Archive | CAT Know-How

STEELS THE ANSWER IN MODERN GASKETS

We know what a gasket is, but what does it actually do, and how?

Fibre gaskets now less popular

What is a gasket? It sounds like an obvious question, but in point of fact, it is not the easiest to answer. Some would say it is any flexible material used to mate two surfaces, while others would have a more technical answer that distinguishes a gasket from a seal. Others, particularly those that own anything powered by the Rover K-series, might have another (possibly unprintable) definition of a gasket.

But for the rest of the aftermarket, when someone talks of gaskets they are generally referring to the cylinder head gasket, which as everyone knows is to act as an air, oil and watertight seal between the head and the block. If the gasket blows when the engine overheats then the driver will hopefully notice the sudden increase in temperature and take action before the head warps or the block cracks.

COMPOSITION
Head gaskets generally used to be made from a form of fibre, but these days are more often than not made from steel. The reason for this is that the crush rate is far more predictable, meaning the head can be tightened with a torque wrench without needing to carefully half-tighten each of the bolts in turn.

Another reason for using steel is that with crush gaskets the height of the cylinder head can vary, literally depending on how much the gasket is crushed under the cylinder head. This might seem like an inconsequential amount, but it makes a difference to modern fuel injectors that have a tolerance of only a few microns.

Steel gasket

PROBLEMS
However, steel gaskets have not been without problems. OEMs have battled with creating a gasket that will apply an adequate amount of pressure to stop gasses from escaping. One way of doing this is to add an additional ‘fire ring’ into the steel, although some aftermarket gaskets don’t have this welded ring, instead relying on a ring folded into the metal. Last time we addressed this issue, we spoke to Dominic Moxon, a Senior Product Engineer at FAI Automotive who explained: “The problem is this folded design will not last as it will not be able to cope with the pressures generated in the combustion chamber”.
Clearly, having to do a job twice, particularly an involved and complex task like a head gasket, so it pays to track down a gasket of a similar design to whatever was fitted to the vehicle originally.

WELL I’LL BE BLOWN… GASKET MYTHS DEBUNKED
Paul Grosvenor from Mahle advises that one of the most common misconceptions is that a good plan with a diesel engine is to replace the head gasket with a thicker one.

“It is not best practice to do that” he says. “The difference in the gasket thickness exists primarily because of the tolerance on other parts. It can ultimately affect the emissions levels by using a thick gasket when it should use the thinnest one”.

“Best practice is to fit like for like, because gasket thickness is calculated on the protrusion of the piston from the engine block so if they are only changing the head gasket they should fit the same as was fitted on it originally”.

UNDERLYING ISSUE
Dominic Moxon of FAI Automotive says that if a head gasket has been fitted for some time suddenly goes then technicians need to look for an underlying cause. “There is always a reason for it failing whether that is down to a manufacturing process, installation issues or a running fault”.

REMAN STANDARD
Simply replacing the gaskets and cleaning a used engine does not make it a remanufactured part. In the UK, the Federation of Engine Remanufacturers agreed a set standard for remanned engines 20 years ago and more recently agreed a strict definition with six other trade groups. John Gray, FER President, said: “The remanufacturing industry has lead the acceptance of a range of terms that have UK origins. This international agreement also provides us with further proof that remanufacturing is on the rise, which is extremely positive for the industry.”

Best practice is to fit gaskets like for like

COOLING BLOCK
Pour-in instant head gasket is hardly a professional repair, but claims that it will clog or cause damage to the cooling system appear to be wide of the mark, at least if you are using the Steel Seal product. “It contains no fibrous material to seal your blown head gasket. It relies on a thermo chemical bonding process that is a chemical reaction, to seal the leak in your blown head gasket” reads a statement from the company.

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THE INTRODUCTION OF THE APPRENTICESHIP LEVY

THE INTRODUCTION OF THE APPRENTICESHIP LEVY

The long-awaited Apprenticeship Levy for UK employers came into effect from 6 April 2017. While it’s been widely heralded, few seem to fully understand what it is, how it will operate and what effect it will have on businesses.

