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ALL CHANGE ON BUSINESS RATES

ALL CHANGE ON BUSINESS RATES

Challenging times for ratepayers: Adam Bernstein investigates

The last two years have brought challenging times for ratepayers and there is little respite on the horizon. With the 2017 revaluation, rateable values are increasing substantially throughout large swathes of the country and the high street is in the front line.

According to Richard New, a real estate litigation partner at Eversheds LLP, ratepayers pay roughly half of what the Valuation Office assess to be the market rental value for each commercial property they occupy, whether or not they own the freehold or the leasehold of that property.

The last rating list was based on 2008 rental values and the impending revaluation came into effect on 1 April 2017, with rental values being assessed as of April 2015.

New says the 2008-2015 period was an especially volatile period for the property market. “However,” he adds, “many cities were over the worst of the downturn and had started to accelerate by 2015 so have seen sizeable increases in their rateable values.”

The Valuation Office published the new rateable values in draft late last year and is inviting representations from ratepayers as to any factual or other substantial errors. New advises ratepayers to instruct a RICS qualified rating surveyor to see whether there is any scope for challenge. “The list went live on 1 April 2017 and ratepayers can now appeal their assessments formally, but a new system was brought into effect which will influence which battles ratepayers wish to pick.” He says that the Valuation Office is hoping that the introduction of the Check Challenge Appeal process will reduce the number of frivolous claims and lead to more challenges being settled in the early stages, with fewer appeals being heard before the Valuation Tribunal. Under the old regime it was felt that too many appeals are being put in speculatively with little chance of success.

“In essence,” says New, “the changes to the appeal process should prompt ratepayers to be more diligent in their appointment of trusted, well- respected advisors because the process will now be more paper-heavy and forensic from the outset.”

Check Challenge Appeal places greater emphasis on the ratepayer ensuring that the appeal is well-founded. “Ratepayers will need to ‘frontload’ more than they currently do for the appeal process, both in terms of assessing opportunities and accumulating evidence,” says New. He warns that except for physical changes to the property or its locality, the ratepayer will only get one chance to appeal.

Under the first step of the new regime, Check, the sides will agree factual evidence regarding the property concerned. “The ratepayer will be responsible for the accurate presentation of information regarding the property and the Valuation Office will reassess whether an amendment is merited,” says New. He warns though, if ratepayers present false information they may find themselves fined.

Challenge follows if Check leads to no amendment. New says ratepayers should expect to state the detailed grounds for the alteration and provide evidence in support. “This might be market data or legal or factual representations which support a change to the rateable value. There will then be a period for negotiation.”

With, Appeal, it is likely that limited evidence can be brought in front of the Valuation Tribunal except for that disclosed during the Challenge phase. This is why New says that there is a real need for comprehensive thought to have gone into the submissions made at an early stage of an appeal. He notes that rather like an employment tribunal claim, those wanting to take an appeal to a hearing will have to pay a £300 fee.

“What is interesting about Check Challenge Appeal,” says New, “is that it will undoubtedly put more onus on ratepayers, both in terms of time and money they spend on preparing its appeals and in compliance with time limits.” He explains that if ratepayers fail to submit evidence by certain deadlines then their appeals will be terminated instantly, but how this will operate in practice is still open to speculation. “This would seem to be unreasonable given that the Valuation Office is recommending that it has 12 months to deal with the Check phase and 18 months in which to deal with the Challenge, so the prospect of an early decision is questionable.” It’s also important to note that the appeal can lead to a rise in the rates and not necessarily a reduction.

The lesson is clear. Businesses must make a point of checking their business rates valuation. If they feel that they have a genuine case to make they should engage an appropriate RICS qualified rating surveyor (see ricsfirms.com) and put together their case for an appeal. They only have one bite of the cherry and so the case needs to be well researched.

BUDGET AND THE CHANCELLOR 

In his March 2017 Budget, the Chancellor bowed to pressure to help those businesses most adversely hit by the April 2017 rates revaluation. “We cannot abolish business rates as they will fund local government,” Mr Hammond said, noting that he wants to find a way of taxing the digital economy. He added: “We will set out our preferred approach in due course”.

In the meantime, the Chancellor promised to cap business rate rises at £50 a month for those leaving small business rate relief (currently set at £12,000 in value but rising to £15,000 from April). There is also to be a £300m discretionary relief fund made available to local authorities to tackle other rates- related issues in their local areas.

Overall, Hammond reckons that his announcements equate to a £435m cut in business rates.

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CHOOSING THE BEST TIME TO EXPAND

CHOOSING THE BEST TIME TO EXPAND

Going up in size can be daunting, but there are a number of options to be considered while doing it.

Mike Owen

Recently, we’ve been approached by several businesses looking to expand, most of them asking about what criteria to use to be in the best position post expansion/acquisition – the answer is simple, follow your entrepreneurial nose! The real question is, has your current business got enough strength to support such an acquisition?

All businesses follow a basic maxim and that is of generating a return on investment. If a company generates sales of a million pounds and a profit of £100K then this is a return of 10% – simple. If you look at that same company and say that the investment in premises, stock, working capital is £250k then the return on investment is 40%; the invested money has rotated four times and generated 10% each lap – ‘circulation of funds employed’ multiplied by ‘return on sales’ equals ‘return on investment’. This is not supposed to be a lesson in accountancy but a yard stick that can be used to evaluate a business’s readiness to expand.

Using the above company again and extrapolating the figures forward some strange things start to occur. The £100K profits this year, after dividends, tax and a myriad of other distributions, is reduced to perhaps £30K and this amount is held within the company then the investment is increased to £280K, circulation drops to (£1m / £280K = 3.6) and the return reduced to 36% and so on – all the time profits are replacing borrowed funds the investment remains the same; once the profits (or reserves) are building up inside the company then the investment increases – time to expand.

