Bank vaults have been slammed shut this year to small businesses, but entrepreneurs are pulling cash from other places to get their ventures off the ground.

Victoria Pavlov
In the past year, I made two attempts to take out a loan for my startup graphic design business. All banks demand proof that our business is successful and earned money for the past two years. I tried to make them understand that our business cannot bring in any money — we need equipment that can only be bought with a loan. If I get it, my company will create new job opportunities that will be beneficial for our economy. However, with that said, all banks remain ignorant. What is the best way to take out a loan for my business?

By Maya Payne Smart, CNNMoney.com contributing writer
Even in the best of economic times, it’s not easy for startups to win bank loans. Most lenders look for a long track record of earnings, and some don’t lend to new firms at all. But you can improve your odds by investing your own cash, building banking relationships, communicating a compelling business vision, and courting local investors.

Jeff Glassman (at left) relied on friends and family to raise the $250,000 needed to launch Fire Island Beer.

"No one should go into a bank and expect 100% financing," says Bob Seiwert, senior vice president of the American Bankers Association, a Washington, D.C.-based trade group. "Bankers are lending shareholder and depositor money, and they want it returned on time. They get paid to take prudent risks, but they don’t get paid to make equity investments."

In short, you need to invest in your enterprise before seeking others’ support. Seiwert also recommends seeking out an experienced small business lender who uses the Small Business Administration's loan guarantee programs.

"While most banks will do small business loans, not all banks specialize in that," he says. "Look for a bank with experienced relationship managers who are used to working with firms in your industry. Many times the advice that a knowledgeable banker can give you is far more important than any product or service that they can sell."

Moreover, establishing a banking relationship sets you apart from other prospective borrowers. "If you look today at who is getting the money, it’s people who’ve invested in a relationship and didn’t just do a series of transactions," Seiwert says. "They have a bank or a banker that they have regular dialogue with. If you’re applying for a loan over the Internet, you’re just going to be a number — and when money gets tight, you don’t want to be a number."

The good news is that small business lending is picking up a bit after plummeting last year. The SBA reported in September that more than 1,000 lenders that hadn’t made SBA loans since at least October 2008 began lending again this year.

But don’t think that traditional banks are your only option. Alex Moazed, founder of Applico, a mobile phone software application development firm, tapped into savings and maxed out his credit card to get his company off the ground in January. "I’m young and in school and don’t have much of a credit history," the Babson College student explains. "I didn’t think a bank loan was an option for me."

His firm launched its first application in May: NYC Transit, which allows New York and New Jersey commuters to view train, bus and ferry schedules on BlackBerrys without network connections. Just a month before the launch, he won $2,500 in a business plan competition at school. Now he says he’s paid off his credit card, and Applico is on track to reap $250,000 in revenue for its first fiscal year.

Moazed advises entrepreneurs to start small to generate cash for corporate growth. "Be relentless, and never let yourself get down about [financing your business], because there are many ways that you can be innovative to get your initial product out there," he says. "Maybe you want to spend $1 million on a full-fledged product, but scale it down to bare-bones and get that out there. Leverage the cash that you have and try to defer payment with your suppliers. Get them to buy into your vision."

When Jeff Glassman decided to launch Fire Island Beer in May with his brother and cousin, he knew their risk profile was unlikely to win traditional bank loans. Instead, he turned to friends and family to raise the $250,000 that he needed to perfect a beer recipe, purchase kegs, retool the bottling line at a brewery, and develop eye-catching creative for labels and advertisements. Glassman offered his investors convertible notes, giving them a direct stake in the potential success — and the risk — of his venture.

"Before you approach anyone else, sacrifice — whether it’s your own money or time," he advises. "Demonstrate that your skin’s 100% in the game. Investors look for that. They want to make sure it’s not a hobby that you’re testing on their dime."

A well-targeted personal appeal coupled with a detailed business plan helped Kim Harmson raise more than $70,000 from local investors when she launched Kizuri, a fair-trade gift shop in Spokane, Wash. "I had never done retail before, so I thought a bank would have laughed me right out of the door," she says.

What she lacked in experience, she made up for in commitment to socially and environmentally just business practices. That, along with her sponsorship of local events and donation of 7.5% of profits to the community, appealed to investors like Denise Attwood.

"Kim really impressed people," Attwood says. "She met individually with each of the investors and she was very thorough and thoughtful in her development of the plan. She knew her audience, and knew that they wouldn’t want fair trade not to be available in Spokane."

Give us your advice: Check out recent “Ask & Answer” questions.

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Selling sweet treats can be a fast way to make extra cash, but the road to doing it legally is paved with bureaucracy.

Ana, Dartmouth, Mass.
I'm thinking about making some truffles (chocolate and peanut butter), putting a flyer together, passing it to friends at work and selling to them. I'm making them at home.  Do I need to get a business license or a food license?

By Emily Maltby, CNNMoney.com staff writer

Lots of people are eying their kitchens right now as a way to earn a little extra cash in a bad economy. The Massachusetts Department of Public Health Food Protection Program receives more than 200 inquiries a year from residents hoping to open a food business.

The permits and licenses you will need vary depend on whether you want to incorporate, where you will be running the business, and the type of munchies you want to sell.

Each state has its own guidelines. Massachusetts recently published a brochure on the requirements for residential kitchens, broken out into two categories: "retail kitchens," from which you sell the goods directly, and "wholesale kitchens," for those who are selling their creations to another vendor, such as a local grocer.

What you're asking about is a retail kitchen. To set one up legally, you'll need to be inspected by the local board of health, which will approve and license you.

"They will test to make sure that there is appropriate sanitation, such as making sure there is enough chlorine to clean the food preparation areas and that the dishwashing operation has a sufficient temperature for sterilization," says Suzanne Condon, director of the Massachusetts Department of Public Health's environmental health and safety bureau, located in  Jamaica Plain, Mass.

The health board's inspectors will also make sure that your product is a "low-risk food," meaning that it does not require refrigeration and does not support the growth of disease-causing bacteria. The board may require a lab test to determine the pH and moisture levels of your snacks, along with other characteristics that would affect the food's shelf life. If the inspectors don't think your food qualifies as low-risk food, chances are you won't get the permit.

You will also be required to maintain a standard recipe, which will enable you to properly label the ingredients in your food. A new analysis may be required if you want to alter the recipe. For guidance on how to label your food, check out the FDA's Center for Food Safety and Applied Nutrition Web site.

In some states, kitchen inspections are conducted by the state inspectors. In Massachusetts, they are carried out on a local level. Fees vary widely: In Bedford, a permit can be had for only $50, but Belmont it is $85. Burlington charges $100, and in Arlington it costs $175.

Once you've had your kitchen and your product inspected, you can secure a business license from your local jurisdiction. The most basic registration is a sole proprietorship, which means you will have the ability to sell your goodies on your own. If someone else is working with you, the best option is to get licensed as a partnership.

You can stop there, or go a step further to form a business entity, such as a corporation or a limited liability company. "As a sole proprietor, all your personal assets are exposed," says John Meyer, business development leader at The Company Corporation, a firm that helps startups incorporate. "But by incorporating, you will establish a brick wall between the business and personal assets, because that business license would be under the entity's name — not yours."

Forming a business entity can also provide more tax flexibility, allowing you to deduct losses in years that your company doesn't make it into the black. It's up to you if the cost is worth the reward: Incorporating can cost as little as $100 through an online filing service, but keep in mind that states have their own, additional fees, which may tack several hundred dollars onto the final bill.

You don't have to decide right away whether you want to classify your food venture as a formal business or an income-generating hobby. At tax time, you can submit Form 5213, which allows you to defer for four more years the IRS's determination of whether your business is a for-profit venture.

For more information, the most comprehensive site about registering your business and obtaining permits is Mass.Gov's step-by-step guide to forming a local business.

Give us your advice: Check out recent “Ask & Answer” questions.

Business or hobby? Deductions differ

Trademarks 101: How to protect your good name

Patent vs. copyright: Protecting your creations

A guide to breaking big in Apple's very crowded market.

Keeven Kuate Konga, Tempe
What steps do I take in order to make a big jump in the iPhone application industry? I have found an app designer. I know the basics, but is there any other information other than what's given on Apple's Web site?

By Kathleen Ryan O'Connor, CNNMoney.com contributor

Imagine being crowned the valedictorian of a class of 50,000. That's a bit of what's it's like to capture the #1 spot in Apple's iPhone app store — only a lot more lucrative. A hot iPhone app is the Holy Grail of mobile software development.