WHAT IS IT?
When the present government was elected in 2015, it revealed ambitious targets to significantly increase the number of apprenticeships in the UK. The plan was that these apprenticeships would be funded in large part by employers and that in turn, they would be able to access the benefits of the new system.

The government then put forward more detailed proposals for a new levy on large employers, with the aim of supporting three million new apprenticeships for people over the age of 16 by 2020. In essence, the levy will be an obligation on all qualifying UK employers in both the public and private sectors to fund new apprenticeships from May 2017.

Although skills training is a devolved policy issue in the UK, the levy will apply equally to employers in England, Northern Ireland, Wales and Scotland. The government has plans to work with those devolved administrations to understand how they intend the levy to operate in their particular areas, but it appears that they plan to utilise the additional funds as a supplement to existing funding arrangements, rather than operate any centralised digital system comparable to that being set up in England.

HOW WILL IT OPERATE?
The purpose of the levy is to encourage employers to invest in apprenticeship programmes and to raise additional funds to improve the quality and quantity of apprenticeships. The levy paid by employers can then be accessed by those same employers to fund apprenticeship training in their business.

In England, control of apprenticeship funding will be put into the hands of employers through the Digital Apprenticeship Service (DAS), an online service that:

  • allows employers to access funding for apprenticeship training;
  • choose the type of apprenticeships they want to run;
  • choose the number of apprentices they take on;
  • choose the training provider that suits their needs.

The levy will be charged at a rate of 0.5% of an employer’s pay bill and will only be paid on annual pay bills in excess of £3 million. In reality, this affects less than 2% of UK employers. The levy will be collected by HMRC through PAYE, alongside income tax and National Insurance Contributions. The pay bill will be calculated with reference to total employee earnings (not additional payments, such as benefits in kind) and will be payable by the employer on a monthly basis. It will be up to employers to notify HMRC each month as to whether they are eligible to pay the levy.

When the money goes into the DAS, it gains a 10% top up from the government. This means that for every £1 that enters a business’ digital account, it gets an additional 10 pence. For example, if a company has a payroll of £3 million, they will pay £15,000 in levy payments throughout the year which will gradually appear in their digital apprenticeship account, and they will also gain an additional £1,500 (or 10%) from the government for the same period. Therefore, the company will have £16,500 in their digital account to pay for apprenticeship training and assessment.

A further aspect of the levy proposals will see each employer receive an annual allowance of £15,000 to offset against their levy payment. If the employer has more than one payroll reference, it may apportion the allowance between them. The levy allowance is spread evenly throughout the year, so that the amount offset against each monthly levy liability is one-twelfth of the total allowance for the year to which the employer is entitled. Any unused allowance from one month is carried forward to offset against subsequent months. At the end of the tax year, the employer may reallocate any unused portion of the levy allowance for one payroll against the liability for another. If the levy has been overpaid, the employer must offset the overpayment against its other PAYE liabilities, before making a claim to HMRC for reimbursement of any remaining excess.

If an employer starts or stops trading during a tax year, the pro-rated share of its allowance for the earlier or later months (as appropriate) is added to that of the month of commencement or cessation (so the full annual allowance still applies). If an employer chooses to adjust a previous month’s pay bill, it should account for the change in its next employer payment summary (EPS). If, at the end of the year, it determines that the National Insurance Contributions reported to HMRC are incorrect, it must submit a correcting EPS.

In the case of a group of employers, only one annual allowance of £15,000 will be available and it will be for the employers themselves to determine how this is apportioned between them.

Each apprenticeship framework will have a maximum funding band and the government has set 15 different bands. Employers can then negotiate an appropriate price with their training provider – for many larger businesses which have a training department, they may be able to make the levy go further by offsetting some of their own training input.