LEAN AND FAT
Rule number one – Fat companies become complacent! Lean companies fight for survival, stay alert to every opportunity and cost increases. In general terms the worst thing to have in a business is money; money should be invested in stock and ‘turned’ but overstocking is the ultimate in stupidity. Businesses that ‘take offers’ that exceed their immediate stock requirements can adversely affect the equilibrium of their returns.

Once a company becomes fat then it needs investment to keep the speed of circulation up and maintain the returns so here is a basic requirement that needs to be satisfied in considering further expansion. Another is the ‘gearing ratio’, the amount of borrowed funds to equity; equity equating to the company’s own funds. We look at this a little differently to most and believe that, particularly now, the ability to repay the interest on, together with the pay-down of the principal amount, of any borrowings is the ‘grail’ rather than the amount borrowed. We considered it good practice to keep repayments below 25% of cash profits – exceeding this may throw you under the bus if rates increase or the cost of stock goes stratospheric post-Brexit.

But of course business expansion looks good on paper – that’s why we do it; reality generally removes the rose-tinted glasses very quickly. Experience dictates that a business planning for expansion rarely gives consideration to the detriment that will happen to the existing business. Most accountants and finance directors will suggest that it brings ‘economies of scale’; basically, if you are taking over another company you will take out the acquired management in favour of current management overseeing both businesses, this rarely works. Surprisingly we often overlook the ‘involvement’ of management in day-to-day operation and how unavailability due to being ‘elsewhere’ will frustrate staff and customers alike.

The most important aspect of business expansion is policy transfer – ask yourself ‘how many times a day do staff ask me…?’ Each of these questions state, in big letter, there is no policy for this item so staff either ask you, don’t want to be held accountable (due to insufficient delegation) or are too lazy to take a decision; before you start expanding getting this right simplifies life post purchase. Instilling missing policies and procedures in the new business will tax your tolerances, putting it into two (or more) is the absolute stuff of nightmares.

DIRTY TALK
Now we must really talk dirty – Health and Safety! If your current business is not squeaky clean then it damn well should be! You owe every member of staff the right to be safe at work and return home alive. H&S does little more than this and whilst it would test the patience of a saint, it is a necessity – No business owner can abdicate responsibility by delegation even to an HR officer so, post purchase, you will have your head on two blocks. Two options present themselves; employ an external specialist company or get your own ‘Gestapo’ but have monthly meetings with them, minute the decisions and make it happen; the Health and Safety Executive, should they swoop, will expect these to be available together with actions taken.

We test readiness of companies both financially and structurally prior to undertaking their expansion programmes and it is an ongoing source of amazement at how much within some companies is left to assumption – assuming that staff know what is expected of them leading to incredulity when they don’t.

MODERN CURIOSITY

Now for the up-side. This is a good time to invest and to expand your business. The day of ‘the old curiosity shop’ business is over – this is the time of the professional; at every level. The days of holistic growth is gone, as is the premise of just opening a new depot in the hope that customers will come in just because you are there; it was former New York City Mayor, Rudy Giuliani, who stated “‘change’ is not a destination, just as ‘hope’ is not a strategy! Ensure that any intended change is not based on hope? Create a plan and test the it with as many ‘what ifs’ that you can imagine – one of them is bound to happen! Any expansion must then be measured against that plan and progress and performance religiously monitored; any shortfall or deviation is costing you money.

Acquisition is often the lesser evil as, whilst you will acquire some problems, you start with a going concern. Don’t miss out on performing your ‘due diligence’, don’t just delegate this to accountants; bean-counters can check the finances but you know about the business – use your expertise and be sure you are buying an asset rather than a liability.

Expansion is the land of the bold not the silly; of course you should look to grow but rather like buying at auction it’s no use asking those around you if you’ve done the right thing – if they thought it was right they’d have done it first! ‘Tener cojones’ and self belief is your starter pack everything else follows!

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IF YOU CAN’T BEAT THEM THINK SMARTER

IF YOU CAN’T BEAT THEM THINK SMARTER

David Massey explores using car forums and social media to work for him at little cost.

massey

I couldn’t count the amount of times I’ve heard a customer say, “I’ve been on a forum and I think it’s this…” It is extremely annoying and turns me into someone angry and not very approachable. I guess it’s typical of the male ego, ‘how dare you tell me what I’m doing’ irrespective of the truth. It is true that some customers spend a decent amount of time sifting through the web and come up with some good info, but others will seek out any explanation of why a dash light has come on, for example, and are not easily dissuaded from their theory when confronted with expert evidence.

So if customers that browse the internet and tell you how to fix cars make your blood boil and gets you angry… then good! Because that means you have the motivation to do something about it.

It struck me that if customers can search and find specific information about their cars then why can’t you find specific customers for your business? The cat becomes the mouse and you’re holding all the cheese.

SPECIFIC CUSTOMERS
This is a brilliant opportunity where you can target and reach very specific audiences and really focus on your selected customer base that maximises profit and cuts out the unwanted work and customers we all dread.

If you type in a common fault into Google – I don’t know, let’s say intermittent loss of power 1.9 diesel VW undoubtedly the first place you would stumble across is a forum with 100’s of posts about turbo vanes sticking or faulty AMM’s. Try it for yourself, go on stop reading this for a minute and try it.

Now what if you had the ability and knowledge to direct people to your website instead and read informative and interesting articles about their problem? In other words by having blog posts or Facebook articles pointing to your site.

In January we were pretty quiet in the workshop and feeling fed up, I decided I wanted to learn how to build and optimise my own website. With fairly basic computer IT skills the amount I learned to never ever rely on third parties to promote and grow your business because nobody in the world has either the same passion or more importantly the same unique knowledge as you do about your business.

Before this exercise my website looked great but was very poorly ranked on Google and I couldn’t be found unless you actually typed in my URL (full web address). Most of my page listings could be found between page 10-20 of which I honestly believe have never been visited since the dawn of the Internet.

