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Lead Your Team Strategy

5 Big Business Mistakes to Avoid

5 Big Business Mistakes to Avoid Photo / Credit: Dreamstime.com

 

Hindsight is 20/20, they say. On the other hand, foresight is invaluable. What if you knew what mistakes were awaiting you and had the foresight to avoid them? That's what Jim Muehlhausen is hoping his book, "The 51 Fatal Business Errors and How to Avoid Them" (Mulekick Publishing, 2008), will help you do.

Muehlhausen started out as the youngest franchisee in Meineke Discount Muffler's history and went on to found an automotive aftermarket parts company that was recognized as one of Inc.'s 100 fastest-growing companies. For the last eight years, he has been a business coach. He offers BusinessNewsDaily readers advice on five fatal business mistakes to avoid.

Hiring your competitors’ rejects – If you hire “experienced” people, you are really hiring your competitor’s rejects. Trying to hire pre-trained employees from other companies, especially the competition, can be a disaster.  You are probably making an incorrect assumption that your competitor would let a truly great employee leave.

"I firmly believe that you should completely give up on the hope of hiring experienced people and start with inexperienced, high-aptitude employees instead," Muehlhausen said. "Once you have identified the high-aptitude people, train them to handle the specifics of your business. Aptitude is discovered by testing, so stop using your gut to hire. It is not that accurate."

Failure to act like a benevolent dictator – The dictionary defines benevolent as "marked by or disposed to doing good" and it defines dictator as "one holding complete autocratic control." An autocrat does not have to be a jerk and a business is not a democracy. Getting employees to "buy-in" is nice, but if they don’t, what do you do? You run your business in a kind, democratic and fair fashion, but if that doesn’t work — and on occasion it won't — you need to be a dictator. Please be a benevolent dictator, but be a dictator when needed.

"Managing employees is a lot like parenting . Employees may not like what you do, but you have to do it anyway. Many CEOs are afraid to be authoritarian to any extent, even a little, but I will take an authoritarian leader over a democratic one any day. Just because you are authoritarian does not mean you cannot be nice. Remember, it is your name on the door," Muehlhausen said.

Paying yourself below market value
– If this does not apply to you, good. Skip ahead. When times get bad, some executives stop paying themselves. This can eventually create a big problem — an artificial subsidy that you are granting the business. This is effectively an off balance sheet loan from you to the company. Typically, this loan is never repaid and the money just disappears. Sometimes, ceasing to pay yourself only camouflages the real issues your business might have.

Wearing the dog collar – Every business owner dreams of the day a $50,000,000 check slides across the table to them.

"I’ve seen checks with a lot of zeros slide to my clients," Muehlhausen said. "It’s great!" By the same token, I have seen many talented entrepreneurial CEOs bogged down in a moderately profitable business. They work too hard for their money and are not overly satisfied with the work. A CEO who is underutilized and working below their true value and skill level is, as I am inclined to describe them, “wearing the dog collar.”

Whether we like it or not, all the daily work we perform has a dollar value.  When the black hole of "the work" sucks us in, the work we do rarely has a high hourly value.  Escape the "dog collar" and you can instantly double your profitability.

The cake is flat – Baking a beautiful wedding cake requires a process and a set of ingredients. This is not unlike a business activity. When we set out to bake a cake, we follow the recipe precisely. After a while, we stop using the measuring cup and start winging it. We do the same with our business plans. When we get off the cake recipe, however, we get a flat cake. When we get off a business plan, we get "flat" business.  Many business owners either do not have a plan or are not working the plan they do have.