For all the dings Apple takes for its dealings with outside developers, the price of admission into its iPhone app program is pretty straightforward: $99 for basic access to the software development kit (SDK). Apple ditched its wildly unpopular nondisclosure requirement back in October.

Once your application is ready for launch, the approval process generally moves fast. According to Simon Pope, an Apple spokesman, 98% of iPhone apps submitted to the store are reviewed in seven days, and 96% are approved.

Then comes the hard part: Getting noticed by legions of passionate iPhone users. Competitive pressure has driven the cost of most of Apple's almost 50,000 iPhone apps to $1.99 or less, according to 148Apps.biz, an independent site about iPhone apps with a good "marketing 101" section. That means volume is king. For your app to make money, customers must find it, like it, and above all, download it.

"It takes making a great game, but that’s just one element of it," says Adam Sussman, vice president of worldwide publishing for EA Mobile, which created top app The Sims 3. The mobile version of the popular game zoomed to #1 within 18 hours of its release on June 2.

"And we did that at $9.99," Sussman says.

Jumping off a wildly popular and established brand helps enormously, but Sussman says marketing is a factor, no matter your size.

"The app store is so crowded," he says. "How do you drive discoverability? It’s not the case that you just do a game and that’s it." EA's strategy was to build excitement for The Sims 3 by releasing all its platform versions — PC, Mac, iPhone and more — on the same day across the world.

One way to get noticed on a shoestring budget is to try to have your app reviewed by some of the dozens of sites that have sprung up to chronicle All Things iPhone, like AppScout. The blog Online Marketing Rant has a handy list of relevant publications.

And while the unfortunate Baby Shaker app produced a lot of press, no expert thought silly or scandalous was the way to go. The best apps leverage unique iPhone features, like the device's accelerometer and touch screen. A rich and addictive user experience is the difference between being a one-hit wonder or creating something with staying power, Sussman says.

Also critical is knowing your audience, says Jonathan Sasse, senior vice president of marketing at Slacker Radio, a popular free online radio station that released its own iPhone app in January.

"We did our best to make sure the iPhone experience is close to the full Slacker experience, so you can go back and forth," he says. Slacker went for a rich-media feel, but developers need to be mindful to keep their mobile apps from growing too complicated.

Try not to get caught up in the frenzy to be #1, Sasse recommends. Concentrate on building a great experience.
Mark Bradshaw, director of development for Stratogon Entertainment Corp. in Plantation, Fla., knows what it's like to be in your shoes. Stratogon now concentrates heavily on the iPhone app market, and will have several apps ready to go live in the next month.

"We think it’s about making a great game that's really quick and fun," he says. "People are going to be sitting at the bus stop — it's something they get in and out of pretty quickly."

So how big a deal will it be if your apps break big?

“It’s a huge deal,” Bradshaw says, especially for those on tiny budgets.

A bestselling iPhone app can easily move 300,000 units in the first three months. At $1.99 per unit, that's almost $600,000. Apple takes a 30% cut, but when you're creating your product on a shoestring upfront investment, that's still a lot of upside. As Bradshaw puts it: grossing "half a million dollars isn't bad."

Give us your advice: Check out recent “Ask & Answer” questions.

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Have a hot idea for an educational software product? Here's how successful entrepreneurs have cracked the market.

Ernest L. Leisner, Buffalo
I have created a word game that I would like to transform into an educational video game. I believe it can go a long way to help improve the dismal illiteracy rate in our schools. I have many aspects of a proposal in place and I’d like to find a government grant to help. I have tried searching the Internet, but there are scams all over the place.

By Kathleen Ryan O’Connor, CNNMoney.com contributor
Finding a grant to develop a business idea is nearly impossible. Scams abound, and legitimate grants from foundations and other philanthropic groups are almost exclusively for non-profit groups or educators, not private inventors. The only genuine place to search for U.S. government grants is grants.gov, but those rarely go to sole proprietors. (See "Business grants: Sorting out the scams.")

But there are still ways for a novice with a great idea to crack the educational software market. The first step is to get your product or proposal in front of people who know the market and can help you sell it.

There are two options: Create, publish and market the software yourself, focusing on either the retail or education market, or license the product to an established company.

Entrepreneur Margaret Johnson chose the do-it-yourself route for ItzaBitza, a computer game that helps kids learn to read through interactive art.

Johnson knew plenty about kids and software: She's a mother and spent nearly two decades at Microsoft. But what she didn't know was retail, which turned out to be the name of the game.

"For an entrepreneur, retail is tough. You are sitting on inventory … it takes a while to ramp up awareness," says Johnson, who left Microsoft to sell ItzaBitza through her educational games firm Sabi Inc. "Awareness is huge. That's tough for a little guy to get."

First, make a list of all the publishers in the educational game space – Johnson mentioned Microsoft (MSFT), Sesame Street and Nickelodeon, but look on the shelves at your local Best Buy or a similar store for more ideas. Then, make it a point to attend their conferences or find them at trade events. You won't need an appointment, but this is where shyness is not allowed.

"I basically stalked people," Johnson says with a laugh. She'd sometimes wait as long as two hours to talk with the right person. "I showed them the game right there." Johnson ultimately made the decision to self-publish – a riskier move, but a more profitable one if you are successful.

If you self-publish, the next step is to get your game into stores. That requires making contact with buyers. At small, local stores, you can approach owners directly, but if you want to crack a national chain, they won't usually field calls from unknown businesses. They work with major retail distributors – who also prefer to deal with larger companies with established sales histories.

Johnson had little luck approaching major distributors abut ItzaBitza, but from them she was able to get the names of several reputable distribution aggregators. Aggregators are companies that take on several smaller clients. Johnson used Channel Sources Distribution Co. of Brookfield, Conn, but there are plenty more out there.

Distributors will take care of logistics and paperwork for you, but their biggest asset is their network. "They have a sales force, and they call on Toys R Us," Johnson says.

ItzaBitza is now available on retail shelves in stores including Best Buy (BBY) and Office Max (OMX).

Despite the recession, the educational software market is poised for growth. Educators staring out at classrooms filled with kids raised on Nintendo and Xbox are more open than ever to incorporating software and video games into their curriculum.

John Rice, an educator specializing in instructional gaming who writes a blog devoted to the industry, points to games that started as purely entertainment that have been repurposed for educational use. The Civilization series, for example, has been adopted by teachers for sociology and history courses.

"Likewise, The Sims can be used as a language-acquisition tool when students play it in another language," Rice says.

That opens the door for direct sales to schools and other educators. Like the retail channel, though, that market has its own challenges and quirks.

"Education, as a market, is extremely homogenous – [schools are] structured roughly the same, with the same purpose – which is good from a business point of view," says Mark Jones, president of Echo 360, which offers technology for recording lectures. Jones describes his product as "TiVo for the classroom."

He recommends you find the early adopters or "visionaries" among educators or education institutions. Is there a school that consistently seems to be in the forefront of new technology? They might be more receptive to a pitch than a place still in love with the chalkboard.

If you can get them on board, "they will become a viral network for you," he says. Education is a very peer-driven field; administrators often rely on colleagues at other departments or schools for product recommendations.

If you're really strapped for the up-front capital to create your product, licensing could offer you the most bang for minimal bucks.

"Think about what kid brand is out there with established credibility and pitch the game as an extension of that brand," suggests Andrew Mininger, CEO of Mada Design, a New York-marketing firm that works with clients in the games, education and licensing arena.

The best and fastest way to reach representatives of major brands is through expositions like the International Licensing Industry Merchandisers’ Association's annual conference. This year, it's set for June 2-4 in Las Vegas. You'll have to pay for a ticket to the show, but it's open to anyone. Prices range from $180 for a basic floor ticket to a full package for $1,170 that will allow you to attend seminars such as "Basic Training for First-Time Licensees" and "Getting Your Brand Ready for Licensing."

Before you approach someone, do your homework. Have a pitch ready about exactly how your game can extend their brand. Do they already have educational books on the market? A software component could be a natural extension. Are they lacking an educational tie-in their competitors already offer? That's also an excellent way to get attention.

You might also want to take a look at developing the game for a particular platform like the Nintendo Wii or Sony's PlayStation Portable. "Everyone is trying to get more exclusive, like Microsoft with Xbox," Mininger says. Everyone wants to make their product the hottest one around, and "education is integrated into that experience."

Give us your advice: Check out recent “Ask & Answer” questions.