I specifically targeted the customers and demographics I wanted to target with strategic and careful methods by using specific faults, vehicle specific info and DTC’s embedded behind and into my website.

TOP RANKING
My website is now ranked first for just about every VW/Audi/ seat/Skoda related search in the Preston area and further afield. If you don’t believe me try it for yourself now with your smart phone or laptop.

I have done this extremely successfully, in fact so successfully it caught me off guard and has completely redefined ADS as a business. Just humour me and try this for a minute, carry out a search for Audi RS4 inlet valve cleaning and see who’s website comes up.

The key is to think like a customer and not like a garage owner, who might type something entirely different to what our customers would.

All this data can be very easily analysed by using web analytics which gives us the opportunity to react accordingly and adjust our key words embedded within our websites or SEO (search engine optimisation).

You have to ask yourself why on earth would you pay a third party who knows very little about your business and cares even less be good at doing it for you? Simple when you think about it.

There’s nothing new in what I’ve discovered only the skills in order to implement the changes. Big companies do all this as a matter of routine, but most garages are literally decades behind in getting to grips with social media and an effective online marketing strategy.

The truth is change is happening and there’s nothing we can do to stop that. We must embrace the change instead.

If you’re curious to know a little more I have created and designed an in house web development program aimed at helping garage business emulate our success. Like the old saying: If I can do it, so can you.

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ARE YOU CREATING ‘THRESHOLD RESISTANCE’?

ARE YOU CREATING ‘THRESHOLD RESISTANCE’?

Don’t entice customers into your premises or website only to have them walk out in disgust.

Andy Vickery is a consultant for the aftermarket

Andy Vickery is a consultant for the aftermarket

Marketing is a process that should be in operation from the creation of initial awareness through to the physical point of purchase.

Whether you are a garage business, accessory retailer or motor factor, your existing and potential customers are picking up signs and signals all the time and at different stages of the buying process.

You’d like to think that the purchasing process is as simple as running an advert, the customer sees what they want, then the customer comes to you to make a purchase – job done. If only it was that easy.

END GAME
The problem is many focus on the early stages of their marketing, for example creating initial awareness, but neglect other aspects closer to the point of sale; failing to realise that there is still the potential for what is known as ‘threshold resistance’.

Threshold Resistance is the title of a book written by retailing pioneer A. Alfred Taubman who states that ‘Threshold Resistance is the physical and psychological barrier that stands between a shopper and the inside of a store’. Of course, these days Threshold Resistance applies equally, if metaphorically, to online selling too (websites can give out the wrong selling signals).

Ask yourself if you’ve ever come across a retailer or business where you just couldn’t bring yourself to go in? There are times when threshold resistance occurs, when there’s no reason for it to be there. This is when there are physical aspects to a business that are repelling customers.

Tidy front-of-house boosts customer confidence

Tidy front-of-house boosts customer confidence

INVESTMENT
So, you’ve done all the heavy marketing lifting, you’ve invested a lot of money in attracting customers and you’ve brought them to the point of purchase. Unfortunately, the job isn’t finished here, you can’t yet guarantee the sale – you’ve got to get the customer through the door. If this doesn’t happen, you’ve blown all that investment in marketing so far, which is why businesses also have signage and point of sale displays – to help customers.

But the reality is often customers are getting as far as the business ‘threshold’, be it a physical retail outlet, garage or online website, but resisting because they’re receiving the wrong signals. One of the biggest signals people base their judgements on at this stage of the marketing process is how your business and the people within it look.

But there are still certain types of business that could do so much more to improve their perception, but have resisted making improvements to their physical environment. Unfortunately, many automotive outlets remain in this category. Many obviously consider that they fall outside of this customer judgment arena. Well they may have in the past, but in an area where the dealerships and chains are seeming to excel, the independents must follow or risk losing out.

INTIMIDATION
Customer intimidation is a term that could be swapped with threshold resistance. It’s another thing that will destroy a sale.

In areas where customers lack knowledge and expertise, it is natural for them to feel a little
uneasy when making a purchase. Not only do they not want to make bad decisions, they also don’t want to be laughed out of the shop either.

It is well known that some people, especially women, do feel intimidated by the garage environment. But I would say that garages, retailers and motor factors aren’t the only culprits. There are other trade counters such as plumbing, electrical and builder’s merchants that could make positive improvements through tidying up their appearance and coming across as less intimidating to customers.

To customers, little things do matter. Customers do notice when furniture is threadbare, when floors and walls are dirty, when an environment is just plain untidy and this does reflect on their judgement. I once read an article about an airline where the CEO remarked that if a customer found a coffee stain on their fold-down table in front of their seat, they would think that the airline didn’t take care when maintaining its engines.

The same could be said of delivery or company liveried vehicles – if these are dirty,
what sort of signals are they giving out to people who see them? And what about dress- sense and personal cleanliness?

Okay, garage environments can be dirty, but simple procedures can mitigate the customer having to see or witness this – we’re talking dirty overalls and hands here. You’ll notice that the likes of Halfords have tidy-looking staff.

A very simple example that I particularly notice is when an independent garage or retailer, provides their employees with liveried overalls or shirts – this is something that is expected in big retail, but to me, an independent that goes to the trouble of putting their logo on clothing is more likely to apply more attention to detail on larger issues.

In the grand scheme of all things marketing, the recommendation is don’t be deliberately putting people off buying from you. Improving your premises and how you look could be one of the most cost effective investments you could make to your business.

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YEAR END TAX PLANNING TIPS

YEAR END TAX PLANNING TIPS

Don't leave it until financial New Years Eve

Don’t leave it until financial New Years Eve

Forward tax planning might not be at the front of your mind right now, but the end of the 2016/17 tax year, April 5, 2017, is just around the corner. If you made a New Year’s resolution to get a tighter grip on your finances this year, now’s the time to act – before it’s too late.

INCOME TAX
For those in business there’s plenty to think about. Starting first with Income Tax, watch out if you’re approaching a tax threshold, or find yourself in a marginal relief band. If you are one of those lucky souls, you may want to act to put your tax affairs into order before 5 April 2017.

