License to do business

Every year we see in the media a number of lists variously titled “best countries for doing business” or “ease of doing business”. And New Zealand always places right up near the head of the list. Which is positive acclamation of the minimal hurdles to doing business in New Zealand.

But there is one list which is cause for concern. That is the “best countries to start a business” list. Last year New Zealand placed at number three. According to this list New Zealand is the third easiest country in the world to start a business. Which means that (according to this list) there are only two countries in the world that place fewer obstacles to starting a business than New Zealand.

But is it really a good thing that it is so easy to start a business?

Any plonker can wake up in the morning, and in New Zealand start a business before nightfall – with minimal or nil business skills or knowledge. They can be loosed on an unsuspecting public with no knowledge whatsoever of their regulatory obligations. Let alone understanding of GST, PAYE, provisional tax. Or even customer service.

We would argue that there should be a world of difference between an environment with an “ease of doing business” and “ease of starting a business”. Business is the life blood of a country, and the economy. Placing, or failing to eliminate, un-necessary obstacles to doing business is restrictive to economic well-being and progress. But that is very different from making it ultra-easy to start in business.

Taking a break over the festive season has reminded us of the numbers of small businesses (and New Zealand is predominantly a nation of small businesses ) that are being run by people who should not be in business at all. That’s not just the ones who don’t understand customer service, never return telephone messages (because they don’t answer their telephone in the first place, after they never replied to email messages) and have a sign in their window saying “open” when the lights are turned off, the door locked and they are very obviously closed. It does not take Fair Go to highlight to us businesses that risk the safety of their clients, damage the reputation of their industry, and generally take the unsuspecting public’s money and don’t provide the service or product they purport to.

It’s not just the fraudsters who regularly re-appear under new names. It’s the serially incompetent. Our argument is that we should be making it easier to do business – but harder to get into business. Real Estate agents need a licence to practise. So do doctors, physiotherapists, chiropractors and other medical professionals. We won’t let teachers in front of a classroom without a practising certificate.We don’t allow a bar manager to sell liquor without a licence. Yet anyone can start a business at will. And potentially do as much, if not more, damage than employed professionals who need a licence.

The counter argument is that the market will sort out the incompetent, the fraudsters and the bumbling, who somehow manage to get into business. And to an extent it does. Trip Advisor, No Cowboys and other feedback sites provide a forum where consumers can share their experiences of businesses. And inevitably poorly run businesses disappear. But often not before they have wreaked havoc on the unsuspecting.

In our own sector of industrial property we encounter  far too many landlords who have a very incomplete understanding of the business and skill  of being a landlord. That is actually positive for Expedio, as a part of our business is acquiring properties that have been poorly run, and injecting professionalism into the management of both the property and the client relationship with tenants. So to create obstacles to incompetent landlords getting into the business would actually harm our business. But we believe that the industry generally would be better off if potential landlords had to undergo some form of training, however basic, before they were allowed to practise.

In the food industry some years ago there was introduced a food handlers certificate, that under local body regulations every person employed in the handling of food needed to possess. At the time it was introduced we believed that the content of the course which lead to the certificate was so basic it was redundant. We completed the course with a 100% pass on the assessment. Yet to our amazement the participants in the class we took who failed the assessment, were the ones working in the most vulnerable sectors of the food industry. We rapidly changed our view on  the food handlers certificate. It was not only necessary – it should be beefed up in it’s scope and implementation. It’s a basic form of protection for the public against poor and inadequate food handling.

Creating a “Licence to do Business”, however basic, would have a similar impact in the business community. It would create a baseline that ensured anyone running a business understood not only their regulatory obligations, but also the basics of customer service – similar to the original “Kiwi Host” program.

And therein lies an idea for our major real estate companies. How about creating and offering a course in “how to be a landlord”?  Because owning a commercial or industrial building for lease is a business. Not merely a “passive investment” as many agents are apt to portray. Investopedia defines an investment as “an asset or item that is purchased with the hope that it will generate income or will appreciate in the future”

A building is not just a static asset. It – both the building and the tenant – require active management  to ensure both the income continues, and the asset appreciates in the future. And that, unfortunately, is what many  industrial landlords do not have the knowledge to do.