HOW WILL IT AFFECT FIRMS?
Companies which qualify to pay the levy will need to consider the impact that it may have on their business, including:

  • any changes that need to be made to the payroll system;
  • dealing with associated payroll administration;
  • seeking advice on financial (re-)modelling; and
  • potentially mitigating the impact of the new costs incurred.

The government has announced that any unused levy funds (i.e. those that have gone beyond the 18-month expiry date) will be used to fund apprenticeship training for small and medium sized businesses, which do not reach the threshold to pay the levy in the first place. It is expected that the levy will raise approximately £2.5bn per year for training in England and that this will cover all employers who take on apprentices, regardless of their size, as there will be many employers who do not use all the money in their digital accounts. This means that non-qualifying businesses will not miss out.

Non-levy paying businesses with over 50 employees, or businesses that have used up their levy pot, will have to make a contribution of 10% towards the cost of apprenticeships. The remaining 90% will be paid for by the government. Smaller businesses will not have to make a contribution for apprentices up to the age of 23. For all employers who take on apprentices between the ages of 16-18, they will receive a £1,000 bonus payment from the government. However, it is also worth noting that the levy can be used to fund apprenticeships for new or existing employees of any age or position, as long as there is a genuine need for training. Employed adults can undertake apprenticeship training – they do not need to be in entry-level job roles and they can continue to be employed on their existing terms and conditions.

In light of these upcoming changes, therefore, it is important that businesses consider their strategy for dealing with the new levy. Although it may focus primarily on lower-level staff, it should also reach up to include leadership and management programmes and in some cases might also include professional pathways.

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ILLEGAL WORKERS

ILLEGAL WORKERS

As we approach Brexit, employers now more than ever before, need to ensure their employees have the right to work in their business. In 2016, both the offences and penalties relating to the employment of illegal workers broadened significantly, meaning mistakes can be extremely costly for a business.

The problem isn’t new to the automotive sector. Back in October 2011, CAT reported that ECP had been caught employing illegal workers at the Tamworth distribution centre and also at its head office in Wembley. The company was subsequently fined £35000. Interestingly, a recruitment firm – Winner Logistics – which supplied staff to ECP was also caught and fined £15,000.

LAW AND PENALTIES
It is unlawful to employ someone who does not have the right to live and work in the UK or to employ a person who is working in breach of any conditions imposed upon them by the Home Office. Employers have an obligation to prevent illegal working. To comply employers must carry out right to work checks on all prospective employees before their employment begins; conduct follow-up checks on employees who have a time-limited permission to live and work in the UK; keep records of all the checks carried out; and not employ anyone it knows or has reasonable cause to believe is an illegal worker.

THREE STAGE CHECK
Employers need to follow a three- stage check. The first step involves obtaining the employee’s original documents proving their right to live and work in the UK. Next, those documents that relate to the individual in question should be checked to see if they are original, unaltered and are valid. Lastly, they should be copied and kept securely with a record of the date of the check and a date for any follow-up check that may be required.

Different documents must be used for employees that have a permanent right to work in comparison to those who have a time-limited right to work. A full list can be found in the Home Office’s website.

FAKE DOCUMENTS
Employers are not expected to be experts in identifying false documents, however they could still be liable to pay fines if it is “reasonably apparent” that the document is a fake. Employers are therefore urged to carefully examine documents when performing checks but are not required to use any technological aids. The documents should only be originals not copies and the employer should try and ensure they have not been tampered with in any way. Equally, employers should satisfy themselves that the documents provided relate to that employee, for example checking the picture on photo ID is a true likeness of the employee.

PENALTIES
If employers breach their obligations they may now be liable for both a civil penalty and they could also be found to have committed a criminal offence.

An employer will be subject to civil penalty if it is found to employ someone who does not have the right to undertake the work which they are employed to do. The maximum fine is £20,000, which doubled from that levied in 2014.

A criminal offence will be committed if the employer knew or had “reasonable cause to believe” that the employee did not have the appropriate immigration status. After a conviction, an employer can receive an unlimited fine or imprisonment of up five years (or both). The term of imprisonment has more than doubled in under recent legislation.