There are several thresholds for the 2016/2017 tax year that you need to be aware of. Breach any and you’ll pay more tax:

■ Higher rate income tax band. Anything over £43,001 is taxed at 40 percent.
■ High income child benefit charge threshold which means that child benefit begins to be clawed back once income exceeds £50000.
■ Personal allowance reduction threshold where the personal allowance of £11,000 is reduced by £1 for every £2 above £100,000.
■ Additional rate income tax band where income above £150,000 is taxed at 45 percent

In addition, two new tax allowances became available from 6 April 2016. They’re good news for some, but mixed blessing for others, so it’s well worth being aware of them.

So, bearing these thresholds in mind, there are some legitimate tax planning options to avoid an eye-watering tax bill including:

■ Deferring your income to the following year if you expect a lower level of income then;
■ Making pension contributions for yourself and your family;
■ Transferring shares or bonds to your spouse to make the most of the dividend nil band and savings allowance;
■ Switching your investments into tax-efficient investment schemes; and
■ Making donations to charity.

TAX RELIEF
There are several ways to reduce a business owner’s tax bill while keeping essential cash in the business.

Carry back trading losses
If you’re self-employed, any trading losses that you make in the year can either be set against your other income as a current year tax deduction, or carried back against income in the previous tax year to reduce your previous year’s tax liability (and gain a cash tax refund).

In terms of Corporation Tax, the Finance Bill 2017 will reform the loss relief mechanism from April 2017. On a positive note, it means you will be able to offset trading losses against all types of past or future profits. However, the loss that you can offset in any given year will be restricted to 50 percent of the taxable profits for that year.

Optimising your capital losses
Next, any capital loss you make from selling your assets in 2016/17 will automatically be set against your taxable income for that year first. After that, you can elect for any remaining capital loss to be carried back to the previous year, or do nothing and let the loss be carried forward indefinitely against future years.

TAX-EFFICIENT PENSIONS
Tax-free pension contributions
For most people, making pension contributions is a tax- efficient way to put money aside. Not only do you get tax relief on your pension contributions, recent changes have also made pension schemes more flexible, allowing you to draw down the pension pot before retirement.

When you pay into a pension, you receive tax relief on your pension contributions. The tax relief is at the highest rate of income tax that you pay. There are limits to what can be paid in.

As a business
If you own your own company, making pension contributions to yourself is a great way to extract value from your business.

On top of the personal income tax relief, pension contributions give corporation tax deductions to the company. Further, because pension contributions are a non-taxable benefit, both the company and the employee can save on national insurance contributions. As an employer and company owner, it’s well worth thinking about exchanging some of your and your employees’ salaries and taxable benefits for larger pension contributions.

If you have a large pension pot (over £1m) or have a taxable income over £110,000, new changes from 2016 can affect you, so think about seeking professional advice.

GETTING MORE OUT OF YOUR INVESTMENTS
Lastly, with interest in high- street banks still standing at an all-time low, you may be considering ways of making your money work harder for you. Some investments might prove a tax-efficient alternative to savings, if you have the appetite for risk.

One recommendation would be to load up your ISAs, to benefit from tax-free income and capital gains. Adult UK residents can put up to £15,240 each into savings, investments or a combination of both. In addition, parents can pay up to £4,080 per child into a junior ISA.

First-time buyers can now save up to £200 per month over four years in the new help-to- buy ISA, and get a 25 percent tax-free bonus capped at £3,000 for £12,000.

There are also several other tax efficient investment schemes such as the enterprise investment scheme, investing directly in an unlisted company, venture capital trusts, the Seed Enterprise Investment Scheme, Innovative Finance ISAs, and social investment tax reliefs. It’s worth noting that they are high risk, so consider these options only if you are a seasoned active investor.

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WHERE EMPLOYERS GO WRONG

WHERE EMPLOYERS GO WRONG

Human capital is more than just a resource, it is your strongest asset – so look after it writes Adam Bernstein

Employees are a firm’s greatest asset and they’re probably the most expensive too. So why is it that some employers and managers seem hell bent on treating their staff so poorly? Why do they create ‘them and us’ divisions without a care?

Having a unified and happy work force is critical to success. Employees can make or break an organisation. Staff don’t have to go the extra mile, they can upset a customer base, and they will leave for other opportunities taking both knowledge and customers
with them.

Any manager worth their salt knows that recruitment of replacements is both expensive and disruptive.

FIVE CAUSES FOR CONCERN
Lee Ashwood, a Senior Associate in the employment department of law firm Eversheds, reckons that there are a number of common causes of employee malcontent.

In his experience, and in no particular order, there are five key areas of concern.“The first”, says Ashwood, “is company sick pay being withheld in situations where the employer has a discretion over the payment.” From his point of view, those genuinely unwell consider the withholding of monies as an arbitrary penalty.

Next he sees real and sometimes bitter disputes over pay “in relation to hours worked, what constitutes overtime and, of course, simply not being paid enough in their opinion”. The issue at hand is that the web has made salary and pay more transparent and staff consider it their right to be paid the market rate. A number of cases on this have been brought and won by employees.

Thirdly, and this is a big problem for Ashwood, is inconsistency in treatment: “I’ve seen on many occasions situations where an employee feels that they are always given the worst tasks to complete, have not been allowed time off at short notice when others have in the past, or have not had the perks that others have been given in similar circumstances.”

Fourth on the list, and one that many can attest to, is an employee thinking that their workload is too much or that work has not been distributed evenly. This disparity is a real cause of employee stress that can lead to an employer either paying for employee sickness and lost production or finding themselves in a tribunal.

