by Michale Malausky

Created on: March 21, 2008

Most small business owners share in making many of the same mistakes as a result of inexperience and lack of knowledge. These mistakes are common to most in the start-up phase and during an expansion or when diversification attempts occur. Most owners fail to do enough research or are venturing into fields that are outside their expertise. These mistakes can be expensive and or devastating if not corrected in a timely manner. Below are some of the more common mistakes and their causes.

The most common mistake a small business owner can make is underestimating his start up capital. No matter how good a business plan is, it seems to always err on the side of too little capital. This is a result of not knowing all the variables in the equation. It should be expected and accounted for by increasing estimated start-up capital by a minimum of 10% above your original number. Murphy's Law is prevalent in any start-up venture. As soon as you believe you have covered all your bases then another expense pops up to remind you that you are human. If the additional capital is not available this can result in a serious competitive disadvantage.

Another mistake in small business is their employee hiring practices. Most small business owners evolve from an active employee to an owner in relatively short period of time. Therefore they have little or no experience in evaluating potential employees. This can cause the business to be less productive, less efficient, theft can occur, and ultimately can affect the momentum in a start-up situation or the profitability of an ongoing concern. A small business should research and implement a hiring practices approach to avoid this costly mistake.

The most serious mistake a small business makes is in evaluating their manager's performance. Most of these businesses hire their managers/leaders that are represented in having expert knowledge and experience in their field. These managers are most often given too much latitude in their day to day operations and not evaluated in a manner that truly grades their performance. A small business needs to have a system in place that will evaluate new managers in a timely and results driven manner. Base their incentives on results. By tying their pay to performance will ultimately make them a partner in the business yielding better results for all.

Expansion and Diversification of a small business always seems to create problems. This is due to the lack of knowledge and experience in what to expect from

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