Top 12 Pitfalls of Starting a Business

Tennis fans Ernabel Demillo and Meredith Kasun thought they had a greatidea for a new business: a neoprene belt that could hold all your tennisballs.

By March, BodyStyle Athletics was up andrunning, but it has been slower going than the owners expected. Why?They underestimated how much they had to spend to educate customers.

"We assumed people would know what the TennisRAQ was," explains Demillo."We budgeted $1,000 a month on marketing and advertising, but we've waysurpassed that. Right now, we're reworking the budget."

They're not alone. Experts say this is just one of several commonmistakes first-time small business owners make. Here are the top 12pitfalls and how to avoid them:

Idea Trumps Demand

You think you have the best idea for a company, but is there really aneed? According to Victor Cheng, founder and president of BookmercialProductions, a branding and marketing consultingcompany, veteran entrepreneurs "are demand driven. They become studentsof demand and find a solution. Rookies are supply driven. So they getthe process backwards." Dig deep and really discover if someone would bewilling to pay for your product or service. If the answer is no, thenyou don't have a business.

Being Just One of the Guys

Given today's tougher economic climate, a company needs to stand out inorder to survive. That means solving a problem that no one has solved,recommends Cheng, author of Bookmercial Marketing (Innovation Press)."Or you can solve a common problem in a unique way, or solve a commonproblem in a common way but specialize in a particular audience."

Failing to Get Good Legal Advice

Before Pom Lampson launched her London-based lingerie line, Sexy Pantiesand Naughty Knickers, she ran thename past a lawyer. Told that it would be OK to have S.P.A.N.K.embroidered on the back of her designs, even if she started selling inthe U.S., she set up shop in 2004. Four years later, it's become afavorite with celebrities like Gwyneth Paltrow, Eva Longoria-Parker and KellyRipa. But this success also attracted the attention of SPANX, amulti-million-dollar body-shaping hosiery company started by SaraBlakely in 1998. SPANX sued Lampson in April in Georgia for trademarkinfringement.

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

Not Doing Your Homework

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

BodyStyle Athletics hasto rethink its marketing plan because it wasted valuable funds onsponsoring tennis tournaments that did not reach the consumers it wants.

"We sponsored this massive tennis tournament, but it turned out we had noidea who the customers were there and the kind of traffic booths wouldget," says Demillo. "We now know not to sponsor tournaments unless we'veresearched them, and the only way to do that is to participate in themas a fan." Their new plan: to hold demos at tennis clubs and sportinggood stores because "it's such a unique product and people don't knowhow 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 another50%.

Underestimating What It Takes to Sell

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

Unwilling to Be a Salesman

Cheng says of all the successful business owners he's met and advised,those who remain in the game are the ones who are good at selling andmarketing. "They ought to take a leadership role even if they hireconsultants to help them." Not willing to do the pitch? Then don't hangout that shingle.

Skimping on Staff

How long your company stays around is, in part, determined by thequality of your employees. While hiring part-timers or less qualifiedpeople may save money at first, they ultimately become more costly downthe road. Why? They may take twice as long to do something or make mistakes that can possibly be damaging. "You get what you pay for here,"says Prosen.

Going It Alone

No one is an island, especially when involved in a start-up. Findmentors and tap them for their knowledge and connections. You may avoidmore rookie mistakes. Surround yourself with an experienced team ofadvisers, board members and employees. "Lenders may not like you as anindividual but they may like your team," says Prosen, who also wrote Kiss Theory Good Bye (Gold Pen Publishing). "It's important that you layout clearly for the lender that you've got the talent."

Not Communicating

As the business grows, be sure that new employees are one the same pageas you on the company's mission and priorities. For Sydney Price, ownerof Manhattan-based play space City Treehouse, thatmeant writing down everything discussed at the staff meetings, since injust one month it grew from five full-time staffers to eight full-timestaffers and four part-timers.

Being Overly Ambitious

City Treehouse's Price says too often entrepreneurs want to get off theground with a bang. "They want to do everything," she explains. But theobject is to be around for the long haul. That's why she had a softopening, first offering music classes taught in conjunction with MusicTogether in April. By the summer, she addedlanguage classes after partnering with Bilingual Birdies. In the fall, after hiring two full-time peopleto teach, the space will offer a mix of unique classes and partneredones.

Crying Uncle Too Soon

Starting a business takes time, passion, sweat equity, luck, thepatience of Job, and in many cases, a healthy dose of stubbornness. Eventhough she faces a lawsuit that threatens her dream, Lampson isdetermined to hang on.

"When you hit a brick wall, you fight hard untilyou can get through," she says. "Generally there is a way around. Youhave to fight and keep fighting."

If you have a story idea, email Lan.thestreet@hotmail.com.

Lan Nguyen is a freelance writer based in New York City. She has written for the New York Daily News, The Wall Street Journal, Worth magazine and Star magazine.

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