Underestimating expenses is top mistake for startups

2/24/2011

Starting a new business is an incredibly difficult venture, filled with challenges for entrepreneurs to overcome. According to a recent survey conducted by business insurance agency Hiscox, the No. 1 mistake that startup business owners make is underestimating expenses.

Nearly one-third of respondents (32 percent) said that underestimating monthly expenses was the top mistake they made when opening their businesses. Other obstacles included hiring the wrong people (20 percent), not knowing how to market and sell products (18 percent) and not securing enough financing (18 percent).

"People who take the leap often have great energy and passion for their area of expertise. They have a clear goal, but as they embark on their journey they may not foresee the bumps along the highway. Cash flow, human resources, marketing and insurance issues can seem boring, but are hugely important," said Kevin Kerridge, small business insurance expert at Hiscox USA.

With the greater availability of commercial loans, small business owners shouldn't be afraid to spend more money. As the survey notes, funding was at the core of two of the top four issues.