was about loose business formulae.

All the best

Pete Muckle

[voice of reason]

I will however comment on the phrase ...
"by yoofs in sharp suits who have never got their hands dirty."
I would state I am time served on getting my hands and everything else dirty. I will mention, therefore, a few sites Thwing Hazleton Avebury Caerleon Usk Abergavenny Coppergate Trondheim. On saturday I even used a trowel on an ameteur dig for a few minutes!

No problem with that, and without being unduly personal, I suspect the phrase 'yoof' could not be applied to you . I was referring to some of your fellow consultants.

[drpeterwardle]

They are not fellow consultants they are the business rivals and the competition. They are certainly not comrades.

Peter

BTW there is the cost of broadband ?280 a year at least at the cheapest rate. Postage - how much do you spend on sending reports and copy correspondence. Toner for those printing - a colour laser toner costs ?400 to replace them all - more than the cost of the computer or the printer.