One of the biggest mistakes small business owners make is that they conduct the interview process with a `gut-feeling' approach," said Judy Madrigal of Judy Madrigal & Associates Inc., a San Mateo personnel management firm that acts as a personnel department for small businesses.

According to Madrigal, 60 percent of small-business owners with fewer than 10 employees don't check references. "References have become so hard to get that people throw up their hands," she said.

To ease the process, she suggested, have the candidate sign a disclaimer that will hold previous employers harmless for any statements or references they provide. Or ask the applicant to contact their references and prepare them for your call.