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Registering your company's name as a trademark isn't legally required, but it can pay off down the road.

Nick, Seattle
I am starting a clothing company and need to copyright the brand name. What is the best way to do this on a tight budget?

By Kathleen Ryan O’Connor, CNNMoney.com contributor
The difference between copyright and trademark isn't always obvious, but the distinction matters here.

Both are ways of protecting intellectual property, but copyright generally protects "original works of authorship" like a book, song or poem. A trademark covers the right of such things as brands, titles and logos. In your case, establishing and protecting the brand name of your clothing company is clearly a trademark issue.

There are plenty of low-cost ways of accomplishing this, none of which even require a lawyer. Do-it-yourself legal sites like LegalZoom or Nolo can be great resources for registering a trademark. The do-it-yourself cost ranges from $150 or so for a basic package to around $400 for more bells and whistles. LegalZoom, for example, will search the federal trademark database for direct conflicts – if you try to give your clothing company a name another clothing company has already trademarked, your application will be rejected – and perform a comprehensive state and common-law search. Absent conflicts, you, a lawyer or a legal service will prepare a federal trademark application and file it with the U.S. Patent and Trademark Office. The USPTO Web site has a wealth of information, including an extensive FAQ section and a fee schedule if you choose to file directly on your own.

There is nothing that says you must trademark your name, says Oliver Herzfeld, chief legal officer for The Beanstalk Group, a brand licensing consultancy in New York. You technically gain rights and protection just by using the mark – but there are advantages to owning a federal trademark registration. The registration will give you an exclusive right to use the name nationwide, certain overseas rights, and a legal presumption of ownership.

Registering your trademark is only the start of defending your corporate name. For your rights to a trademark to continue, you have to use it, protect it against infringers, and renew it. The history of brand names is littered with aspirins, cellophane and crock-pots – all former trademarks that lost their protection because their use became generic.

The most fraught venue for trademark disputes is the Internet. In that realm, trademark fights pop up constantly, according to Mark A. Lemley, a professor at Stanford Law School.

First, take keyword advertising. Companies frequently buy ads that appear on search results for competitors' trademarks. "If a consumer searches for Honda, a Toyota ad might come up if Toyota has purchased the right to place an ad there," Lemley says. "There is a lot of litigation on this, with inconsistent results so far."

Another trademark issue on the Internet is the problem of geography.

“Your name may be unique in your hometown, but someone across the country or across the world may use the same name, and online there are no geographic boundaries,” he says. “So we get all kinds of conflicts – does the domain name delta.com go to the Delta Faucet company, Delta Airlines, or Delta Dental plans, for instance?” So far, the tendency is to register domain names on a first-come, first-served basis.

“But we also have circumstances in which a small company who is first runs into a large company that comes later. Amazon (AMZN), for instance, is the name of a long-standing women's bookstore in Minneapolis,” Lemley says. “When Amazon.com began selling globally, the bookstore sued because it was confusing their Minneapolis consumers, and Amazon.com had to buy out their rights to online sales.”

As you pick out your company name, it pays to plan ahead and chose the strongest possible trademark. Very specific and descriptive names are easier to defend than broader ones, and the strongest trademarks are extremely unique. “Fanciful” marks like Exxon (XOM) or Kodak, essentially made up words, are the easiest trademarks to protect, Herzfeld says.

Once you have your name, be sure to police it. Patents last 20 years and copyrights live on for 70 years past the death of the author, but trademarks can last forever as long as you monitor them and follow the rules. ”That’s a huge benefit,” Herzfeld says.

Give us your advice: Check out recent “Ask & Answer” questions.

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If your company is stalled, a coach could be the catalyst you need.

Darrin Lugash, Houston
I have a business in theory, but haven’t seen any action in it. I’m working full-time in my former trade while I wait for my business to take off. I'm not sure where to get help – when is it time to hire a business coach? What should I look for in a coach, and what should my expectations be of him or her?

By Lenora Chu, CNNMoney.com contributor
A business coach can be helpful when your company is in transition, you’re in financial trouble, or you’re facing a critical decision such as whether to add employees.

“When things are going steady you don’t typically need a coach,” says Vancouver, Wash.-based small business consultant Doug Williams.

Finding the right coach is important, especially since the marketplace is saturated with people advertising business coaching services. Start the hunt by creating a list of 10 or so prospects, suggests Rick Lugash, Southern California regional owner of the small business growth services company OneCoach. Some things to consider include how many current clients a coach has, any association membership or certifications, and verifiable success stories.

Make sure your prospects have proven track records in the specific area you need help with. For example, if you need help starting up a business, find a coach with a history of guiding successful startups.

Start by interviewing the top candidates on your list. Be sure to get the names of past clients, and contact them as references.

“You want to go through the same process to hire your business coach as you would use to hire the pediatrician to treat your children,” says Lugash.

And find someone who’s good at training and teaching. “You don’t want someone who will do the work for you,” Williams says.

Most coaches will charge from $150 to $500 an hour, says Williams, and a good one will grant you a complimentary initial consultation.

Don’t choose a coach based on price alone. Sometimes the inexpensive coaches are people who are “in between jobs,” says Williams. “They’re not going to help you.”

“Treat your coach as part of the startup investment,” Lugash recommends.

And although chemistry is important, don’t automatically eliminate a prospect because their style doesn’t match yours. Think had about why you're clashing.

“A good coach will take you out of your comfort zone into uncomfortable waters,” says Lugash. “That resistance might be the place you need to go.”

When you’re finally ready to sign on the dotted line, establish clear milestones by which to measure progress, such as “how many, and by when?” Lugash says. “Put them into the agreement.” Like a business owner, a coach has to deliver a clear payoff if they want their clients to keep coming back.

Give us your advice: Check out recent “Ask & Answer” questions.

You don't get a tax break on money you borrow – but the interest you pay on your loans is fair game for deduction.

Bryanne Goetz, Orlando
I started a business from home this year. Can I write off the money that was loaned to me to start the company?

By Lenora Chu, CNNMoney.com contributor
You cannot write off money that was loaned to you. However, you can deduct the interest that you pay on the loan, says Martin Chan, a CPA of Philadelphia.

You can also claim any business expenses that may have been covered by the loan, such as office supplies and utilities, says Fullerton, Ca.-based CPA John Stoller.

In order to qualify as a tax deduction, these expenses must be considered both “ordinary” and “necessary,” says Chan. In other words, they must be common and accepted in your industry, and also helpful and appropriate to your business.

Give us your advice: Check out recent “Ask & Answer” questions.

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Is a court likely to uphold a restrictive noncompete agreement? It depends on where you live.

Ryan H. from Fort Wayne, Ind.
When I started my current job, I signed a noncompete agreement without really reading it. After reading it in full, I discovered that it sounds like they're trying to keep me out of the entire Web design industry, anywhere in the U.S., for two years after leaving. I am looking for a new job right now – should I be worried about this? Would a judge ever uphold such a sweeping contract, in spite of my signature on it?

By Kathleen Ryan O’Connor, CNNMoney.com contributor
A business has the right to protect its intellectual property, but the terms must be reasonable. Unfortunately for employees looking for clarity on their noncompete deals, what counts as “reasonable” is often left up to a judge’s discretion.

On your side is the current legal trend against overly broad noncompete agreements. California courts, where Silicon Valley litigation over top tech talent often ends up, have led the charge by effectively making such covenants unenforceable. The most high-profile recent case was that of Dr. Kai-Fu Lee, a former Microsoft IT executive whom Google hired away in 2005 despite a one-year noncompete agreement. The two software giants battled it out in California courts all year, until a private settlement was reached.

To find out about issues that might be specific to your geographic area, we spoke to Sam Hasler, an attorney in Anderson, Ind.

“Let’s assume they do business in the Marion County,” Hasler says of your former company. If you try to serve clients in the same area before your agreement runs out, having a lawyer at the ready is a wise move.

“I know people hate hearing that, but an ounce of prevention is worth a pound of cure,” he says.

But if you are trying to establish a relationship with a client in, say, New York, and your previous employer has never done business there, you have a very strong argument for a judge that preventing you from pursuing that work is simply punitive.

For workers thinking of using the soft job market as a catalyst to fly solo and launch their own business, are noncompetes an obstacle? A group of academic researchers studying the issue say there's some evidence that their use inhibits entrepreneurship.

