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The 51 Fatal Business Errors

And How to Avoid Them

By Jim Muehlhausen, CPA, JD

The 51 Fatal Business Errors

focuses on lessons learned
by business owners and
CEOs from their successes
and failures, and is intended
as a practical guide to shape
one's own business.

About the Author:

has spent the
bulk of his
professional life
as a business
o w n e r ,
becoming the youngest
franchisee in Meineke Discount
Muffler history. He later founded
a manufacturing concern in the
automotive aftermarket that
achieved recognition from
Michael Porter of the Harvard
Business School and Inc.
Magazine in the IC 100 Fastest
Growing Businesses.

This book offers incisive,

readily applicable real-life
experience gleaned from
w h a t t h e a u t h o r, J i m
Muehlhausen, calls 'the
world's most expensive
business school': The School
of Hard Knocks.
To this end, the book
determines the 51 most
crucial errors a company can
face and discusses how to
overcome them.

Inside This Book Summary:

The Big Idea
Why You Need This Book
Using the Gym Membership
Enter at Your Own Risk
Whats Good for G.E. Isnt Always Good
for G.E.
Fatal Error: Hiring Your Competitors
Fatal Error: Revolving Door Policies

Mr. Muehlhausen also serves on

several non-profit and company
boards of directors as well as
serving as an adjunct professor
of business at the University of

read the summary

Is It Time to Fire Your C.E.O.? (Yes,

Im Talking About You)
Fatal Error: Refusing to Delegate
Fatal Error: Leave Me Alone
Best and Worst Practices
Fatal Error: Turning Racehorses
into Plow Horses
Fatal Error: Ignoring Your
Best Performers
Fatal Error: YABUT
Fatal Error: A Pinch of
This, a Pinch of That
Now What?

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Why You Need This Book

This book is designed to be used as a reference
each time a new issue in one's business venture
arises. In that vein, it discusses the 51 most
crucial business errors to be overcome, fleshes
concepts out with real-life examples, and
provides action steps towards determining the
most effective solutions to these errors.
Unlike many business books which refuse to
stray too far from simply discussing business
theories, the book does so to empower the
reader not just to read and be informed, but to act
upon what he/she has read - in short, to translate
learning into action.
For the sake of brevity and ease of
understanding, only a few of the most
important and significant errors as identified
by the author are taken up at length in this

Using the Gym Membership

Business success cannot be learned in school. It
does not come with any MBA certificate.
It is best discovered by enrolling yourself in the
School of Hard Knocks - where practical
knowledge is taught through tough lessons.

About the Book:

Author: Jim Muehlhausen
Publisher: Maxum Communications
Date of Publication: 2003
ISBN: 978-1-905776-01-6
392 pages

The 51 Fatal Business Errors, by Jim Muehlhausen

Most business books are like gym

memberships. They get all exciting at the start,
but end up without seeing any action. Most
business books discuss a lot of information and
theories, but cannot be proven useful when the
time comes to put what has been learned into
practice. Done right, a business book should
energize you and leave you with tangible action
items to make your business better.
Here are some specific tools needed to get your
business in shape and 'toned'.

Enter at Your Own Risk

If your heart is really set on coming up with
meaningful action for your business to move to
the next level, then you must have courage and
unlimited understanding for accepting mistakes
you may have made along the way, changes
you can adapt, and fresh goals that you can set.
Points and observations raised in this book are
neither for the fainthearted nor those who are
already satisfied with their business' standing.
Instead, this is for those few entrepreneurs who
are eager to make and see things happen. In
fact, you may find yourself disagreeing on some
parts, so here are two important warnings:
Warning # 1: What is discussed here might get
in your face a bit, as you'll be dealing with tough
questions to answer for the benefit of turning
your business into something GREAT. Treat it
as an act of compassion which aims to prevent
you from being the common CEO who may well
have talent and capability but might fall short of
his or her true potential.
Warning # 2: Do not be offended each time the
phrase small business is used. The SBA
defines the small business as less than fifty
million dollars in sales and fewer than five
hundred employees. Any small business would
be happy to attain those goals.