The last cause for concern for Ashwood fits under the heading of bullying by managers and colleagues. Indeed, a recent report by the arbitration service ACAS has found that workplace bullying may actually be on the rise, with ACAS receiving around 20,000 calls relating to bullying each year, more than ever before.thinkstockphotos-627390700

STAFF RETENTION
Points raised about staff retention are true in to all businesses, but it is perhaps factors that rely most on having bright and committed individuals on their teams. However, it is exactly because these people are both bright and an asset, that rival firms will try and poach them… and if the employee thinks they are getting a raw deal at their current employer they will move. Interestingly, research shows that this rarely has much to do with money – more often than not it is to do with how they perceive themselves to be valued by the company. Consider the number of Unipart Automotive employees who ‘defected’ to other companies well before the firm went bust in 2014. If employees think there is a lack of opportunity then there will likely be a high turnover rate.

STAFF APPRECIATION
So with the scene set, why do employers make mistakes? Do they misunderstand the law? Do they deliberately ignore the process? Or are they simply failing to appreciate the value and views of their staff?

With his lawyer’s hat on, Ashwood thinks that “making mistakes in not following what the law requires is understandable as it is often complex” and not well-known. “However,” he adds, “if you treat staff with empathy and respect, you rarely give them a reason to check to see if you are treating them in accordance with the law. It is not appreciating this point that leads to very common mistakes which in turn lead to disgruntled staff, grievances being raised or, worse, Employment Tribunal claims”.

CLAIMS ARE STILL BEING MADE
July 2013 saw the introduction of tribunal fees paid by claimants and although the number of claims has fallen from 50,000 in the first quarter of 2013 to just over 17,000 in the fourth quarter of 2015, an employee claim is not something that employers should welcome. Indeed, in a March 2015 report in the Daily Mail, The British Chambers of Commerce estimated (then) that the average cost to a business of defending itself at tribunal was £8,500 while the average cost of agreeing a settlement was £5,400.

BRING ME SOLUTIONS
The most obvious solution to counter discontent is for employers to take time to consider the impact of a decision on the employee in question; explain the reasons for the decision; and listen to any objection the employee may have about the decision. Following this course of action would make a number of employment lawyers very and distinctly unemployed.

Moving on, the better employer understands the importance of employee motivation, something that Richard Branson is well known for. In an April 2015 blog, How to keep your best staff, Branson underscores one of his key principles…that staff matter: “Making money or moving up the corporate ladder is no longer considered the be all and end all of career success. Today, one of the biggest indicators of success is purpose. And, in a world where purpose reigns supreme, it’s only natural for people to want to be heard and have their opinions valued.”

This logic is noted by Ashwood who understands that every staff member is likely to have different reasons and motivations for coming to work: “Just because you are solely focused on making your business as profitable as possible and would be prepared to work all hours to do this, does not mean others are or should be judged negatively because they are not. This means you should not take staff for granted and should try to tap into what motivates them in order to improve their performance.”

MOTIVATION
So let’s look at motivation. In simple terms, people work because they are either extrinsically or intrinsically motivated. The former is the poorer relation. In essence, it uses bribes to get staff to work harder – pay, holiday or some other reward. The problem is that the efficacy of an extrinsic motivator wanes given time and once the employee becomes disgruntled with the amount of tax charged to the ‘bribe’. Alternatively, and more preferable, is the pursuit of intrinsic motivation where staff do something because they want to do it. It’s the very reason why someone will willingly work through their lunch hour or will go beyond the call of duty to help a customer.

To be a successful manager that can instil intrinsic motivation within employees requires an ability to understand what an employee can do and also what they like to do. These goals can be matched in a number of ways.

Firstly, managers should help staff to develop themselves so that they maintain their market potential. Ignore this and they’ll leave for a firm that will. Next consider that staff now want a good work-life balance because after all, there’s no point being the richest man in the cemetery. Not everyone works for money – it’s the ‘eat to live’ rather than the ‘live to eat’ perspective.

Of course, businesses are not democracies, but nevertheless, staff like to feel that they have some level of input to decisions that affect them. The web has clearly exacerbated the importance of this point and firms that keep employees in the dark will eventually lose out to rumour and gossip.

Firms that don’t treat staff like automatons and who instead offer interesting tasks will keep employees more firmly engaged. It’s a sad function of modern life that people nowadays have shorter attention spans, something that can be squarely blamed on smartphones.

And lastly, staff bask in the glow of recognition for their efforts. Positive feedback and constructive criticism will do wonders for keeping an individual within a firm with velvet handcuffs.

To sum up the mantra for managers must be to look beyond the balance sheet and to those that are the backbone of the business. Get it right and employers will be on to a winner. Get it wrong and it’ll surely be the death knell of the firm.

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IS YOUR GARAGE BUSINESS SITTING ON A GOLDMINE?

IS YOUR GARAGE BUSINESS SITTING ON A GOLDMINE?

Existing customers are the key to reaching that pot of gold, writes Andy Vickery

Andy Vickery is a consultant for the aftermarket

Andy Vickery is a consultant for the aftermarket

If you’re worrying about your garage’s declining MOT or servicing count, or the fact that you’re having to take more and more low value work from online referral sites, did you know that you could actually be sat on your own pot of gold that could be a solution to your worries?

This pot of gold is likely to be in your computer and contained within your garage management system – and it’s called ‘customers’. Obvious really, but in reality, existing customers are very often overlooked in terms of marketing or gaining more business in favour of chasing new customers.

Outside of the garage trade, marketing to existing customers seems to be a recognised and well-implemented method of maintaining and indeed increasing business. But for some reason, many garages are yet to take this on-board.

I know this to be true because I have talked to and worked with many garage owners who have databases of many thousands of previous customers and when I’ve asked them how often they contact them, they say ‘never’. They might send the odd MOT or service reminder, but that’s it. One garage owner I met, who’d been in business for 30+ years, who was recently struggling, and was clearly cynical about marketing in general, actually said to me: “why would we want to waste money contacting customers? They’ve used us before and know what we are like”. Not his fault for thinking this, you would kind of like it to be the case, but consumer buying procedures and habits are now changing, along with technology that is potentially disrupting what we once assumed or could rely on.

