Would mandatory training aid new business owners?

I moderate an internet business forum at the U.K.. An increasing number of people are starting their own company here. On one level that is inspiring. But sometimes I believe there should be a compulsory exam to pass before beginning a business. Some people don’t understand the distinction between being a customer and being a company owner. The Earth, and the law, treats both very differently.

By way of instance, the U.K. has very strict consumer protection laws. The huge majority of these laws, but do not apply when someone is purchasing as a company — versus purchasing consumer services and products. Business owners are supposed to know what they’re doing. There isn’t any learning period or defense against unfair contracts or sympathy from judges when a transaction ends up in court.

In my experience in the company forum, new small business owners lose common sense when things go wrong. Questions such as”can I get my money back from this no return deposit ?” Are posted at least one time a week. The solution is nearly always the same: Read the contract. When it is not in the contract, then no, you can’t get your money back.

It’s so easy to say,”Read the small print.” When you’re buying as a company this is only the start. Not only read all the small print, but be sure to understand it. If unsure, ask what it means. And don’t ask the salesman or promoter or the vendor. Ask your lawyer.

There are a number of mistakes that new business owners often make. Among the most common involves credit card machines and card processing. These contacts have a tendency to bind the owner for years, with no outside clauses. Providers argue that the contracts are necessary because of the cost of the machine and the program. But tell that to a company owner who closes after one year and has four years to cover. (Contributor Phil Hinke has addressed, many times, unfair credit-card-processing contracts and negotiating with suppliers.)

The next most frequent criticism involves leased property. Unfortunately, many new business owners think they have the very same rights in a commercial license as in a residential one. Nothing could be farther from the truth. Most commercial tenants don’t have any rights except what is written in the rental. Indeed many unwary companies have signed leases that put undue burdens on them and leave the landlord with no obligations. These burdens are normally concealed in technical jargon and may not immediately be evident.

I recall once reading a thread on the discussion about a mom-and-pop shop opening and subletting a device from a national retailer. At the lease, they agreed to pay adequate rent to cover whatever the national merchant had to pay the landlord. After a year or two, the landlord decided that the national merchant had missed a rent review thing — like an increase in the lease — and doubled the monthly sum and backdated it two decades. The national retailer, with nothing to lose, approved this and passed the bill to the mom-and-pop owners. It was all perfectly legal, and all totally unfair. The mom-and-pop shop went bust. When they had retained a commercial attorney (who could have clarified the small print and emphasized the potential unlimited liability they were carrying on), the result might have been different.

Then you will find new business owners that are convinced that something that’s not right or fair shouldn’t be allowed. They believe that common sense principles. Unfortunately they are mistaken.

Certainly all this new venture helps the U.K. market. But in moderating the company forum, I see life-changing mistakes by new entrepreneurs. It would helpful if new entrepreneurs had to take a real-world training program and pass an exam. At least 50 percent of new businesses fail in their first year. About 75 percent do not make it to five decades. How much lower would these proportions be if the owners had passed an exam?