Posted on Nov 01, 2011
New Zealand is generally recognised as a business friendly environment. In fact New Zealand has ranked first as the world's easiest place to start a business and third out of 183 countries for ease of doing business in a report from the International Finance Corporation and the World Bank. The cost payable to bureaucracy and time involved in obtaining permits and licences is substantially less than in many countries. While there is still often bribery required to run a business, it is of a level far different from that existing in most jurisdictions.
Generally that ease of doing business is lauded as being positive. There are a number of widely published surveys which rate countries, and being near the top of the "business friendly" ratings is seen as being good rather than bad.
But is it really such a good thing that it should be so easy to start a business?
Perhaps there is indeed a case for making it a little harder to get into business in the first place? Just as it is necessary to pass tests and obtain a licence as a food handler or a motor vehicle driver, perhaps it should be mandatory to have a licence to be able to run a business.
The recent Global Financial Crisis has impacted on many businesses, and there has been a subsequent fallout in terms of business collapses. There is a theory that this periodic clearout of weaker businesses is as useful to the business environment as the forest fire which clears out the buildup of undergrowth on the forest floor.
Although it may be useful to have those poorly run businesses removed from the landscape periodically, surely it would be better if they were never there in the first place.
Whilst licensing would never prevent those operators who have the skills, but choose to use them to fleece and defraud, it might weed out at an early stage aspiring business people who don't understand the basics of how business operates. We would suggest that many of the finance company collapses in recent times were not so much relating to lack of business acumen and skill, and more about greed, avarice and pure selfishness. However, there are numerous examples, albeit less widely publicised, of small businesses which fail for the very simple reason that their operators simply don't understand what is required for a business to survive, let alone prosper. If aspiring business owners and operators had to pass a simple competency test then we might see some small weeding out of the totally incompetent. It wouldn't be a panacea. Just as there are plenty of incompetent drivers who can still obtain a driving licence, I am sure that ways would be found to pass a business operators licence.
As a commercial landlord, we get to meet a wide variety of potential tenants, a number of whom are startup businesses. We know that commercial real estate agents will meet even more than we do. It continues to astound us just how many of these potential startup tenants are lacking in basic knowledge of just how business works.They wouldn't know a profit and loss from a balance sheet, and often don't understand the very basics such as the difference between cashflow and profit.They may know very competently their trade or profession, but transitioning from being a panelbeater to running a successful panelbeating business does not happen without some skills and knowledge in how a business functions and what is required on a day to day basis to run a business.
As a landlord we see the full range of businesses, from those who know what they are doing, have a plan and know how to execute, through to those who obviously don't have a clue. Ultimately it's the ones who don't have a clue who end up impacting negatively on others in the business community through their incompetence in the basics of running a business.
Surely it would be better for us all if it was made just a little more difficult for the incompetent and the inadequate to be able to get into business in the first place?