Ignition Magazine Australia | May 2023

HOW MUCH SHOULD I BE PAYING MYSELF?

Capricorn’s guide to navigating this complex issue.

SERVICING ELECTRIC VEHICLES

A FUNDAMENTAL, INDUSTRY-WIDE CHANGE IS COMING

INVESTING IN NEW

TECHNOLOGY

How do you know if it’s worth the outlay?

CAPRICORN EVENTS

Connect with your industry

In 2023, we are organising many more opportunities to network with Members and Preferred Suppliers. These events support you to grow your business, network and keep up to date with industry news.

ARE COMING!

Are you ready for another year of amazing Capricorn Gala Dinner and Tradeshows in 2023?

David Fraser Group CEO

CEO’s message

If there’s one thing that unites us all in business, it’s wanting value for money. There’s nothing worse than feeling like you’ve been ripped off, realising something was a dud investment, seeing something go to waste, or not getting the maximum bang for your buck.

There are myriad ways we can waste money, fritter away time, leak efficiency or leave money on the table. We can undervalue our services, like not charging for diagnostics. We can underinvest in technology, limping along without the right diagnostic tools. We can underappreciate or overwork our team, leading to high staff turnover. That’s just to name a few classic examples. There are plenty more—like failing to invest and grow our businesses ahead of our retirement, and thereby failing to capitalise on decades of hard work when we sell.

In this month’s Ignition we’re taking a closer look at ways Members can get maximum value out of their business, their investments and their team. At a high level, you could say we’re talking about ways to work smarter, instead of harder. But in reality, what you’ll find between the covers of this month’s magazine are some very thought-provoking articles with actionable advice you can put in place in your workshop as soon as today to help you maximise value.

For example, are you paying yourself enough? We’d all like to take home more, but how did you set the rate you pay yourself? Are you taking enough profits home? We speak to Workshop Whisperer Rachael Evans to get her insights. Rachael also shares her advice on how to work out whether investing in a new piece of equipment or technology is worthwhile. It’s a calculation every workshop makes regularly and there’s nothing more frustrating than spending a fortune on a tool just to see it languishing unused in the corner. We also speak to customer service expert Chris Smoje, author of All-In Culture, to get his advice on how to measure customer satisfaction and turn that into all-important referrals—which is the secret to growing any business in the aftermarket.

Finally, we have another article based on the Capricorn innovation team’s trip to Europe to investigate the impact of EVs on the aftermarket. This time, we’re focused on the servicing needs of EVs, which are radically different to internal combustion engines. For starters, they need a lot less servicing—so getting maximum value every time an EV rolls into the workshop is going to be more important than ever.

There’s lots of food for thought in these pages. If there’s just one idea that helps you maximise somewhere in your business, then I reckon that’s pretty good value.

David Fraser Group CEO

MAY 2023

FEBRUARY 2023

4 HOW TO FIND & KEEP TECHNICIANS

Only at Autocare 2023.

8 INVESTING IN NEW TECHNOLOGY

How do you know if it’s worth the outlay?

10 POWERING UP

The future of battery technology and sustainability.

12 IMPROVING TECHNICIAN PRODUCTIVITY

Proven tips to get the most out of your team.

15 WHAT ARE THE SERVICING NEEDS OF EVs?

How will this change your business model in the future?

18

LIKE FATHER, LIKE SON

Mason Kelly proves that speed is in his DNA.

20

HOW MUCH SHOULD I BE PAYING MYSELF?

Capricorn’s guide to navigating this complex issue.

SILVER EXHIBITOR

NEW

IDEAS for finding and keeping

technicians

- only at Autocare

Taking place on 9-10 June 2023 at the Brisbane Convention & Exhibition Centre, Autocare will host hundreds of workshop owners and managers who want to take their business to the next level. Attendees will learn from the largest collection of industry experts ever seen in Australia, who are tackling the most in-demand topics, including the skills shortage.

Australia has an estimated skills shortage of 30,000 technicians, and workshop owners across the country are desperately trying to attract and retain workers. Businesses that understand the current recruitment landscape can capitalise and will be well-prepared for future growth and success.