A strategy of marketing to your existing customers can be extremely beneficial to your business for many reasons, but before I go into those reasons, I’d like to rollback slightly to the importance of making sure you capture customer information in the first place.

ARE YOU CAPTURING YOUR CUSTOMERS’ DETAILS?

Making sure you have your customers’ ‘full’ contact details is extremely important for your business, but it still seems that many are uncomfortable with asking for this. Along with a customer’s physical address, you need to make sure you obtain an email address and mobile phone number.

This should become standard procedure when booking in a customer or at the point of handing back the car. It’s probably better at the outset as you can state that you may need to contact the customer. You can also make it a standard procedure to email receipts/ invoices to customers, a bit like some large retailers do. If the customer is reluctant to give details, tell them that they will be able to have a record they can file on their computer that will be handy when they come to sell the car. This is just an idea, but hopefully you get the picture – there are ways of gently getting this information, but you may have to counter a customer’s natural objection to disclosing personal info’ – tell them they will be entered into your monthly draw if it helps.

comped-pot-and-tree

EXISTING CUSTOMER DATA
So it is a great idea to implement a standard procedure for obtaining all customer information, but what about your existing customer information? Many businesses will have data that is incomplete or lacking email addresses or mobile phone numbers purely because they date back to pre- technology days.

In the first instance, it would be good to go through the data that you do have to try to categorise it somehow for future marketing. Obviously if you don’t have email addresses, you won’t be able to email those customers, but ‘lost’ customer letters and mailings are still a good technique of bringing business back in. You can then update the customer details when they come in.

WHY MARKET TO EXISTING CUSTOMERS?
Let’s try and answer the question raised by the garage owner who didn’t think it was necessary to market to existing customers. Customer long-term value: In the first instance, customers should be viewed in terms of their ‘long term value’ – not just a one-off sale. In terms of marketing, maximising the long- term value of a customer is much more cost-effective than trying to obtain new customers. If you consider the value of a customer over five or ten years, this will help you understand the value of investing in marketing to retain them.

Customer retention: Is there such a thing as brand or customer loyalty anymore? Yes, this is still alive and kicking, but it has to be worked at and earned. People have very short memories and can be easily tempted by other offers, especially if they are not shown that they are appreciated or important. Staying top of mind is extremely important if you want customers to return year-on-year, especially in this highly competitive and technologically disruptive age.

Upselling other services:
Making sure your customers are aware of your complete range of services is very important in terms of maximising their value. This will also make sure you don’t lose out when a customer goes elsewhere for a service that you could have otherwise provided. You may have recently added services; you may offer tyres, you may be air conditioning specialists – but you shouldn’t take for granted that your customers will know this.

Displaying your expertise:
Customers will often have questions in mind when they need help with their motors. They may have come to you for a service or MOT, but do you offer diesel diagnostics? Can you work on the brand or model of new car they’ve just purchased? Can you work on electric hybrids? It’s easy to assume that a customer would know this, but often it’s not the case. This sort of information must be given to existing customers on a regular basis, that way you will stop them going elsewhere for services you provide.

Justifying prices: When we did a survey a while back, although price was important to customers, it wasn’t the most important reason a garage retained their best customers. In terms of your ideal type of customer, you stand a better chance of justifying your particular level of pricing when you regularly communicate what you can do and your levels of expertise, that way, customers will understand the value of what they are getting and won’t question price.

Getting referral business: A key reason for marketing to existing customers is to stay top of mind when they need you, but a by-product of this is you also stand a much better chance of getting recommendations and referrals from your existing customers. You can even use this as a reason to contact existing customers, telling them that they will be rewarded for referrals.

TURNING YOUR EXISTING CUSTOMERS INTO GOLD
So whilst you might be sat on a goldmine, you will have to work at it and ‘mine it’ to convert its value. This can be achieved by regularly staying in contact with your database of existing customers. By doing this you will make sure they keep coming back to you year-on-year, buying more services from you, whilst also recommending you to others – that’s the gold!

Posted in CAT Know-How, Factor & Supplier News, Garage News, NewsComments (0)

THE COMPUTER WILL SEE YOU NOW

Data protection rules are changing: Here’s what the aftermarket needs to know

Andrew Gallie is a senior associate at Veale Wasbrough Vizards specialising in information and data protection law.

Andrew Gallie is a senior associate at Veale Wasbrough Vizards specialising in information and data protection law.

Data protection law has recently been updated by Europe and will be in place in less than two years. Despite the Brexit vote, businesses – large and small – need to note the changes as the penalties for breaches will be severe and adjusting to the new rules will take time.

The European Union’s General Data Protection Regulation (GDPR) was finalised at the end of April 2016 after four years of discussion, disagreement and negotiation and will directly affect all member states from May 2018. Firms have no choice – the GDPR is not going away.

But a question arises: Now that we’re scheduled to leave the EU, will the GDPR still matter? The answer is yes – it will. The Secretary of State for Culture, Media and Sport, Karen Bradley, before a House of Commons committee at the end of October 2016, formally stated that: “We will be members of the EU in 2018 and therefore it would be expected and quite normal for us to opt into the GDPR.”

TAKE THE LAW SERIOUSLY
The GDPR is not a monster but it needs to be taken seriously. Changes will be required, and if the required changes are not made then firms risk considerable fines and reputational damage. Indeed, under the GDPR, those organisations that breach the law could face a fine of up to four percent of annual worldwide turnover or €20m (whichever is the greater).

These penalties do seem geared to the larger firm, but a quick search of the Information Commissioners Office (ICO) website – the UK enforcer of data protection law – shows that organisations of all sizes are being taken to task.