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Remember, it is very much essential to be open

to points that will make you REALLY think and
eventually act.

these people were let go because of poor

performance? It's wiser to decide to hire
'inexperienced' people with high aptitude rather
than 'experienced' ones.

Good for G.E. Isnt Always Good

for G.E.

Train them according to your standards and make

this a solid basis for your hiring decision. Leave
your gut instincts behind, as they are never
entirely accurate, and don't be deceived by the
'movie star' look of the employee on paper.

Most business materials are written for and/or

about large businesses like General Electric;
such coverage and analysis of business issues
becomes conventional wisdom. But then
closely-held businesses cannot follow the
same wisdom.
Most of the time, businesspeople forget the
difference between past, present, and future.
They tend to follow conventional business
wisdom, forgetting that some of what they learn
might not be applicable during the present.
Trends shift, industries evolve, and even
people change. You must be willing to
challenge conventional wisdom to find the one
fit for your own business.
The discussion of some of the commonly
committed errors is meant to jumpstart your
ability to challenge convention and push you to
think outside the box.
Fatal Error: Hiring Your Competitors'
Let's take the case of Tom, who is having an
awful time hiring quality customer service
personnel. He can only offer an average
amount of pay for his business to remain
profitable. Eventually, he realized that out of
desperation to hire experienced people, he
could end up hiring his competitors' rejects.
Instead, he decides to focus on looking for
people who may not have experience but
instead possess skills that can be honed by
training and various skills tests.
It's an incorrect assumption to think that your
competitors have simply let some of their best
people leave. Doesn't it make more sense that

The 51 Fatal Business Errors, by Jim Muehlhausen

Personality profiling can also help you weed out

people who would have a difficult time being
effective in some positions while testing provides
you with hard data upon which you can base your
hiring decision.
Fatal Error: Revolving Door Policies
Alan was very proud of his ability to know every bit
of information there is to know about his thirty
employees - their hobbies, kids' and spouses'
names, and personal histories, for starters. His
policy worked well for some time, but his people
began to take advantage of it. They became so
comfortable with him that they entered his office
anytime they wanted; they could plop down in a
chair and voice out various complaints. Even
when Alan had an important presentation to do,
his employees kept on interrupting him and he
could not get a minute to himself. His presentation
was adversely affected by the constant
interruptions of his open door.
Allowing a 'very open' direct line to the people on
top of your management heap could lead to the
creation of an environment where gossip and
unnecessary demands proliferate and take time
and resources away from actual business.
It may be better to set regular meetings where
everyone can have the opportunity to voice out
their opinions, requests, and essential feedback
that could be of help to the company.
A closed-door setup with regular meetings might
work best to sustain the structure of the business
without burning the bridges of communication.

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Is It Time to Fire Your CEO? (Yes, Im

Talking About You)
Do you remember the Mad Hatter in the famous
story Alice in Wonderland? He was so busy
running around that he could not even
remember what he was late for whenever he'd
run around saying, 'I'm late, I'm late for a VERY
important date.'
Most entrepreneurs run their businesses like the
Mad Hatter. They work IN their businesses but
totally forget to get themselves involved in the
meaningful activities that will drive long-term
The fatal errors below provide some insight into
how you can begin to improve your performance
and effectiveness as CEO of your company.
Fatal Error: Refusing to Delegate
Cindy was an extremely hard worker and she
hadn't slowed down from the time that she
started her own business. But 24 hours a day
wasn't enough for Cindy to manage everything.
She was directly involved in her business; few
workers were anywhere near as good as she.
When she got into an accident, she was
confined in the hospital for three weeks and was
forced to delegate. Surprisingly, and quite
fortunately for the company, all the workers
performed well in her absence.
Some CEOs say their people are not good
enough to assign important tasks to, when they
actually mean that they are unwilling to a take
chance on them. As the CEO, you may be the
best at doing almost any task. But you can't do
everything; you'll run out of time and everyone,
yourself included, will suffer as a result.
The solution: manage outputs, not inputs. Learn
to delegate jobs to your staff! There is a great
saying: It does not matter how well you do a
task that you should not be doing.
Also, keep a time log of your day. Find some of

The 51 Fatal Business Errors, by Jim Muehlhausen

the simplest tasks you do and delegate them to

free your hands for the more complex ones.
Some of the factors to consider when
delegating are:
The difficulty of the task (the lower the level of
difficulty, the more likely you should delegate