"It’s the chilling effect," says Matt Marx, a doctoral student in business administration at Harvard. Very few companies actually take former workers to court over the agreements, but simply having them in place can discourage ex-employees from launching new ventures. “They think, 'I better play it safe. There is no upside for you; you have to protect yourself.'”

Marx and two co-authors published a 2007 study examining commerce in Michigan before and after the 1985 repeal of a state law barring noncompete agreements. By studying investors' patent records, they found a significant drop in employment mobility after the state began enforcing noncompetes.

The issue is a personal one for Marx, an active inventor in the speech recognition field.

Before embarking on his Ph.D., he worked at a Boston company and was bound by a noncompete agreement when he was recruited by another firm. Because the new employer was in California, he was able to disregard the contract. But, in an ironic twist, when Marx returned to Boston years later to attend business school, his original employer wanted to hire Marx as a consultant but couldn't because of his concern that Massachusetts courts would enforce the noncompete deal that the California company had Marx sign.

“You have California at one extreme and then you have a bunch of states at another extreme,” says Lee Fleming, a Harvard professor and one of Marx's co-authors. He and Marx believe businesses would be better served by ditching noncompetes and focusing their energy on enforcing covenants that specifically protect trade secrets.

The researchers hope the economic pressures of the recession will help weaken noncompetes. Companies are laying off workers en masse but insisting that those workers respect their noncompete deals, they say. That's a hard position to defend.

“Is that reasonable?” Fleming asks. “Do we really want to prevent [job seekers] from getting work where they can be productive?”

Give us your advice: Check out recent “Ask & Answer” questions.

Our experts try to jump-start a struggling auto services venture.

Eddie Freeman II, Lube N Go Michigan!, Mich.
I started a mobile oil change business. We change your vehicle's oil at your location, work or home, for $24.95. I am having trouble launching the business – the phone is just not ringing, and I am having no luck with fleet businesses. I've tried word-of-mouth marketing and handing out fliers. I started the business with my own money when gas was $4 a gallon to save customers money and time. Everyone thinks the idea is great, but no one is using it. I quit my job as a dealership service manager to start this business. What advice do you have to get it going?

By Emily Maltby, CNNMoney.com writer
There are a lot of things working against your business right now, both in and out of your control. First is the economy. People are putting off expenses that aren't imperative, and they may wait an extra couple thousand miles before spending money on an oil change.

"Nationwide, the majority of shops are experiencing a downturn," says David Rogers, president of Auto Profit Masters, an advisory firm for auto service shops, and COO of repair shop Keller Brothers Auto in Littleton, Colo. "I've seen many have to take measures like opening extra days and staying open at night, but it's not working."

Another other issue is your competition. You're up against not only mom-and-pop establishments and service gas stations, but the JiffyLube and Midas chains as well.

"It's a cutthroat market, where people are offering the cheapest of cheap, $10 to $14," Rogers says. "Even on Craigslist, there are no-name people who will do your oil change to earn a few extra bucks."

But the main problem you should focus on right now is your business model.

"This concept has been tried before, but from what I've seen, most of them are suffering," says Rogers. "And it's because consumers are simply not comfortable with it. People are conditioned – they like the feeling of going to a brick-and-mortar shop. With your model, they think of a greasy guy jacking up their car in a parking lot and then they'll have to get it towed to a shop anyway. Or, if they're at work, you'll come in and interrupt what's going on. On the surface, it seems pretty sketchy, so it'll be a long road to overcome that image."

To start turning that around, marketing is vital.

"When you have a product that's unlike any other, people have no trust," says Jim Lanzalotto, president of marketing firm Scanlon.Louis in Newton Square, Penn. "The trick is to show them why they can't live without this service, and the best way to do that is to offer free trials. That will get the relationships established, and you'll also start to get feedback."

But you don't want to just give away free services randomly. The key is to focus on the gatekeepers of word-of-mouth advertising. For instance, offer free trial services to your local radio announcers or writers from your hometown newspaper. If they like the service and talk about it, your name will spread faster.

To help your marketing, make sure your name says it all, so that people understand what you are all about the instant they hear your company's name. "Your name is a value proposition," says Lanzalotto. "'Lube 'n Go' – does that mean 'I drive to you?' It's not clear."

Also reevaluate who your target customers are and how you can access those customers. Instead of trying to focus on individual employees at companies, Lanzalotto suggests arranging a deal with the HR managers of those companies. See if you can get a coupon program going for the whole office.

Also, one great place to find car owners is gas stations. Try to partner with fuel stations that don't have their own service center. You can organize a referral or revenue-share deal with them to boost their incentive to tout your business.

Polishing your image can also pay off. "You have to come off square – you have to scream professionalism, from the uniforms to the truck you drive," Rogers says.

Your truck should be lettered and decorated with your logo so that people who drive by can see what you are doing. "It's a staging area," Lanzalotto says. "Put out banners and signs when you do your work, something like, 'Another oil change by Eddie Freeman.'"

And, tough as it is to put entrepreneurial dreams on hold, you'll also need to think about an exit strategy. When consumers aren't spending, even strong businesses can face insurmountable obstacles.

"This is not the greatest time to launch this type of business, particularly if you don't have a lot of experience," Rogers says. "This is the time to study and find help. I'd say you need two years of operating expenses and marketing and advertising expenses to make it through."

Give us your advice: Check out recent “Ask & Answer” questions.

Related links:

Finding the best customers for your business

Finding buyers when sales are sluggish

Starting a business from behind bars

For retailers that don't want the overhead of stockpiling merchandise, drop shipping can be a cost-saving option.

Mike, Queens, NY
I started a home-based wholesaling business six months ago and got four credit cards totaling $18,000. I was scammed out of $10,000 and invested another $4,000 into a Web site and advertising. Now my cards are almost maxed out, and I need the cash or credit to purchase merchandise. Business people tell me it takes a few years before turning a profit, but I've worked like the devil these past six months to finally get the contacts and deals I've been searching for, only now I don't have the cash or the credit. Is there anything I can do?

By Kathleen Ryan O'Connor, CNNMoney.com contributing writer
Starting a business from scratch takes time and an incredible amount of energy – and setbacks are inevitable. It can feel like you're knocked two steps back for every step forward.

Lacking working capital is going to make it even harder, unfortunately. Credit markets have grown extremely tight, and the fact that you're using nearly all of your available credit lines pushes down your credit score, which makes you a less attractive candidate to the banks for extending further credit. That's never ideal, but it can be the kiss of death today, when even people with pristine FICO scores and very little debt are finding it difficult to find decent lending options.

So what to do?

One option is to take a break from working on your business full-time and find an outside job that will let you pay down debt.

But if you want to keep forging ahead, you could approach the suppliers you've already lined up and ask if they will open an account for you to buy on their credit terms. That may be tricky: When you run a credit check, you might not rate as a good risk.

Another option is for you to start an account with a drop shipper. Drop shopping is a "buy-as-you-go" model under which you advertise the merchandise, sell it to the customer, and then, after the buyer's money arrives, you complete your purchase of the requested products from the drop shipper, typically via credit card. The shipper then mails the purchased items to the customer on your behalf. The transaction is generally invisible to buyers: Drop shoppers offer a variety of arrangements, from plain boxes to packaging decked out with your logos.

Drop shipping isn't a new concept. One of the few studies on the practice, published in the journal Management Science in 2006, found that about one-third of Internet retailers rely on drop shipping to fulfill orders.

"Early on, there was a lot of hype around drop shipping," says Serguei Netessine, an author of that study and an associate professor of operations and information management at the University of Pennsylvania's Wharton School of Business.

The initial idea was that drop shipping would be a one-size-fits-all "panacea" for e-tailing. That hasn't panned out. In its early days, even Amazon.com (AMZN) used drop shipping, but the bookselling Goliath soon realized the practice wasn't a good fit for the volume of business it was doing. Amazon instead committed to buying its own inventory and building warehouses. It now offers its own drop-ship service to smaller retailers, Netessine says.

"That's kind of a natural evolution," he says.

Among the downsides of drop shipping: You are introducing a middleman into the transaction, the drop shipper, who has to make their own profit, so your margin is going to be smaller than if you acted as the wholesaler yourself. On some products, the profit margin is already so low that drop shipping makes it extremely difficult to make any money at all.

Another challenge: Drop shipping scams are all over the Internet. Key red flags include recurring monthly fees or difficulty in getting a live person on the phone. Try to hit a trade show. If a drop shipper has a booth there, that's probably a good sign. Several Web sites help connect online merchants with drop shippers and wholesalers; WorldWideBrands.com is one example.