SITE CLOSURE
The Chief Immigration Officer also now has the power to issue an illegal working closure notice, to effectively close a business premises for up to 48 hours while they apply for an Illegal Compliance Order if the employer has either been convicted of employing an illegal worker, has been required to pay a civil penalty within the last three years, or at any time if a civil penalty remains unpaid.

An illegal compliance order may be issued for up to 12 months and can include conditions prohibiting or restricting access of people to the premises, requiring a specified person to carry out right to work checks, and to produce documents following such checks in order to prevent illegal working.

WORKER’S RIGHTS
But while employers face serious sanctions, a worker who is found to be working illegally can now also be prosecuted for illegal working and/or removed from the UK, as well as having their earnings seized. Immigration officers now have increased powers to enter business premises to search for documents and to seize and retain evidence in relation to any potential offence. Immigration officers may visit a business on their own initiative if they suspect a business is employing illegal workers or they’ve had a tip off.

With high fines, potential for criminal convictions, and negative publicity, employing illegal workers or not undertaking proper checks is unlikely to be a risk many businesses want to take.

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FUELLING SYSTEMS: WHAT’S REALLY THE PROBLEM?

In many cases, the injector and pump are not the cause but the victim of the piece.

The fuel system market is growing, with a recent report citing continued growth globally to 2022. Europe is the second largest market for fuel injectors, partially due to improving economic conditions and tougher emission standards, which is expected to grow the market further.

These emissions standards are at the forefront of manufacturers minds and therefore the onus is on their suppliers to develop products that keep vehicles running efficiently. This has put pressure on the fuel system, which is constantly developing to keep up with the demands of the modern world, and forcing the aftermarket to keep up with innovation, causing problems when it comes to identifying faulty units.

FINE TOLERANCES
Petrol and diesel injectors are intricate parts, with holes around 50 microns wide. To put this into perspective, the human hair is around 100 microns wide, which really highlights the tolerances they’re put under. Any form of dirt or grime pulled through the system from the tank or lines could cause issues. As fuel has to be injected at high pressure, a reduction of 8-10% efficiency could cause a misfire due to a leaner fuel mixture.

Yet a number of fuel system parts can be replaced when they are not the main cause of any issues. The injector is the point that can be observed when a problem is being diagnosed, meaning if there is a report of low fuel pressure, some garages can believe the injector is the issue, leading to a replacement that is not necessary, especially if the original issue remains.

Julian Goulding, UK Marketing Manager at Delphi explains: “The problem causing a loss of pressure could be further down the chain. For example, the pump may have an issue, may not be generating enough pressure, or in terms of diesel, it could be contamination in the rail. It is important that garages therefore carry out a full diagnostic of the system before replacing the injector, then that will resolve the problem. Where the problem becomes visible, may not be the root cause.

“Our distributors see a lot of parts that are returned due to the fact that they have failed early, and this is down to the fact that the original issue has not been rectified, damaging new parts much quicker. It may be a simple flush of the system that is required, but with a set of injectors costing £800 to £1,000 it can be costly to a garage if the part is misfitted or not required.

Garages must also play their part in ensuring injectors and pumps are not damaged or contaminated during fitting,” Goulding continues. “The areas where such components are stored and worked on need to be clean, torque settings must be adhered to and care must be taken, after all, especially in the case of diesel, the fuel system is a high-pressure system.”

Injector testing kit in action

Karl Horton, Warranty and Technical Manager at Carwood, believes there are other reasons as to why a number of units returned are not faulty:

“From injectors being returned to us, we have a three percent return rate on our remanufactured products,” he comments. “Of this, around 1.2% is accepted as we recycle a lot of products in our remanufacturing facility. The remainder is returned either due to contamination or incorrect fitting, or there is no fault found with the unit. What customers do with the products can depend on the level of training on the fitment of these items. We find that some garages are fitting injectors and pumps as a process of elimination, and we return these once we have tested them to see if they are working or not.