To address the huge industry demand for guidance on this issue, Autocare has created a dedicated session ‘The Race to Find and Keep Top Talent in Your Workshop’. This session will provide crucial insights and tactics into how to improve retention and recruitment through real-world workshop examples and the latest industry research. The impact of EVs and how technology is changing the future employment pool will also be explored, plus what the industry can do to increase the automotive recruitment pipeline so businesses aren’t competing with each other.

“If you are experiencing staff vacancies, facing additional pressure on your team, or are turning away new customers, this Autocare session is critical to attend. We face a unique, challenging and changing skills environment. Traditional job ads and terms and conditions are no longer enough, and workshops need to ensure they are putting their best foot forward to attract staff,” said Lesley Yates, Director of Government Relations of the Australian Automotive Aftermarket Association (AAAA).

The session will be hosted by automotive and recruitment experts including Peter Rogers, National Manager of Repco Authorised Service (RAS); Ben Selwyn, Director of ACA Research; Fred Molloy, MD & Registered Migration Agent of AutoRecruiter & Konnecting Migration; Gabrielle Clift, Technician at Highfields Mechanical; and Lesley Yates, AAAA.

“Our latest research into staff recruitment and retention paints a clear picture of the challenges that workshops across the industry are facing in delivering to the expectations of apprentices, but also highlights the best-practice techniques being utilised by industry leaders to support apprentices and deliver innovative and engaging training throughout their journey. These findings can help other business owners better understand the market, and provide a clear direction of what is and isn’t working to find and keep talent,” said Ben Selwyn, Director of ACA Research.

The session will form part of Autocare’s comprehensive Workshop Management Program designed to increase workshop efficiency, sustainability and profitability. Other valuable topics include: the future of the aftermarket, customer service best practices, relationship building, digital marketing, cybersecurity, the customer of the future, mastering difficult conversations, business planning and environmental sustainability.

The Workshop Management Program is complemented by a dedicated Technical Training Program for technicians and features sessions on EV servicing and safety, advanced diagnosis techniques, Pass Thru technology, oscilloscopes, fuel injection systems, diesel diagnostics and much more.

A feature-packed Trade Show with over 100 of Australia’s best brands, a training stage and a networking event will complement the training programs, offering a complete solution to take your automotive career development, skills and business growth to the next level. Review the full training program schedules and secure your tickets to Autocare at autocare.org.au

You can pay for your Autocare tickets on your Capricorn Trade Account. Select "Charge my Capricorn Account" in the billing section when you checkout.

Autocare 2023 will tackle the automotive technician skills shortage head-on, providing workshop owners and managers with new best-practice techniques to find and keep top talent.

Access the latest tech through Capricorn Rewards

You can use your Capricorn Rewards Points to upgrade your tech to the latest version. Whether it’s something you’ve been meaning to upgrade for a while, or you think it’s time to treat yourself – Capricorn Rewards has a huge range of products to choose from including phones, speakers, cameras and headphones.

HOW TO

Technology is expensive and these days it’s rarely a oneoff capital cost. There are often ongoing operational costs involved such as subscriptions, software updates, regular maintenance, and training—all of which impact your bottom line in the long-term.

So, getting the decision correct up-front really matters. While it’s something every workshop owner grapples with from time to time (18% of Members told Capricorn’s State of the Nation 2022 that staying up to date with technology is something they struggle with), it’s an issue that has come into particular focus today, as our industry prepares for the transition to electric vehicles. How do you know whether an investment is going to pay off for your business?

How do you know whether it’s worth investing in a new piece of technology for your business?

calculate whether investing in new technology is worthwhile

Calculating the pros and cons of an investment

Automotive business consultant, The Workshop Whisperer, Rachael Evans said when doing the sums on a potential investment in new technology or equipment, you need to take into account factors like the capital cost, training cost, the ongoing operational costs over the lifetime of the piece of equipment, and the expected lifetime of that equipment. Which means it’s time to do some maths.

“You need to actually break it down to, ‘this cost me X amount to purchase up-front and it’s going to cost X amount in software updates over the next however long’,” she said. “Then you can work out, ‘I need to have a charge out fee of $30 on every single service and I need to see 3000 cars a year’. You work it out like that.”