And since your shipper will be packaging and shipping merchandise under your name, be certain to pick one that demonstrates a commitment to the same quality and customer service you'd want your customers to expect of you.

Also take care to thoroughly note your shipper's policies on backorders, returns and lost shipments. Chronic problems in order fulfillment have destroyed many a small business, online or not, and savvy consumers used to Amazon or Zappos boxes dropping on their doorstep a day after they've clicked in their order will not look kindly on poor or slow service.

Give us your advice: Check out recent “Ask & Answer” questions.

Related links:

Business grants: Sorting out the scams

Raising cash for a fast-growing business

Securing small business loans in a melting economy

Some clients aren't worth the headaches. Advance vetting and precautions can spare you the pain.

Chris Walker, Phoenix

I started a concierge service on a tight budget. I am not looking to conquer the world in a day. I would like to attract the "right" customer and grow the business within my means. What would be the best methods to find that "right" customer?

By Kathleen Ryan O'Connor, CNNMoney.com contributor

For an entrepreneur just starting out, it's tempting to taken on any client willing to promise cold, hard cash in exchange for your services. But the seasoned small business owners we spoke with all say the same thing: Do all the due diligence you feel is necessary for your particular business – credit checks, background checks, reference requests – but never forget the most important check of all, your instincts.

"Twice during the past year, I've signed clients about whom I felt uneasy," says Steve Winston, who runs a marketing and communications firm in South Florida. "And both times, I should have listened to my gut feeling."

One client was unable to communicate what he wanted from a marketing campaign and frequently left Winston waiting for an hour or more at appointments. "Yet, because of fears of about the economy, I took them on," Winston says. In the end, they parted ways.

The client never paid for the initial work completed. "I wrote it off as bad debt and lessons learned," Winston says.

If you want to formally vet potential clients, you have a few options. A Google search is an easy first step for finding out more about an individual or a business. If your potential client is a company, you can go to the Better Business Bureau's Web site and check to see if complaints have been filed against the company, and if so, how they've been resolved. A Dun & Bradstreet background check is commonly deployed for vetting. The most extensive report will give you a complete snapshot of the business: who owns it, how long they've been in operation, how often they pay late, details on any court judgments or liens, and even a recommendation about how much credit to extend.

You can also ask for references and check them by calling others with whom your potential client does business. What's been their experience? Did they get paid on time?

Consider joining a trade group to swap ideas and advice with fellow concierges working outside your geographic area – i.e., those who aren't direct competitors. The National Concierge Association is a good starting point for your industry.

And because the best defense is a good offense, it's critical to have a contract that spells out all the details. Unless you've comfortable drafting one yourself, it's worth paying an attorney to help you create a basic template contract you can use on all of your future engagements.

One excellent and often overlooked way to guard against deadbeat clients is to require that at least a portion of your fee be paid up-front.

"'Will they pay me, and will they pay me on time?'" are the key questions every business owner needs to ask about potential customers, says Dave Richards, who has run niche marketing firm Resort & Golf since 1990 in Bloomfield Hills, Mich.

"It sounds simple, but so important, especially now," he says. "I'd rather have one client that pays than three that don't."

Before accepting a new client, Richards calls his contacts within the business and checks with the potential client's suppliers. For a golf course, he'll go all the way to the company that sells them fertilizer or mows their grass to find out how timely the company is with its bill payments.

You're in a business where you'll have to spend a lot of time catering to a client's needs and wants, so it's essential to make sure you're personally comfortable with potential customers. All the legal vetting and paperwork in the world won't be as valuable as your initial impressions.

"Intuition is a real big part of this," says Ellen Delap, a Houston-based professional organizer.

Pay attention to the client's motivation, and whether it fits your business goals. Are they looking for the cheapest service, or are they looking for the best?

"We are always leery of working with a prospect whose sole motivation is saving money, because if they buy on price then they will leave you on price," says Lauren Brenner, president of the HR division of HCR Group, an HR and benefits consulting firm in Waltham, Mass. "We are looking to build an on-going relationship with our clients."

One final bit of advice: "Don't be desperate," says marketing specialist Winston. "You cannot be desperate, recession or not. Those kinds of clients pay you the least money and give you the most headaches."

Give us your advice: Check out recent “Ask & Answer” questions.

Related links:

Help! My client won't pay!

How to handle bounced checks

How to avoid deadbeat clients

Planning ahead is your best bet for a successful resolution if a business deal turns toxic.

Amy, Wheeling, W.V.
I formed an LLC with two other partners. They are a couple. One owns 33%, the other 34% and I own 33%. We do not have any legal documents drawn up. I want to take the business and get them out. One partner does nothing and still works a full-time job and the other is a control freak making poor choices. This is a new venture, and they funded it with credit cards. The debt is small and I can easily take it over financially, but they will not sell the business to me. The response has been fantastic, and I want to have the business before they ruin it. Do I have any options at all?

By Kathleen Ryan O'Connor, CNNMoney.com contributing writer

Starting a business with partners is a lot like embarking on a marriage. Attending to details like what happens if it all falls apart can seem silly and unromantic. After all, you’re in love. What could possibly go wrong?

But as any seasoned business owner can tell you, things go wrong all the time. The most successful entrepreneurs always plan for the worst from the very beginning.

The first mistake came when you started the business without a detailed and written-down operating framework.

“This was just not smart,” says Francie Dalton, founder of a Columbia, Md.-based consulting firm that specializes in communication, management and behavioral sciences. Dalton is also the author of Versatility: How to Optimize Interactions When 7 Workplace Behaviors Are at Their Worst.

The time to have hashed this all out was when the limited liability corporation was first formed, she says. An LLC operating agreement should spell out all the rights and responsibilities of the partnership, from profit distribution to exactly how a partner can exit.

Drafting such an agreement doesn’t have to cost a mint, Dalton says. Boilerplate legal language covers many of the details.

But since this didn’t happen in your case, you now have two choices: Stick it out and draw up a solid agreement with the help of a lawyer, or get out.

“If she wants to stay, she needs to get a little bit of humility,” Dalton says. If you want your partners to work with you on drafting bylaws for your company, you’ll need to offer them something they want in return.

“Start or stop doing something that to make [the other partners] happy," Dalton advises. "Once she has given those things, then she can request what she wants them to start and stop.”

If communication has become truly toxic, calling in a professional facilitator to manage the conversation might be money well spent.

Danielle Luffey, a marketing and public relations consultant in Minneapolis, founded DVA Brand Communications after a failed partnership – like you, she didn’t insist on having the key details worked out in writing before she jumped in.

Looking back, Luffey wishes she and her partner had consulted a facilitator. The two had been longtime friends, which added another layer of difficulty when tensions arose over responsibilities and expectations. They eventually went their separate ways, but not before they had to work out some fairly painful details, like how clients would be divided and who got to keep the domain name and logo.

“I really felt like we were going through a divorce,” Luffey says. And without a legal safety net set up in advance, there was little a lawyer could do at that point. "The attorneys said at the time, ‘Since you don’t have any paperwork, it’s sort of up to you.’"

It's also very easy in the first blush of a new business venture to forget some basic rules of human dynamics. The fact the other two partners are a couple should have been a red flag to consider, Dalton says: "They are motivated to be a unified front."

Say you decide to cut your losses and move on. Now what?

They may not be willing to sell the business to you, but will they agree to buy you out? As Dalton put: “’Hey guys, here’s my number and I’m out of your hair.’”

If not, it might be worth it to leave your chips on the table and walk away. There's at least one upside of having no operating paperwork: There is likely nothing in writing that says you can't turn around tomorrow and start your own rival business doing the exact same thing.

“This kind of thing can eat you up inside,” Dalton says. “You have to decide if it’s worth it.”

This column provides general information only and is not intended to replace the services or legal advice of an attorney. Always consult a lawyer regarding any specific legal concerns, as laws vary from state to state.

Give us your advice: Check out recent “Ask & Answer” questions.

Related links:

Did I stumble into an illegal business deal?

Did my partner cheat our firm?

Divorcing your business partner

What’s a fair split when partnering up?

Buying out your partner

A good distributor can make or break your product line. Here's how to find the right one.

Deziree Williams, Sugar Free Baby, Los Angeles
I have a children's eco-friendly clothing line. We are taking it slow because we are branding our line and are in some ways picky about who we sell to. I have recently been approached by a distributor, but I'm not sure if this is the best way to launch into the market. Any advice?