PRESENTLY
The present data protection regime, under the Data Protection Act 1998 (DPA), protects a person’s rights in respect of their personal data and is built upon eight data protection principles. These are all common sense and require that personal data is processed fairly and lawfully; obtained and used for specified and lawful purposes only; adequate, relevant and not excessive in relation to their purposes; accurate and up-to-date; not kept for longer than is necessary; processed in accordance with the individual’s rights; kept secure; and not transferred outside of the European Economic Area without adequate protection.

Apart from these there are other points to note about the present law. The first is that there are extra obligations when handling sensitive personal data such as information about ethnic origin, sexual life, trade union membership etc. Further, individuals have a right via a Subject Access Request (SAR) to find out what information is held about them.

computer_data

THE CHANGES
Rights of the individual
Individuals have a right to know what is going to be done with their data, and who it is going to be shared with. A website privacy notice can tell people about this. Under the GDPR there is additional information which must be provided: Firms will need to tell data subjects – users – the legal basis for processing their data, the data retention period, and of their right to complain to the ICO. There is also a requirement that the privacy notice is concise, easy to understand and in clear language.

The GDPR confers new rights such as having inaccuracies corrected, to have information erased, to prevent direct marketing and a right to data portability (because of this firms will have to provide data electronically).

Presently, firms have 40 days to respond to a subject access request but under the GDPR this will drop down to a month. Refusing a request will require a firm to have appropriate policies and procedures in place. There will also be obligations to provide additional information such as data retention periods and the right to have inaccurate data corrected.

Consent for data processing
For many the most challenging area under the DPA is that of “consent”; that consent to use personal data cannot be inferred from silence, pre-ticked boxes or inactivity. The GDPR requires that consent must be freely given, specific, informed and unambiguous. If a firm is going to rely upon ‘implicit consent’ then it must be ready to deal with a challenge as to how unambiguous the consent was.

Other obligations
There is presently no general obligation to report any data breaches but the GDPR radically changes this and creates an obligation to report data protection breaches which could cause an individual harm within 72 hours. Firms should consider how they would deal with this new obligation. They should be asking: How secure are their systems? What training do staff have? Is personal data encrypted? What breaches might result in an obligation to report? How would the harm to individuals be mitigated? Do the procedures in place around data breaches allow these obligations to be met?”

One solution to compliance is obvious – appointing a capable, interested person with the responsibility for ensuring that the obligations are met.

The GDPR is a real and present threat to firms and organisations of all sizes and the financial consequences for ignoring the new rules are severe. However, those that plan and who choose to follow their obligations should have little to worry about.

Posted in CAT Know-HowComments (0)

MARKETING YOUR GARAGE BUSINESS EFFECTIVELY

MARKETING YOUR GARAGE BUSINESS EFFECTIVELY

Marketing is more than just a token social media page, writes Andy Vickery

Andy Vickery is a consultant for the aftermarket

Andy Vickery is a consultant for the aftermarket

Let’s cut to the chase, marketing to most garage owners and businesses is a can of worms. What works, what doesn’t? Are print, direct mail and advertising dead? Should we do more emails – should we do a video?

To most, marketing appears to be a smoke and mirrors art that is more about luck and being in the right place at the right time. After all, you’ve tried it and nothing appears to have worked before.

The problem is there are so many elements within marketing to attend to, but most only ever see the end results of what others are doing – an email, mailer or advert, and not what is going on behind it all. The best that most can come up with then is to copy what others are doing. But what if the garage down the road was just guessing at their marketing and you were to copy them?

Then there’s being drawn to the latest ‘shiny’ object. A media rep calls from an online technology company that promises your business will be in front of a gazillion customers visiting their website every day.

The media rep tells you that this is what you should be doing because everybody’s doing it and you’re going to miss out. The rep then goes on to say ‘you’re not still using old-fashioned methods of marketing are you?’ It’s enough to make your head explode.

When you first set up in business, nobody ever told you that you had to be a marketer as well. But marketing isn’t difficult, that is when you know how. If you can fix cars, you can certainly embrace a few concepts that will improve your marketing.

CHANGE YOUR THINKING
The problem is that many just don’t take marketing seriously enough to turn it into a business process. The first thing to do is to see marketing as part of the process of running your business, like you would with doing the accounts or any other admin’ system or procedures you might have in place.

Realise that marketing is something that requires investment, but that it’s also a process that will provide a return on investment. A problem that many have is they try to do marketing that is free or cheap,
which sadly ends up being ineffective for that very reason.

Marketing and sales are as important as the work you do. The main difference to any other business procedures is that your marketing process is what will bring customers to your door, pay the wages and overheads and hopefully make you a profit.

marketing

CLEAR ON YOUR MARKET
Who are your best customers? What is your best type of work? Determining your ‘target market’ can be a very technical subject, but these two basic questions are a great place to start. Taking a step back to consider these could provide the impetus for change in your business. Once you know the type of customers you want more of, you will be able to devise promotions that ‘talk their language’, promote the things that will resonate with them, and turn up in the right places to get you noticed.

YOUR MARKETING MESSAGE
Again, this is a subject that could fill a book or two and indeed has. But what you say to your customers is important. Too many rely on advertising that just contains a logo and a list what they do – which is actually
probably no different to the business down the road. Put yourself in the position of the customer; who should they choose when both garages appear to offer the same services? The cheapest?

Your ideal customers are likely to be those that have values above what you actually do. They see a value in your training, your honesty, the fact you are involved in community projects. How can you make yourself different from your competitors? These things do help customers make a discerning decision. So, going back to your ideal customer, what is it that appeals to them?

MEDIA – DELIVERING YOUR MESSAGE TO YOUR MARKET
Do you start a Facebook Page? is Social Media what you should concentrate on? Let’s get one thing straight from the outset – when it comes to marketing, no one method should be utilised at the expense of others. And as far as Social Media is concerned, it won’t necessarily be the one thing that is going to bear the sort of fruit you require very quickly; certainly not on its own. Use Social Media, but in a measured way.

By spending a bit of time considering your market, your message and your media, you will be able to put together much more effective marketing; there will be more of a method and strategy behind it – it may not be perfect straight away, but it can be refined as you move forward.