A positive return on investment

Ideally, any new equipment or tool purchase should result in a positive return on investment (ROI). In other words, it should be making you money. For example, if you buy a new diagnostic tool, charge your customers for the diagnostics you perform with it—enough to cover the ongoing running costs and chip away at the capital investment.

There are, of course, other ways technology investments can provide positive ROI, which you should factor into your calculations. For example, if a diagnostic tool halves the time it takes a mechanic (who you're paying $32/hr) to diagnose a problem, it means that they can move on to the next job more quickly. Multiply that by how many hours a week they’re sleuthing out problems, and multiply that by the number of technicians you have doing the same, and it quickly adds up over the course of a year. The efficiency and productivity dividends make the investment a nobrainer. If it meets an existing need but uses fewer resources, then it’s probably a winner.

Consider the intangible benefits

Will the investment in technology bring in more customers? Will it make customers happy? Will it keep them coming back? Will it make your employees happy? Will it make their lives easier, end one of their big workplace complaints or make them more excited to come to work? Will it improve the culture of the workshop? Will it make your life easier? These are harder data points to calculate, but they are worth considering.

If you’re still unsure whether to make an investment, do some more research. Speak to friends and colleagues at other workshops and see if they’ve found value in making the same investment.

Investing in EV-related technology

Rachael said it was common for business owners in the aftermarket to “live too much in the present and not forecasting for the future”.

“We often go for safety and security,” she said.

The transition to electric vehicles is a prime example of an area where business owners across the aftermarket are not doing enough to prepare for the change in technology and the resulting investment their businesses will need.

“There’s a fear,” she said. “We have to overcome a fear to get people to even attend training on EVs. It’s crazy. The fact is this thing is coming and workshop owners don’t know what it’s going to look like for them, and they can’t see how they fit into it yet. “It’s about them understanding that, even if they have no plans to be owning a business in 2030 when things should dramatically have changed here in Australia in terms of the number of EVs on the road, they’re going to have to start the transition.”

In the case of EVs, Rachael recommended investing in education before investing in equipment.

“Then you can see what investments you might need to make financially in the future,” she said. “Don’t be afraid to do that.”

The last word on calculating any investment

Ultimately, whether to make an investment is a decision for you as the business owner. There is always a risk, but there can also be huge rewards— and risks can be mitigated.

“It comes down to, ‘If I have this piece of equipment, or I have this higher skilled person that I need to pay more, then what does that piece of equipment or that person need to generate for me in order for it to make a profit or in order for it to be worthwhile?’” Rachael said.

“As we tell our clients, everything comes down to an equation and a calculation. That’s how you work out if it’s the right thing for you to do. And if you can’t make the numbers work, then you don’t do it.”

Up Powering

UpThe future of battery technology and sustainability

As battery-powered devices become more common in everyday life, manufacturers are investing heavily in developing new battery technologies to improve their capabilities and reduce their environmental impact.

The Evergreen 12-volt battery technology

The 12-volt battery is the most common type of battery found in vehicles today. It has been around for over a century and has remained relatively unchanged in terms of its basic design. As the electrical loads of vehicles continue to grow, new 12-volt battery technologies are being developed, such as incremental 12-volt batteries, 48-volt batteries, and 400-volt batteries. These new technologies can improve vehicle performance, efficiency, and reliability, while also reducing emissions and energy consumption.

Beyond traditional battery technology

In addition to improving the traditional 12-volt, researchers and manufacturers are exploring new types of batteries that offer higher energy density, faster charging times, and increased safety. These new technologies include solid-state batteries, hydrogen fuel cells, and lithium-sulfur batteries, among others.

Solid-state batteries, for example, offer much higher energy density and faster charging times than traditional lithium-ion batteries, while hydrogen fuel cells offer a clean and efficient energy source with long ranges and short refuelling times.