By Emily Maltby, CNNMoney.com writer

By the look of your Web site, SugarFreeBaby.com, it seems you are off to a great start. You've evidently taken the right steps to approach the smaller retailers already, as your line is already in a number of stores.

You are wise to be conservative about which storefronts represent your line. But as you expand, part of your decision about working with a distributor will depend on whether you want to stick to the small stores or get to the national chains. You can continue to go it alone if you stick to the smaller outlets, but a distributor is essential if you want to reach out to the big guys.

"Large retailers want to see someone in the buyer's office that they already has a relationship with – someone who knows the system," says Gordon Cundell, a former assistant buyer with Sears Canada and current president of the Canadian Sporting Goods Association, an information service for sports equipment and apparel buyers and sellers.

Working with a distributor could be a smart move even if you want to indie shops. "Suppliers often have the passion needed for a successful product, but no business sense to get the product in to the right places," Cundell says. "Chances are the average clothing designer doesn't even know all the distribution channels that are available."

And of course, even if you have the knowledge to do the job, you may be stretching yourself too thin by taking on the daily activities of a distributor.

"One benefit of using a distributor is that ideally you have one place to ship your goods to. They break it out and do all the individual shipping and selling for you," says Rob Reger, president of Cosmic Debris and creator of the gothic Emily the Strange product line, which is sold internationally, in 200 independent boutique stores, and in large chains such as Hot Topic and Borders. "This leaves you with designing and manufacturing, keeping the quality control in your hands."

If you decide to work with a distributor, picking the right one is critical. What should you be looking for?

Both Reger and Cundell say your distributor's vision is crucial to a successful relationship. You need a partner who fully understands what type of customer you're targeting, and who has ties to retailers that serve your market.

"Taking it slow and building your brand with a specific core customer in mind is wise," Reger advises.

"Find out what they already distribute," Cundell says. The other lines they represent should be similar but not exactly the same as yours.

You'll want to find children's clothing distributors who don't currently have green attire in their lineup – if the distributor already has eco-friendly offerings, "you risk the lines competing with each other," Cundell says.

Give us your advice: Check out recent “Ask & Answer” questions.

Related links:

How fashion designers break in

Get your clothing line into gift shops

Grants for small companies are almost as rare as unicorns. Here's how to protect yourself against fraud.

Adriana Matteo, Warwick, R.I.
I'd like to start a small business and need a grant to start. How do I go about it and who do I need to contact? Everything seems to be a scam, but I know there are grants out there for young women who want to start a business.

By Kathleen Ryan O'Connor, CNNMoney.com contributor
You're right to be cautious – bogus claims of free money to start your business and shady outfits promising the moon are everywhere.

While legitimate grants for small business owners do exist, even for startups, they look very different from what you might encounter online. A typical Internet ad will promise thousands even if you don't know the difference between a balance sheet and a balance beam. Real government grants are scarce, tightly targeted toward specific industries, and rigorously competitive. If it sounds too good to be true, it probably is.

Getting a refresher course in that truism cost Donna Hartley of Tahoe City, Calif., a cool $2,500.

A survivor of a major plane crash, cancer and open-heart surgery, Hartley works as a motivational speaker. Interested in raising capital for her management company, Hartley scoured the Internet for leads. She found Grant Financial Network, and in August 2007, she gave the company $2,500 in return for detailed information on grants and assistance in securing them.

Grant Financial Network asked Hartley to authorize payment of the fee as a bank draft, rather than by mailing a check or paying with a credit card. That's a big red flag: Consumer groups warn that an ACH draft or wire transfer is the most difficult kind of payment to delay or dispute.

"Months and months pass," she recalls, with her calling repeatedly and not hearing anything. She eventually received some information from the company, but Hartley says it was nothing she couldn't have found out herself for free – and she never received any grant money.

When Hartley called to try to get her money back, the Las Vegas-based company instead tried to get her to part with an additional $6,500, for which it promised to help her turn her company into a 501(c)(3) charitable organization. The brazen pitch, she recalls, was about how that would make her eligible for even more grant money.

"I feel like I got taken to the cleaners," she says.

When we tried to call Grant Financial Network for a comment, the phone number listed for the company was disconnected. The Better Business Bureau of Las Vegas rates Grant Financial Network as "unsatisfactory." The bureau processed 26 complaints about the company in the last 12 months, mostly over refund issues and allegedly dishonest sales practices. More than half of those complaints went unanswered by the company.

Hartley, still the sole proprietor of Hartley International, has lodged her own BBB complaint, but doesn't expect to see her money again anytime soon.

"I know that grants can happen – I've written grant proposals for the Parent Teacher Association," she says. "It makes you feel very stupid."

John Miller, a spokesman for the Small Business Administration, says there is only one place to look for legitimate government grants: www.grants.gov.

"Speaking for the SBA, we do not provide grants to start or expand a business," he says. "The only grants the SBA administers are for research and development for high-tech companies through our SBIR/STTR [Small Business Innovation Research/Small Business Technology Transfer] programs."

Real grants have very detailed eligibility procedures. Take a look at the specs for this solicitation on grants.gov: "Eligible applicants for this program are non-profit, non-governmental organizations with a nationwide organizational infrastructure. … Applicants ideally should have state-level constituencies representing all states and territories, but at a minimum representing 20 members including both U.S. states/territories and international members."

Contrast that with this come-on from one of a dozen sites promising free money for your business: "None of these Grants require a credit check, collateral, security deposits or co-signers, you can apply even if you have a bankruptcy or bad credit, it doesn't matter. Its [sic] Free Money Never Repay!"

That said, entrepreneurs with great ideas, even if their business is in its infancy, can sometimes land grants, says Bo Fishback, vice-president of entrepreneurship at the Kauffman Foundation, a Kansas City foundation devoted to entrepreneurship. There are opportunities, but they are extremely competitive and often confined to science and technology.

"I don't know hundreds," he says, "but I know of a few."

The state of Missouri, for example, offers a grant for "Phase Zero" companies, which contributes $5,000 toward hiring a grant writer to help land a SBIR/STTR grant. "Those types of programs, state and federal, are in some ways the most obviously legitimate and recommended for startups to go after," Fishback said. "It's about as close to free money as you can get."

Angie Barnett, CEO of the Better Business Bureau of Greater Maryland, warns that now is a particularly vulnerable time for people to get taken in.

"After the holidays people are going to be grasping at every straw, and scam artists know that," she says.

To find legitimate resources for expanding your business, Barnett recommends visiting your local college- or university-based small business development resource center, or a nearby SCORE office. SCORE is a program backed by the SBA that brings together retired business executives and small business owners looking for guidance.

Your local economic development agencies can also point you toward financing resources. For example, your home state, Rhode Island, has a Web site at everycompanycounts.com with an online guide to organizations that assist local businesses. You won't find no-strings free money, but you will find loans available to new entrepreneurs. The Minority Investment Development Corp. is one local agency that focuses specifically on the needs of minority- and woman-owned businesses.

"People need to do their homework to be directed toward those [resources] which are legitimate," Barnett says.

Barnett has a list of warning signs that a grant offer is fishy:

-Grants are usually given to non-profits, and rarely go to small businesses for personal gain.
-The government – federal, state and local – does not make phone calls or send e-mails soliciting people to apply for grants. "If all of a sudden you start to get marketing or advertising, that's a tell-tale sign," she says.
- Be wary if you're asked to pay any kind of up-front processing fee. "One consumer reported they called it an ‘attorney's fee,'" Barnett says.
- If you're asked for your bank information, case closed: It's a scam. "They're fishing," Barnett says.
-Finally, don't be deceived by logos or graphics that appear to offer official endorsements. They're easy to fake, and can lend a false air of legitimacy.

Give us your advice: Check out recent “Ask & Answer” questions.

Related links:

Can I get a loan after bankruptcy?

Raising cash for a fast-growing business

Securing small business loans in a melting economy

We asked the experts and created a step-by-step guide to getting noticed on the fashion scenes.

Samantha Risto, Risto Designs, New York, NY
I recently launched a small women’s clothing business in New York out of my apartment. I would like to know how I can sell to small retailers and boutiques. Do I just show up at their store with samples in hand or is there an "established" way of doing this?

By Emily Maltby and Shara Rutberg, CNNMoney.com
The answers are yes and yes: You can show up at a store, but there is an established way of doing so.

"A scattershot approach won’t work," says Ira Davidson, director of Pace University’s Small Business Development Center and a former buyer for Abraham & Strauss, a famed New York City store that later became part of the Macy’s chain. "You have to have some discipline."