About the Author:

Jim Muehlhausen has spent the
bulk of his professional life as a
business owner.
Mr. Muehlhausen started young.
While in law school, he became the
youngest franchisee in Meineke
Discount Muffler history (19871991), he set the franchise sales record during his
He went on to open multiple locations. After selling
the businesses, he founded a manufacturing
concern in the automotive aftermarket. During his
9 year tenure, the company achieved recognition
from Michael Porter of the Harvard Business School
and Inc. Magazine in the IC 100 Fastest Growing
For the past eight years, Mr. Muehlhausen has
worked with hundreds of businesses on three
continents. Working directly with business owners
in over 3000 live one-to-one sessions, Mr.
Muehlhausen has boiled down the most valuable
business lessons learned and articulated during
these sessions into his book The 51 Fatal Business
Errors and How to Avoid Them.
Mr. Muehlhausen serves on several non-profit and
company boards of directors as well as serving as
an adjunct professor of business at the University of
Aside from his book The 51 Fatal Business Errors
and How to Avoid Them, Mr. Muehlhausen has been
published in numerous publications including
B u s i n e s s w e e k . c o m , E n t r e p r e n e u r, I n c .,
Indianapolis Business Journal, The Small Business
Report, Undercar Digest, Digitrends, and NAICC
Legal Journal.

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The length of time to complete the task (the

longer time the task takes, the more likely you
should delegate it)
How often the task arises (the more often the
task arises, the more likely you should
delegate it)
How difficult it would be to train someone else
to do the task (the easier it is to train someone,
the more likely you should delegate it)
What the impact on your customers would be
if the task is done wrong (the higher impact,
the less likely you should delegate it)
How much you like the task (you are allowed
to enjoy your day, so if you like the task, keep
Fatal Error: Leave Me Alone
Rudy had his own service firm for many years.
Over that time, he had rescued a friend from a
failing business and made him his 'right-hand
man.' Eventually, Rudy made his friend an
equal partner in the business. One day, Rudy
left to take a vacation. When Rudy returned, he
learned that his friend had raided the computer
files and talked all his customers into migrating
to his friend's new firm.
But with the support of his CEO group, Rudy
was able to overcome his emotional storm and
his friend's betrayal. The traumatic event
challenged Rudy to take his business to the
next level. Today, his business is in significantly
better standing than before.
It is not a shameful thing to ask for help from
someone else. Being a CEO should not stop
you from finding someone whom you can
confide in, complain to, and consult with.
Everybody needs help once in a while.
You should know how to handle the qualities of
ego, stubbornness, and pride in balance when to use them in being highly
entrepreneurial and when to discard them
when they are not serving you.
Find yourself a group of business owners who
can give you support and advice.

The 51 Fatal Business Errors, by Jim Muehlhausen

Best and Worst Practices

Learning about some of the best practices that

work for other businesses and adapting them to fit
your own firm can help you avoid some tough
situations. The key is to keep an open mind and
read them with positive expectation.

Fatal Error: Turning Racehorses into Plow

Ed was running a logistics company and had put a
person in a job who was not performing at the level
expected. Ed realized that his company was
paying too high a cost just to keep this person in
his position. So he decided to hire someone new
and kindly asked the person to step down. But the
talk didn't go well and the person resigned in the
end. It wasn't what Ed wanted. He liked the person
and he knew he could be of big help in other ways.
The situation worsened when the following week,
another person in the division resigned, feeling he
had been overlooked for the new job and that he
had been quietly waiting for the opportunity to
advance until he was denied the opportunity to do
so. Ed lost two great people and he was left to
adjust until he could find replacements for the two
who left and until the new person could learn the
Be aware of detecting frustration in your people.
This would mean that they are no longer enjoying
or feeling satisfaction from their work. Don't let
your most talented and most driven people go
down the drain.
Here are some points on how you can prevent
your people from getting frustrated:
Use tools to ensure you know the needs,
motivations, and talents of your players.
Communicate with your employees often, and
ask them what they want.
Watch for people who are becoming rebels
because this is a shift in their actions that is a key
indicator of dissatisfaction.
Know what skills and personality traits are critical
to a position before moving someone into the job.