ARE YOU COMMITTED?
The last part of the equation is commitment. Marketing is not something that should be seen as free or cheap, or indeed something that is done only once. It is a continual process. Your final thing to do is to set up a marketing calendar then stick to it, measure it, refine it and repeat it.

motorrepairmarketing.com

Posted in CAT Know-How, Garage News, NewsComments (0)

NATIONAL MINIMUM WAGE TESTED

NATIONAL MINIMUM WAGE TESTED

It’s a financial burden for all employers, but can the NMW be turned to your advantage?

Adam Bernstein is a freelance business writer specialising in management, marketing and the law

Adam Bernstein is a freelance business writer specialising in management, marketing and the law

Every few months HMRC publishes a list of those employers it finds underpaying employees the National Minimum Wage (NMW). The most recent list, published mid-August, was the largest ever and named 197 employers, 11 of which were in the automotive sector who collectively owed £17298.58 to 13 workers. And looking back to previous reports, there are plenty more in the sector who have been caught out – none will have welcomed HMRC’s attention, especially as they’re now on HMRC’s radar.

Judging by the size of the list it’s clear that employers have problems in either calculating NMW, understanding their obligations, or they assume that the rules don’t apply to them. With real pressure from the government and the media to have employees paid correctly, employers need to know the rules.

NATIONAL MINIMUM WAGE
NMW, called the National Living Wage (NLW) for those who are 25 or older, was introduced in 1999. It is a specified minimum hourly rate of pay to which anyone aged 16 or older is entitled. NMW is presently:

 

  • £7.20 an hour for anyone aged 25 or over;
  • £6.95 an hour for anyone aged 21 – 24;
  • £5.55 an hour for anyone aged 18 – 20;
  • £4.00 an hour for anyone aged 16 – 17;
  • £3.40 an hour for an apprentice (under age 19 or in their first year)

Lee Ashwood, a senior associate in the employment department of Eversheds, says that you would think that calculating NMW is simple – but it’s not. “To most the calculation would be total pay divided by the number of hours worked. Unfortunately, it is not that simple and this is often why employers inadvertently pay people less then NMW”.

The first step, he says, is to note that the calculation must be based on the relevant ‘pay reference period’. But not all pay in the reference period counts towards the calculation. Ashwood goes into detail: “A pay reference period is the period for which an employee receives pay (assuming they are paid regularly and at least once a month). For example, if someone is paid weekly, their pay reference period is one week; for those paid monthly, it is one month. Employers then need to look at the total employees were paid before deductions for income tax and National Insurance contributions in the period in question (the relevant pay reference period), and then remove any payments and deductions that do not count towards NMW.”

BONUS

Basic salary, bonus, commission and other incentive payments based on performance, all count towards NMW as does, in some circumstances, an accommodation allowance. But there are a number of elements of pay that do not count including pension payments or benefits in kind such as private medical insurance or other benefits (except an accommodation allowance); any extra pay for overtime or shift work. Only the basic rate of pay is taken into consideration for overtime worked; expenses; and any allowances or payments that are not attributable to their performance and is not part of their basic salary, for example an additional element of pay that is for London-weighting or an on-call allowance.

The amount that is left is the total amount paid for the purposes of NMW.

Establishing how many hours the employee worked is not simple either and Ashwood says employers need to consider the time spent actually working, but not any rest or meal breaks during which the employee is not required to work (even if they voluntarily do some work during the break). “It’s also important to note standby or on-call time, but only if they are required to be available at or near their place of work should they nmwbe needed; any travel time for business during normal working hours, but not commuting to and from work; and time the employee spends receiving training, whether at work or anywhere else during normal working hours.”

To stay out of HMRC’s reach, Ashwood firmly advises employers to note these relevant factors when calculating NMW. “Remember, NMW is not going away. As the government minister responsible for NMW, Margot James, recently said: “This government is determined to build an economy that works for everyone, not just the privileged few. That means making sure everyone gets paid the wages they are owed – including our new, higher, National Living Wage. So we’ll continue to crack down on those who ignore the law.”

Kevin Shortis, group chairman of the Shortis Group, a firm celebrating its 50th anniversary that has some 600 staff across nearly 100 sites, has very definite views on NMW – he’s decidedly against it.

The company operates motorist’s shops, fitting bays and motor factors with within the hour delivery – Shortis Group is very people intensive to the point that its wage bill makes up around 70% of its gross profit.

Shortis says that making a living is getting harder: “Cars now have, as standard, most of the things we used to sell. Service intervals have been extended and whereas a few years ago on a Sunday people would be out working on their cars now they don’t even wash them.” He says that the sector has oversupply issues – “few are making money, but we make a profit, just!”

“Pre-NMW there were some operations [pushing their luck] on pay but most businesses lost staff if they did not pay the market rate and virtually no business wants to lose good staff – but as always we have to put up with legislation for the few who abuse it.” Shortis has had to cut his cloth accordingly and says casual workers – retirees – have had to go. He says that the new NLW is really causing problems and wonders why the government didn’t add another tier to the NMW with the same review dates.

Shortis notes that the bonus he used to pay did not count towards NMW so it was consolidated into pay and he now pays £7.20. “We cannot afford to pay extra whereas before our bonus was extra, and NMW had a knock on effect that staff only felt better off for a week or two when they first got the increase.”

Another issue for Shortis is that NMW is applied on age and not performance: “If a driver continually scraped a van in the past we would cut bonus, now we have to hold a disciplinary as we are not allowed to treat them differently.”

Shortis values his staff “but we have to work with the funds available or they will all be out of work for our 50th anniversary.” Indeed, he paid the staff £50 for each complete year of service “and that gave us a bill of £185,000 (plus 13.8% NI)… that at least made them smile.”

Posted in CAT Know-How, Factor & Supplier News, Garage News, Retailer NewsComments (0)

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