The best way to establish yourself is to start small. Boutique retailers should be your training wheels for the department stores.

"The boutiques will help you learn the process of how to run a business and show you how quickly you can manufacture the goods, and how to structure the orders," says Bliss Lau, an accessories designer who now has her line in more than 40 stores worldwide, including department stores in Japan. "The smaller retailers will be more flexible. If you manage to get into a large department store off the bat and the goods miss the deadline, you'll lose the order."

So how do you get your foot in the door at a small boutique? First, carefully identify your target stores. Then, reach out to them by visiting or making appointments. To increase your chances, find out what time the owner or the buyer is in the store, make a business card, and wear your line when you drop by, Lau suggests.

This method takes a thick skin, so you can't be afraid of rejection. Lau once took a train from New York to Washington, D.C., getting off at each stop to pop into stores. "I got flat-out rejected by half of them and had a great time at only one of them. But the way I saw it, I scored a new client, which was great," she recalls.

Many retailers don't think the drop-ins are effective.

"It happens frequently in my store, but it's usually not a good time to engage in conversation because the customers have to come first," says Candice Waldron, owner of boutique store Jumelle in Brooklyn. "Making an appointment for before-store hours is better."

Yvonne Yip, head buyer at Big Drop, also in New York City, thinks that the most effective way to get exposure is to mail in a Look Book. "About 10 pieces, photographed from different angles and put together in a professional way, will speak for itself," she says. "Also make sure the book includes a line sheet describing the items and listing the prices of each."

Your sample line is critical, says Linda Carter, president of The Retail Management Advisors, a Dallas-based retail consulting firm.

"Do not go with 50 samples," Davidson says. Six to 12 of your best styles is enough. And don’t forget to bring a color swatch book, showing off small squares of the fabrics for your line.

But buyers don't simply wait for designers to come to them. Yip finds most of Big Drop's products in fashion showrooms.

"Sales reps at the showrooms have connections to us. They know how to best present the lines and they know how business is done," she says. "Nine times out of 10, it's easier for us to work with a rep than with the designer." Most showrooms will have multiple lines, so when Yip goes to see one line that has piqued her interest, she often gets to see four or five others as well that she wasn't expecting.

Showrooms charge designers for the space, and often for commission as well. Before you sign on with one, research the reputation of the showroom. Notice what other lines it showcases – if the showroom carries denim and you also have a denim line, they may compete with each other. Pick a showroom that has lines that will complement yours.

And be wary if the turnover is quick. "If the showroom features the same designer for a few years, it speaks very highly of the relationship," Yip says.

In addition to a sending out a book and displaying your work in a showroom, you should hop online and see what trade shows cater to your type of customer, Carter says. There are many run all throughout the year, especially in New York City. "It can be costly right off the bat to rent space, but may be less expensive in the long run as far as letting people know who you are and what you offer," she says.

"When I first started my company five years ago, I went to every trade show and conference I could find and would chase down all the big name sales reps," Lau says. "I'd show them any piece of press that was written about me and ask them for suggestions about my line."

If you do pursue trade shows, don't forget to focus on also getting your designs into local stores. "Big stores send buyers to trade shows, but then they continue their research at the boutique shops," says Jumelle's Waldron. "Buyers from Anthropologie and Harvey Nichols come to my store because they know the smaller stores are more willing to take risks with the designers."

If you're looking to break into the big leagues, make sure you have your manufacturing operations in order and are ready to expand your business to handle the demands of department stores.

"You have only one chance with the big players," Yip says. "You can't go from zero to 500 units, so put your designs in the boutiques to work out the kinks."

For more advice, Bliss Lau recommends The Fashion Designer Survival Guide by Mary Gehlhar.

"From having a fashion show to a company to pitch, it is a wonderful book for the creative mind," Lau says.

Give us your advice: Check out recent “Ask & Answer” questions.

Related links:

Get your clothing line into gift shops

Startup skills for a t-shirt company

Working around the vendor fee

If you want to reach a national audience through the home-shopping networks, you'll need mass-manufacturing capabilities and a catchy storyline.

Mona Kahn, Salt Lake City
I am a jewelry designer and I want to present my merchandise to a larger audience. How do I get my products on ShopNBC, QVC or similar outlets?

By Christina Crapanzano, CNNMoney.com contributing writer
The application process is quick and painless. Both ShopNBC and QVC have applications available online for downloading, and both sites offer guidelines for product submissions. You'll need to send in digital photos of your product and answer questions about your manufacturing process and price point. The networks are looking for vendors who already have a product – they aren't interested in ideas, sketches or prototypes.

We asked the shows' vendor scouts to tell us a bit more about how they pick new products to feature.

QVC has more than 10,000 applicants each year, and also recruits vendors from trade shows or craft fairs. From that, only about 500 new vendors are introduced on-air each year.

"Don't be redundant," says Marilyn Montross, QVC's director of vendor relations. "The first thing we look at is the product. For jewelry, we're asking, 'is this something new and innovative versus products we're already selling?'"

The same philosophy holds true at ShopNBC. "The product is the star of the show," says Anthony Giombetti of ShopNBC's media relations department.

Watch the networks you are applying to and get to know their current products and vendors. That will also give you an idea of their target audience and your potential customers. For ShopNBC, the typical viewer is over the age of 45 and is affluent, with an average household income of more than $70,000. QVC says its customers are predominantly women, though its demographic changes hour-to-hour depending on programming.

Knowing your audience's tastes is only the first part of the battle. The next step for applicants is demonstrating a capability to produce in mass quantities.

"They have to have their ducks in order," says ShopNBC Chief Merchant Kris Kulesza. "If you can only make five to 10 units of something, that could close the door." ShopNBC, which broadcasts to more than 70 million homes, might ask vendors to have as many as 5,000 units available.

However, QVC's Montross warns against jumping the gun – never manufacture large quantities of your product on spec before getting approval from the network. They want to see that you are capable of manufacturing mass quantities, not that you've already done it.

The volume demand usually rules out hand-crafted items.

"In order to do both the volume and quality, [vendors] need to be working with a pretty sophisticated manufacturing factory," Montross says. In rare cases, networks might put vendors in touch with manufacturing companies, but they will not pay manufacturing costs.

"[Merchants] have to be willing to make an investment," Kulesza says. "Not everything will take off or sell out from the get-go. You may have to make an investment up front."

Something else the networks seek: A personality and a story to go along with the product. If you become a vendor, you will likely present your product yourself. You should be prepared with all the elements that go into making compelling TV, such as a good storyline with twists and turns. You'll want to have themes and variations in your product line that you can discuss.

Finally, don't be shy. Be able to talk enthusiastically about your product, both to the vendor scouts and also, potentially, on air.

Persistence is key: Kulesza says that if you submit an application and get no word back, "Don't be afraid to make the call directly to us."

Got a brilliant new idea for a patented product? Here's how to get your idea to the market, legally.

Joseph, Houston, Texas
I have a business idea that is based on a different application of a patented product already on the market. Is it best to proceed by taking my ideas to the company itself, or pursing them independently while contracting to the original patent holder?

By Paul Roberts, Fortune Small Business contributor
If the product you want to use is already patented, but you see a way to build a new business around a new application of it, you're almost certainly going to need to do business with the company that owns the patent, says Bill Barrett, a patent counsel at Advanced Liquid Logic in North Carolina and author of the book iProperty: Profiting from Ideas in an Age of Global Innovation.

However, before you approach the company, Barrett recommends that you – and perhaps a trained patent attorney – take a hard look at the patent that has been issued. The initial description of a patent might make you think that the owners have received a broad license. However, the meat is often further down, where the applicant makes specific claims about what the patent covers. Those claims limit the patent. Your application of the patented technology could constitute a patentable idea in its own right, Barrett says.

"A lot of people read more into a patent than is really there," Barrett says.

With the help of a licensed patent attorney, you can also look into the history of the patent, including communications between the applicant and patent officers in the U.S. Patent and Trademark Office. That will give you an idea of what the government's examiners see as the limits of the patent grant, rather than what the patent holder understands them to be, Barrett says.

If you think there's the possibility that your idea for applying this product is patentable, file a patent application of your own before contacting the company. "A lot of people are under the misconception that filing a patent application is in itself [patent] infringement, and it's not," Barrett says. Having a patent application filed will keep you from having your good idea snatched away from you by the company, should it have merit.