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Fatal Error: Ignoring Your Best Performers

Yolanda was an excellent problem solver. One
key to her business success was her number one
employee Rachel, who also happened to be her
right-hand person. Rachel had been given raises
and was making an excellent wage. However,
Yolanda was so busy growing the business that
she forgot to praise Rachel's heroics. After some
time, Rachel quit when she had found a position
for less money but which included more skill
growth and responsibility.
If you're thinking of saving money by cutting down
on giving raises to your good employees,
remember that if they decide to leave you, you'd
have to spend much more to recruit new ones that
are at least as good as them.
There are many simple and easy ways to reward
your employees - an unexpected day off, tickets
to the movies, a surprise vacation package, and
so on and so forth.

You have three basic methods to choose from to
run your business.
1. Create a great business model plan, create
customers, and so on and so forth do it the
best way you can. Run your businesses as
you would run yourself.
2. The second method to run a business is to
squeeze the square peg (the environmental
variables) into the round hole (you).
3. The third and best option is to ACT as a
CEO. Being a highly effective CEO involves
moving outside your comfort zone.
Fatal Error: YABUT
Joe had spent almost six months completing his
marketing plan. Not surprisingly, his sales force
was not as successful as they were expected to
be. They offered a host of complaints: they
needed better marketing, the price of the goods

The 51 Fatal Business Errors, by Jim Muehlhausen

was too high, they needed to add XYZ feature,

and so on and so forth. The YABUTting of the
sales force was the problem. Joe recognized
this and planned to put a team of nonYABUTters in place for better performance.
YABUT = yeah but Cultivate a performance
culture by not tolerating YABUTs from your
people or even yourself. It is better to say NO
than accepting a project and letting it all fail. In
this way, you'll be able to set and enforce
standards with your employees.
Here's a step-by-step solution:
1. Recognize if you are YABUTting. Then if
you see that you are allowing your people to
YABUT, you have half of the problem solved.
2. Eliminate items from your list. You can't
promise your people you will do something
and then not do it.
3. Realize that it's all right to say NO! Saying
that you are not going to tackle a project is
much better than allowing it to fail or to stall
4. If you're being a leader of the YABUTS,
simply stop doing it. You will be ready to
model, and to enforce, your standards with
your employees.
Fatal Error: A Pinch of This, a Pinch of That
Ryce and her landscape company always
seemed to be so occupied with the day-to-day
details of the business that they tended to forget
about taking the time to understand the future
direction of the business.
It's the nature of the industry to change as time
passes; for instance, consumer preferences
shift and industries consolidate.
Handling such changes poorly can cause any
business harm, not to mention the continuous
failure of some to take the big picture into
consideration and plan accordingly.

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Make sure that each of your daily activities is a

part of a bigger plan that produces bigger
accomplishments. If you fail to plan, you are
planning to fail.

Phase Four: Train Better

Break the training into tiny steps, eliminating as
much variety as possible. Variety kills training.

The power of the pyramid is at the top - that is

where vision and planning take place. The middle
layer is where strategy takes place, and the
bottom layer is where the daily activities occur.

Phase Five: Create Systems

Be willing to put your stake in the ground. That
is, pick a specific, objective solution DESPITE its
imperfections and STICK WITH IT. Recognize
that not all solutions will be perfect.

Now What?
Here is a step-by-step action plan to improving
your management and your business:

Phase Six: Enjoy

Remember, it is your business' function to serve
YOU, not the other way around. You are
supposed to enjoy it!

Phase One: Work on Building Your New CEO

Get rid of the emotional baggage.
Eliminate your low-impact activities and learn
how to delegate.
Delegate the function, not the task.
You must be confident that you can make
yourself more valuable than the cost of buying
your time back.
Phase Two: Learn How to Act
Like it or not, management is acting. You are not
the real you at work; you are playing a role as the
manager of your business. Why not play the role
of the BEST ever manager of your business?
Phase Three: Hire Better
Find out what your current key employees'
aptitudes are and find a test. Then use this test to
screen hew hires. Forget the resumes. Make your
own test if needed.

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