Battery recycling and reuse

As the number of batteries used in various devices continues to grow, we can’t ignore the environmental impact. Automakers and other manufacturers are exploring various recycling and reuse technologies, such as second-life use, recycling and remanufacturing, and material recovery. These efforts can help reduce waste and environmental impact while also recovering valuable materials from used batteries.

The development and innovation of battery technology will be crucial in driving the growth of various industries and improving sustainability in everyday life.

As the demand for new and improved battery technology grows, it’s important for technicians to stay up to date with the latest advancements. Capricorn Service Data provides access to battery fitment and electrical component locations, and if you are looking for wiring diagrams, guided diagnostics and much more, you can upgrade to the full Autodata service at the introductory price of $2 for the first 30 days*.

Autodata, a leading provider of automotive technical information and solutions, offers a dedicated battery disconnection and reconnection module to provide technicians with all the necessary information for working efficiently and successfully with today’s batteries.

Battery technology has come a long way in recent years, with advancements in materials and manufacturing techniques enabling better performance, longer life, and reduced costs.

Improving technician productivity

by Geoff Mutton

It doesn’t automatically mean the workshop is achieving optimum profitability for the hours and effort it puts in. For many it just means working harder for the same result.

The number one reason for this is poor technician productivity, or the proportion of a technician’s work week that is productive and invoiced to customers. A simple example: if your technician worked eight hours and at the end of the day only four hours were invoiced to customers, technician productivity will be 50 per cent.

Technician productivity is obviously impacted by every technician’s skill set but it’s not the overriding factor. Just as important are the internal procedures and workshop culture. Below are some proven tips that will help improve your workshop’s productivity.

Set output expectations

Sales reps, accountants, lawyers and even parking inspectors all have targets they are expected to reach. Automotive technicians should be no different. Start by reviewing all your technicians. After taking into account their qualification levels and any additional responsibilities they have in the workshop, write down how many hours you think they should be able to charge out each day. Make sure the review includes historical data so that your new target is realistic.

Having determined your technicians’ chargeable hours target, discuss it with the staff so they are very aware of the workshop’s expectations.

Record time taken on jobs

I remain amazed by the number of workshops that don’t record the time taken on each job. Some business owners have this warped belief that they know exactly how long everyone is spending on each job. Labour is the most important commodity a workshop sells, so it demands a lot better than a rough estimate.

It’s imperative that all technicians clock on/off jobs or manually record start/finish times. This information can then be used to calculate how many hours each technician has sold each week and also is a means of analysing those jobs on which technicians gained or lost time. Modern workshop software programs should make this a fairly automated process.

Analyse technician labour results and discuss with the team

There is no point recording technician output if you are going to do nothing with it. Each week or month you need to devote the time to analyse every technician’s performance reports. Where appropriate, discuss the results with your team either as a group or individually, so that a mutually acceptable path to improvement can be worked out. Again, modern workshop systems should make it very easy to generate these reports.

From all accounts, auto workshops are extremely busy, with many booked out weeks in advance. This is good news, but being busy isn’t always reflected in the bank balance.

Managing the type of work booked in

The natural tendency is to book jobs on a first-in, first-served basis. Any job is certainly better than nothing, but when you start booking out in advance you will be able to start allocating work to those days that will match the technicians you have available.

For example, a day spent on diagnostic work and timing belts on late-model vehicles will most probably result in junior staff standing around doing little. In this instance leave some space in the diary for general servicing and repairs and only at the last minute fill it up with more advanced jobs.

Estimate hours when taking bookings

Job prices can vary from $50 to $5,000 so the number of jobs you have booked in is irrelevant. Workshops sell labour hours, so this is what you must estimate and monitor when taking bookings.

As each booking is taken, use your experience to best estimate the time it will take to complete the job and any estimated additional work. Stop booking in work only when you estimate that all available technician hours will be fully utilised.

Review vehicle history with the customer

When customers drop off their vehicle it is imperative that the vehicle’s previous history is reviewed and discussed. Very often, items you’ve mentioned last time will be well overdue.

Technician productivity will be significantly boosted if you have the go-ahead on additional items before technicians have started the job, rather than having to report the same problem again and then wait for customer approval or parts before the job can be completed.

