by C.V.Rajan

Created on: April 24, 2009   Last Updated: October 23, 2009

Entrepreneurship, drive to succeed, spirit of independence and having one's own exclusive turf to play are some of the characteristics of small business owners. By the very nature of a small business, the responsibilities, risks and pressures are much more severe and concentrated on the owner, unlike a corporate office where there will be a large hierarchy to spread the responsibility and the risk.

Naturally, this unenviable state of a small business-owner makes him prone for committing several management mistakes that may prove to be detrimental to the business. Some of such common mistakes in small businesses are elaborated below:

== 1) Not Employing Professionals ==

Need to cut cost on salaries is one of the prime concerns of a small business house; many times, small businessmen genuinely feel that they cannot pay through their nose to hire true professionals like corporate companies do. They tend to deploy under-qualified and under-experienced personnel to manage key responsibilities. Such persons generally prove to be ill-equipped to handle responsibilities professionally and independently. They generally lack decision-making skills and run to the proprietor for every petty issue and seek direction.

== 2) Lack of Trust on Staff ==

Some small business owners start their business from scratch as a one-man-show and gradually grow up to an organization. However, they tend to carry the same mindset that they possessed at early stages of business. They are used to taking all the decision themselves, doing all the talking themselves and doing all the petty financial transactions themselves.

Even after growing to a bigger level, with many employees and supervisors working under them, they fail to delegate responsibilities to others. They lack trust on the staff; they think that given the freedom, they will make mistakes and even cheat the organization.

== 3) Excessive Dependence on Borrowed Money ==

Some shrewd businessmen do business with a mindset that business risks should not affect their equity and in case of a financial crisis, only the creditors should bear it. There are also people, who start businesses without personal financial strength and rely excessively on borrowed money. In the event of failure of the business, they get into debt trap and suffer.

== 4) Overestimation or Confidence about Market ==

Some businessmen start with very novel business ideas or products. They are so much fueled by their own over-enthusiasm about the novelty of their finding that they fail to properly gauge the true market potential. They may fail in business since investments do not match the returns.

== 5) Biting More than What One can Chew ==

This is a very typical mistake many small businesses do. By under-quoting or by over-smart sales promotion, they book orders for making a new product far beyond their present capacity or producing a product in unprecedented quantities or in supplying the items within very unrealistic time frames. Over-enthusiasm, over-confidence or sheer greed - the reason could be anything. Many times, they fail to deliver and lose money and reputation in the bargain.

Apart from those listed above, there are also many other mistakes that small businesses commit, which prove to be detrimental to the organization in the short and long run. They include: showing favoritism to "visibly loyal" employees over truly professional employees, misunderstanding or lack of trust between business partners, siphoning away profits without adequately redeploying them in the business, excessive dependence on a single customer, lack of vision for the future, lethargy towards accepting changing technologies, over-enthusiasm in adopting unproven but latest technologies and so on.

Learn more about this author, C.V.Rajan.
Click here to send this author comments or questions.