Top 12 Pitfalls of Starting a Business

"Although I never used S.P.A.N.K. to build the brand, SPANX is trying to close me down," says Lampson. "It's really hard because, I made this business out of nothing, and I'm tiny compared to them. I advise, get a second legal opinion. You have to plan for the long term."

Not Doing Your Homework

More homework -- not something you want to hear. After all, putting together that business plan may have taken months. But before you throw away your money on any marketing or publicity idea, you have to make sure it's the best way to reach your customer.

BodyStyle Athletics has to rethink its marketing plan because it wasted valuable funds on sponsoring tennis tournaments that did not reach the consumers it wants.

"We sponsored this massive tennis tournament, but it turned out we had no idea who the customers were there and the kind of traffic booths would get," says Demillo. "We now know not to sponsor tournaments unless we've researched them, and the only way to do that is to participate in them as a fan." Their new plan: to hold demos at tennis clubs and sporting good stores because "it's such a unique product and people don't know how to use it."

Short on Start-Up Funds

Always raise more than you think you'll need, warns Bob Prosen, president and CEO of The Prosen Center for Business Advancement. "Starting a business will take longer than you think, so you'll need more money." Take that budget and increase it by another 50%.

Underestimating What It Takes to Sell

As Demillo discovered, marketing took a huge bite out of their start-up capital. Cheng recommends that entrepreneurs should devote 80% to 90% of the starting budget to sales and marketing. "Putting people on the wait list isn't bad," he asserts. "You've proven that people want it. If you have a stack of orders and they've given you their checks, then you're in a more comfortable position."