Charge for diagnostic time

It’s in a technician’s DNA to fix customer problems by spending whatever time it takes to figure out how to approach the problem before they even pick up a spanner. This is all very noble, but if every minute of this time is not being charged, technician productivity goes out the window.

Diagnostic work must be treated like any other service. You would not do a brake fluid flush for free, so why diagnose a customer’s problem for free? The customer is paying for your expertise, which begins the moment they walk in the door and tell you what’s wrong with their car.

Be up-front with the customer and gain a financial commitment before going ahead. This methodology needs to be applied to standalone diagnostic problems or a routine vehicle service when a customer may have asked for an additional problem to be fixed. A service is a service, and the book time allocated for that service does not accommodate the extra time to investigate why the headlight globe keeps blowing.

Learn to say no

In today’s complex vehicle maintenance world, it is no longer realistic to expect that technicians can do every type of job on every model. This expectation is a recipe for disaster and nothing kills productivity like a job gone wrong. Many of the best workshops I know have learnt to say no and happily refer work on to associates and other workshops. Being realistic means accepting those jobs your workshop is good at, and outsourcing the rest.

In summary, working hard is a given, but working smarter on managing and controlling your technicians’ time is essential for maximising their productivity. Make it your priority and I am sure you will be pleased with the results.

What are the

SERVICING NEEDS

of

ELECTRIC VEHICLES?

As the global automotive market transitions away from the internal combustion engine, many Members have reached out to us with questions about the requirements for servicing EVs, what kinds of servicing will cease to exist and the implications for their businesses as EVs become a mainstream part of the aftermarket.

In late 2022, a team from Capricorn visited the UK, Norway and Sweden to scan the EV market in Europe, which is well ahead of Australia and New Zealand, to see what lessons the industry has for us at home. Kim Radalj, Capricorn’s Chief Innovation & Transformational Officer, was among the group.

Reassuringly, Kim said the study group found there are also no signs of workshops or service work falling in either of the countries visited. Indeed, car demand has continued to grow, with new car sales highly skewed to EVs, even if the aftermarket is still mostly servicing internal combustion engines. While there is still plenty of time to make the transition, the transition is inevitably coming.

“EVs require very different servicing and there are obviously different skills that will be required in servicing those vehicles,” he said. “The key message is that members will really need to think about their workshop and its set up.”

Servicing will never be the same again. The transition to electric vehicles is set to fundamentally change the business model of many workshops in the automotive aftermarket.

Let’s look at the most important findings from Kim and the team.

Up to half of current servicing will no longer be needed

Say goodbye to oil changes. In fact, 30 to 50 per cent of traditional servicing jobs will no longer be required. Given oil changes are a major trigger for service intervals, this could prove a challenge to profits.

While original equipment manufacturers still suggest annual services and are often providing highly itemised service schedules, motorists appear to be questioning the value for money these services provide.

There are, however, still good reasons for regular services. Teslas need their dehumidifiers replaced every few years, along with cabin filters, wiper blades and washer fluids. Cooling systems, like air conditioners, are potentially key servicing needs.

Battery maintenance and replacement is one opportunity for servicing, but these are high voltage components requiring specialist skill and training. Newer kinds of batteries also have a low failure rate, so battery repairs during the useful life of the car within the workshop appear unlikely. This may feel like slim pickings, so far.

Wear and tear in some areas will still create demand for servicing

Tyres, brakes, suspension and charging cables are all likely to need regular replacement, although there is always the chance OEMs will design out issues over time.

The high torque from electric motors, for example, is wearing through rubber compounds in tyres at a faster rate than traditional motors, resulting in higher frequency visits to tyre shops.

Expect higher data access charges from OEMs

Like aftermarket workshops, OEMs are grappling with how to make up lost revenue from servicing and parts. In Europe, while legislation gives workshops access to the data they need, it doesn’t appear to limit what the OEMs can charge which is resulting in higher data charges for mechanics.

“The perspectives shared suggested that this risk is best managed through both vertical regulatory frameworks, like Right to Repair, and through horizontal frameworks, like consumer data access regimes that provide consumers with choice on what data is shared, based on their consent,” Kim said.