“One thing we have also found is that customers are not programming injectors properly. Automatically they then think that the problem is with the product rather than what they are doing. If you look back at vehicles from the 1980s compared with modern ones then there are big changes. A lot of injectors and pumps today are programmed and there are technicians that don’t carry these procedures out, expecting them to work rom the off. In many examples, that isn’t the case.”

UNDER PRESSURE
What then, could be the cause of fuel system issues? “The pump itself is a durable part within the fuel system and under good conditions ‘should’ last for the lifetime of the vehicle,” explains Chris Newey, Product Manager at Cambiare. “However, the fuel pump isn’t the only part of the fuel system that can experience problems which could result in a lack of fuel being delivered to the engine. Typical causes for low fuel pressure include a dirty fuel filter in which the fuel is being obstructed from flowing at the required pressure,incorrect tank venting in which the quantity of air coming into the fuel tank is insufficient to allow fuel to be withdrawn by the pump or restricted fuel lines in which the diameter of the fuel lines is insufficient to support the f low of fuel.”

“Damage during fitment is not an uncommon situation for fuel pumps and injectors. The most common issue we experience with ‘damage during fitment’ is broken fuel pipe connectors on the latest electric pumps. Whilst care should be taken when connecting and securing the pipes to ensure a tight seal, fitters should not over-tighten them as it can cause damage.

Bosch diesel injector

“Removal of old injectors can also be problematic. Over time, the O-Rings can harden and the cylinder head can corrode seizing the injector in place. Once removed, it important to ensure the fuel rail is free from any residual material to ensure the correct fitment of the new injectors and the new seals provided with the new injectors should always be used.”

HIGH LEVEL OF DETAIL
Ian Proctor, Diesel Product Manager at Bosch, adds: “We estimate that around 300,000 Bosch injectors are replaced in the UK every year and it is a part that is made up of very intricate pieces. Most injectors tend to see a lifespan of eight years, however the tolerances they are subjected to are great. Any contamination in the system can mean particles being pushed through the small injector holes which can cause wear, this can add to early failure of a component and is included in that high number of yearly injector replacements.

“When you take an injector apart, there are pieces inside that can easily become lost. For example, a garage may remove the injector and start to take it apart to clean it, before realising that the number of components within is greater than they realised. Without taking care, they may have already lost one of the tiny bearings that lie within, which will mean the entire unit will need to be replaced, or sent to a repair centre where an expert can examine it, at cost.”

DIRTY FUELLING
Which procedures should garages be undertaking to make sure of a correct diagnosis? Chris Newey of Cambiare adds: “Check the electrical circuits to ensure connections are in place, undamaged and in particular, free from rust.

“Fuel injected engines are extremely sensitive to the pressure of the fuel. Technicians should check fuel pressure using a pressure gauge to identify if the pressure is not running too high or too low. If the pressure is too high for the vehicle and the pressure regulator is faulty, the fuel consumption will increase causing a rough idle and surging. If the pressure is running too low for the vehicle, it can cause lean misfire, hesitation, rough idle and misfire when accelerating.”

A common theme is that of contamination in the system, which throws garages off the scent when diagnosing fuelling problems. Cleaners can therefore play their part in repair, sometimes before the idea of replacing the injector or pump should come into question.

Carl Ebanks, Brand Manager at Redex, comments: “Not so much contamination but dirt deposits from the fuel builds up on the fuel injectors, which alters the spray pattern and dosage so they become less efficient, making the car overall less efficient. Fuel System cleaners reduce emissions, clean up the dirt deposits in the fuel system, improve engine performance and save fuel. Cleaners stop dirt deposits building up on them, but do not prevent issues in the case of mechanical breakdown.”

As such an expensive and mechanical piece of the vehicle, diagnosing the problem in a fuel system is only part of the job and taking time to explore and rectify potential problems could save much future hassle. Parts are delicate and care is required, while attention is mandatory.

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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.

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

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.

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

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.

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

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.

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

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