While current software updates take considerable time, requiring fast Wi-Fi and internet connections, overthe-air updates like Tesla’s may soon become the industry standard.

EVs are going to change your workshops and your business model

Kim said servicing EVs came with high safety, training and awareness requirements because of the high voltage nature of the vehicles. “It was really interesting talking to those who were servicing EVs, because they had to really think about the spatial considerations and how the cars are moving in and out of the workshop,” he said. “EVs are much quicker to service and that has implications on the workshop floor and, of course, there has to be a safety-first mindset.” Some business owners will not want to make the transition to EVs. Some, especially those in the later stages of their careers, may well close their doors and enjoy a well-earned retirement. But for those with many working years ahead of them, Kim has good news.

“There’s obviously still servicing work to be done, it’s just going to require different skills,” he said. “The skills are very learnable.” The even better news is, you still have time to make the transition.

LIKE FATHER, LIKE SON

by Paul Marinelli

Mason Kelly, the secondgeneration race driver.

It was looking like a pleasant retirement for a while there — at least it seemed that way for 2005 Bathurst 1000 Champion, Todd Kelly, until Mason Kelly, his 18-year-old son, made his debut as a second-generation race driver He made his Supercars debut at the series’ opening round held on the concrete-walled streets of Newcastle in early March.

The junior Kelly competed in the Dunlop Super3 Series, which is the entry-level racing category before Super2. These racing categories are the two key steps a driver needs to make before breaking into the main level Repco Supercars Championship Series.

Very fittingly, Mason Kelly will drive the Nissan Altima Supercar, which was the last car that his father raced in the Supercars Championship before retiring from the sport at the conclusion of the 2017 season. In another interesting coincidence, the last time Todd Kelly raced that exact Nissan Altima Supercar was when he competed at the 2017 Newcastle 500, the final Supercar race of his outstanding career.

Mason’s Supercars debut also marked the return of Kelly Racing, the team founded in 2009 by his father and uncle, champion racer Rick Kelly. Their family-owned team successfully competed as a Holden team and later as the official Nissan Supercars team for 12 years.

Like all aspiring young racing drivers, Mason Kelly has enjoyed a steady rise through grassroots motorsport, including Karting, the Hyundai Excel Series and other state levels of competition.

Todd Kelly takes on the role of team manager and mentor for his son for his inaugural Super3 season, which is sure to be a very memorable father-son experience.

According to Mason Kelly, “It’s weird how it has worked out — the same car and same event as my dad’s last Supercars race. I was there for that race and I am glad to have my dad looking over my shoulder at my first race.

“I’m incredibly grateful for our friends and sponsors who have come on board to make it possible. It’s going to be a great experience,” the newest racer of the Kelly clan stated.

As you would expect, this is all a major case of deja vu for Todd Kelly. “I wasn’t expecting to get back into Supercars so quickly. It was a short-lived retirement from the pit lane, but I definitely have a good reason for it,” Kelly said.

“Mason has progressed well in his racing. He has really impressed us with his level-headed attitude all the way through his junior racing.

“We have everything we need to give Mason a good shot at it. The infrastructure from the old Kelly Racing is all there to run a Super3 team and with the help of some good friends, we are just going to get him out there and see how we go.

“Personally, it’s very exciting. My little guy is making his Supercars debut! I remember when I made my Supercars debut. It’s a big moment and I know that he is ready for this major next step,” Todd Kelly concluded.

Following the Newcastle opening round, the Dunlop Super3 Series will be supporting the Repco Supercars Championship at Perth, Townsville, Sandown, Bathurst and Adelaide. Full calendar information can be found at supercars.com

The veteran of 541 Supercars race starts, Todd Kelly was enjoying the good life for a couple of years, until his son, Mason, quickly proved that talent does indeed pass through the generations.

my HOW MUCH should I be paying elf

elf?

Are you paying yourself enough?

As money-related markers of success go, it comes between being profitable and having no financial stress (58%) and being able to efficiently manage cash flow (19%).

But how do you work out just how much you should be taking home in your pay packet each week? How do you know if you’re paying yourself enough? Could you be short-changing yourself and your family, and not adequately rewarding yourself for your efforts? Or could you be overpaying yourself, with potentially negative effects on your cash flow, your ability to respond to crises, or your means to invest?

Being able to pay yourself a healthy salary is meant to be one of the big advantages of running your own business and being the boss. We know from State of the Nation 2022 that for more than a quarter of Capricorn Members, being able to pay yourself a steady wage is considered a marker of success.

What is a workshop owner’s role worth?

To find out how much a workshop owner should be paying themselves, we asked automotive business coach Rachael Evans, the Workshop Whisperer, for her advice.

“In general terms, they should be paying themselves the equivalent of what they could go and earn out in the market for every single thing they do for the business,” she said. “That’s a sixfigure sum, straightaway.”

That’s because when you’re running a business, you’re not just a mechanic. You’re often doing everything from managing the books to doing the hiring and firing to ordering parts and stock to looking after the marketing.

But how do you work out the actual value of your contribution to the business?

Calculating your value to the business

Rachael said when she works with workshop owners, she has them implement a financial management system that helps them work towards a predetermined set of percentages the business should be operating on, including the owner’s salary. Perhaps predictably, those percentages are all based on revenue.

So, what does that look like in practice?

“Let’s say their revenue is between $500,000 and $1 million dollars a year,” Rachael said. “This would put them into a bracket that means that what they pay themselves, or what’s available to them to receive, is about 20% of revenue. Now that doesn’t mean that they have to pay themselves that, but that’s what their share of the pie is for their pay.”

This percentage is, very specifically, your wage as a business owner. It’s called “owner’s compensation” and it covers all those day-to-day things you do for the business.

Owner’s compensation versus profit distribution

“The other way workshop owners need to be paid is through profit distribution, because salary is just the reward for the everyday work that they do inside the shop,” Rachael said.

“Profit distribution is the reward for the risk they take of owning the business and employing all those people and being the one who has to withstand the market’s ups and downs.”

How profits are dispensed in a business will depend on a range of factors, like the company’s structure, the number of shareholders and the percentages of their holdings, and any profitsharing agreements in place. The amount available for distribution may also depend on any longterm business planning, including scheduled investments in new technology, plant, equipment, property or additional staff.

“If they’re following a financial management system, there’ll be a percentage which will apply to profit sharing, based on their revenue again,” Rachael said.

“If your owner’s compensation is at 20%, then your profit distribution is going to be somewhere between five and 10%, and they should take that quarterly.”

The amount you’re able to pay yourself may also be heavily influenced by the maturity or development stage of your business. If you’re a startup or a new owner, cash flow may be tight. If you’re an established business investing in a growth phase, you might need to take home less money in the short-term. If you’re nearing retirement, perhaps you pay yourself more to top up your savings or your superannuation.

Don’t short-change yourself, but think long-term

It is quite common for small business owners to pay themselves a smaller salary and top up their incomes with dividends from profits. Others may only pay a salary.

“If you’re only taking salary or wage, then you’re actually doing yourself out of the real benefit of business ownership, which is profit distribution,” Rachael said.

Talk to your accountant for the most effective way to structure your income for you, your family and your business, but make sure you’re not undervaluing your contribution to the business. Your accountant will be able to help you maximise your personal income, while ensuring that your cash flow is sustainable and your business prospers in the long-term.

Remember, nearly six in 10 Members told State of the Nation being profitable and having no financial stress was a key marker of business success. In fact, it was second only to doing highquality work (on 60%) when we asked Members what success looked like.

HOW MUCH should I be paying my$elf?

MEMBER PROFILE

AVON SERVICE SPECIALISTS WESTERN AUSTRALIA

Located in Northam, Western Australia, Avon Service Specialists might have been established in 1986, but they have some deeper roots that connect them to an interesting slice of local automotive history. The business evolved from the original local Holder/Chevrolet dealership, Badgers Motors of Northam, that was owned by infamous daredevil race car driver Aubrey Badger in the 1950s (as is evidenced by the below image of him taking a high-speed corner on two wheels in a ’48 FX Holden).

The business was also the local RAC contractor up until 2007, and in 2002 they moved to their current location in a building that once served as a Coca-Cola bottling factory. They’ve also commissioned a custom mural on the façade of their new home that honours the historical significance of the business and building — including Badger’s two-wheeled driving heroics.

When asked why he chose to get into the automotive industry, Avon Service Specialist Managing Director Cameron Blackhurst said, “I always had a passion for the automotive industry and a love for cars. I was lucky enough to have worked with a gentleman who mentored me and opened my mind to the idea of business ownership.

With his encouragement, I was able to make that dream a reality. When the opportunity to buy this business was presented, I knew that it was for me.” In terms of their favourite parts of Capricorn Membership, Blackhurst says,

“Management of our consolidated accounts and having access to a list of prequalified preferred suppliers makes purchasing so easy. The buying power that Capricorn exposes our business to gives us security and this is something that we really appreciate. We also look forward to the annual gala dinner every year. ”

avonservicespecialists.com.au

Wheel action at the Northam Flying Aubrey Victor Badger

Avon Service Specialists Badgers Motors' façade in 1950s

PREFERRED SUPPLIER PROFILES

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Hydrosteer specialises in the manufacturing, development, servicing, diagnosis, and supply of heavy vehicle power steering systems. With a focus on technical leadership and a commitment to delivering high-quality engineering product enhancements, Hydrosteer has established itself as the go-to company for all heavy vehicle power steering needs.

One of Hydrosteer's key strengths is their wide range of parts, including custom-manufactured one-offs and small-run productions. The company also offers full engineering services to ensure that their clients receive the best possible solutions for their power steering needs.

Hydrosteer is able to provide costcompetitive solutions while maintaining their reputation for technical superiority. They’re also the only ISO-accredited steering company in the country.

hydrosteer.com.au

PATTERSON CHENEY CARS & TRUCKS VIC

Patterson Cheney is a renowned automotive group that offers a "onestop shop" for some of the world's leading automotive brands. Specialising in both the mechanical and collision industries, the company's conveniently located Distribution Centre allows them to service both Metropolitan Melbourne and Country Victoria daily. With a team of manufacturer-trained experts, Patterson Cheney offers the right part, at the right price, at the right time to look after your requirements.

With over 100 years of experience in the industry, Patterson Cheney has been a proud Capricorn Preferred Supplier since 1996. Whether you are in need of mechanical or collision repair services or simply require top-quality automotive parts, Patterson Cheney has the expertise and experience to meet all your automotive needs.

pattersoncheney.com.au

Tritech Lubricants Australasia is a proudly Australian-owned and operated company established in 2002, offering one of the largest lubricant product ranges in Australia. The company is dedicated to technical and quality excellence, ensuring that all its products are rigorously tested to perform under the most demanding conditions.

All products are manufactured under a strict ISO 9001-2015 qualityendorsed manufacturing system. Tritech Lubricants' products are blended using OEM-approved formulations and developed to meet or exceed industry specifications, complying with SAE, API, ACEA, and ISO guidelines, backed by a product guarantee.

With over 20 years of experience, Tritech Lubricants is a well-established player in the oil and lubrication markets, offering an extensive range of products for various applications.

tritechlubricants.com

FUN ZONE

SPOT THE DIFFERENCE

5 Differences To Find

Email your entries to ignition@capricorn.coop before the 30th May 2023. Winners will be selected by a random draw of the correct Member entries occurring in West Perth on 1st of June 2023. The winners’ names will be published in the July edition of Ignition. Please ensure you include your Member number and email address when submitting your entry.

Last Month’s Winners

1st Prize - ALPINE AIR TARANAKI - 4,000 points

2nd Prize - PLIMMERTON AUTO SERVICES - 2,000 points

LAST MONTH’S ANSWERS

WORD HUNTER

Find the 15 words hidden in the jumble. They could be horizontal, vertical, diagonal or backwards. See if you can find them all!

BATTERY CHARGE COMPLEX

ESTIMATE EXPECTATIONS

IMPROVING

INVESTING OUTPUT

POSITIVE RECRUITMENT REVIEW

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