Once you're ready to approach the company, you should do it anonymously, through an attorney and under the auspices of a non-compete and non-disclosure agreement, recommends Edward Fenno of Fenno Law Firm in Charleston, S.C. Such forms are easy and inexpensive to have drafted, and they protect your ideas from being copied by the organizations or individuals with whom you're negotiating.

After all that due diligence, striking a deal with the patent holder depends on your negotiating skills and business acumen. At the very least, you will need to convince them that you're serious and have the financing and skills to make your business idea a success.

Fenno warns that many large companies spend millions on product research and may have already considered, and rejected, the application you're proposing. But Barrett says that companies may well be open to licensing their product if you're proposing an application for it that is outside their core market.

You'll need to be persistent, he warns: "I've seen licensing negotiations that last years, unless there's someone there that's really pushing it along."

Give us your advice: Check out recent “Ask & Answer” questions.

Related links:

A small company's secret: Pick big partners

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Our Caribbean experts weigh in on which island is best for an expat's bar biz.

Edd, Philadelphia, Pa.
I'm interested in starting a bar or café somewhere in the Caribbean. I have around $400,000 in startup capital and 20 years of experience managing restaurants. I am trying to find the best and easiest island on which to start my business.

By Blake Ellis, Fortune Small Business contributor
We set out to find the best locales in the Caribbean for entrepreneurs, and found a wealth of options for you.

Nerissa Golden, an entrepreneur and host of the annual Caribbean Young Entrepreneurs Symposium says that if you're looking to make an investment of more than $100,000, the best option for you is to become a naturalized citizen before establishing a company, because being a citizen will make the process much easier. Some countries, such as Saint Kitts and Nevis, offer "investment programs" that allow foreigners to receive citizenship in return for an investment in local real estate.

The first step toward picking the right spot for your business is to visit various islands to see how their economy and culture suits you. Jim Beach, executive editor of InternationalEntrpreneurship.com, rattles off a number of features potential Caribbean expats should evaluate: "Do you like the rich, celebrity filled – and maybe a little snobby – St. Bart? Or the more relaxed St Lucia? Do you like arid places for scuba diving, like Bonaire? Do you want to live with mostly American tourists as customers in Jamaica, or Europeans in Curacao?"

To find the right place for your business, you need to select a spot where you fit in and feel at home. If your café doesn't fit in with the distinctive atmosphere of the community it's in, it won't be successful. Language is also a factor: If you don't know French, you'll want to avoid one of the French-speaking islands, such as Martinique or Guadeloupe.

That said, Beach believes Curacao is the easiest place to start a business, thanks to its low crime rates and strong government protections.

"Jimmy Buffet is currently looking for someone to buy a Margaritaville franchise in Curacao, but $400,000 might not be enough to get that up and running," he says. St. Lucia and the Turks and Caicos are the trendiest places, and "certainly 'the places to be' if you want to follow all the development."

Golden says that St. Kitts, Anguilla, Antigua and St. Maarten are also good options. "They are experiencing a surge in foreign investors, and are very attractive to high-end tourists as well as other vacation travelers," she says.

However, given the size of your startup capital, Beach thinks you might want to look outside the Caribbean at a less developed area instead. He cites Costa Rica as a hot spot for entrepreneurs with modest capitals.

Michael Stamler, a spokesman for the Small Business Administration, suggests looking at the World Bank's latest "Doing Business In" report, which examines the ease of starting a business in countries all over the world. Puerto Rico ranks in the top 10 countries globally for making it easy for entrepreneurs to get off the ground: registration paperwork is quick and inexpensive. Jamaica is also a standout for startup efficiency – and none of the countries in the Caribbean have minimum capital investment requirements except Haiti.

Once you select an area, Golden advises you to contact a notary or a trust company to apply for a business license and permit of residency. That process takes between three months and a year, she says.

As you create a business plan, remember Golden's advice: "Food and parties go together in the Caribbean, so some of your capital needs to be spent on having regular nights of live music or popular DJs or international acts."

Another recommendation: "When it comes to marketing, research what is most effective on each island, because some islands are more radio-driven, so spending money on print advertising is not the best use of cash. On others with a heavy newspaper readership, print ads get you more bang for your buck."

Give us your advice: Check out recent “Ask & Answer” questions.

Related links:

Enterprise zones yield lucrative tax breaks

Is now the time to buy a business?

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Getting your products on the market is a first step, but getting them in front of the right potential buyers is essential.

Callixte Matala, Mac-uisine, Montreal
A year ago, I started a high-end, stainless-steel kitchen sink distribution company in Montreal. I've recently added bathroom sinks and bathtubs to the line. The sinks are very high end, made of marble and granite, ranging from $600 to $2,500. Cabinet makers and kitchen designers spotlight them, but I'm still having a hard time selling my sinks. I'm trying to target those who are remodeling their kitchens. What should I do?

By Emily Maltby, Fortune Small Business staff writer
Dear Callixte: You are going in the right direction by working with resellers rather than going it alone.

If you have a retail location, you can set up events to expose yourself to builders and home associations. "You could buy some wine and cheese and host meetings or networking ," says Randye Spina, chief solutions officer of Affordable Marketing Solutions in Bridgeport, Conn. If you don't have your own store, work with the retailers who display your goods – you can probably arrange to run networking events in their stores to show off your sinks.

Spina recommends joining an association called the Society Of Certified Kitchen Designers in order to get to know architects and designers who could use your wares. And because it's so important to network with those in the industry, you should seek out trade shows. The granddaddy of trade shows is the International Home & Housewares Show in Chicago, which will be held in March 2009, but smaller kitchen expos take place in other locations throughout the year.

"Even if you don't have enough money to set up a table at these places, go as an attendee and walk the floors to make appointments with designers and hand out brochures," Spinya suggests.

Giving sinks away can help get your name out there. Spinya recommends contacting HGTV shows that focus on remodeling to see if you can contribute a product to one of their episodes. The host of the show can talk about why your sink works in the remodeled kitchen, and your company may be listed in the credits of the show.

If you are working on a shoestring budget, try to work also with the manufacturers to help you sell their product. "It behooves them to give you money to sell the product," Spinya says. "Ask the manufacturers for collateral materials to produce marketing materials. Tell them you need their assistance to produce banners, postcards and brochures and they should chip in. Take that a step further and split the cost of a radio ad."

Also, a Web presence is essential. "A Web site is the equivalent of a business card," Spinya says. "Even if it's just a beautiful home page with your contact information, it's essential." If you don't have your own retail store, a Web site is a good way to show off your sinks and direct potential buyers to shops carrying them.

In the meantime, since you don't have a Web presence, try to get your phone number listed in online directories. Gregg Stewart, senior vice-president of TMP Directional Marketing, a search engine marketing agency in New York City, says when there is a lot of money on the line, the buyer will want to see the product and have contact with a human before making a purchase.

"In your industry, 85% of purchases are made within 15 miles of the home. People want local solutions because the product is high-end and may have installation issues," Stewart says. "E-business is good for CDs and books, but for expensive home improvement, the consumer wants to see it before investing money."

A downturn can be a great time to become an entrepreneur – but only if you're prepared, financially and emotionally, to wait out the economic turmoil.

Charlene, Fort Myers, Fla.
I'm interested in buying a small pack-and-ship company. It's for sale for $70,000 with a gross profit of $245,000 a year. As an owner, after making all my bills and deductions, I would make about $60,000. My husband and I want to run it ourselves, with no employees, but we are worried: Is buying a business in the current economy a smart idea?

By Kathleen Ryan O'Connor, Fortune Small Business contributor
When Ken Proskie started his occupational health and safety consulting business in 2004, the economy was emerging from its post-Sept. 11 downturn, but downsizing and offshoring were still pummeling Main Street.

Proskie knew the problem too well: The impetus to strike out on his own came from being laid off after a 30-year corporate career in the field.

The economy seems even worse off now. What's his advice for someone pondering the same plunge today?

"It may sound philosophical, but sometimes a crisis is the biggest chance to find out who you really are," says Proskie, who lives in Evanston, Ill.

Convinced that his advance research was sound and that a clear need for his services existed, Proskie went in prepared to wait out the economy. He planned for a stretch of red ink before he'd see profits.

That approach was smart, experts say. Anyone thinking of starting a new business or taking over an existing one in late 2008 should keep that in mind and be prepared for a potential sales decline.

But above all, finding financing is going to be the top challenge. As banks pull away from lending to large, established companies, you can only imagine what they're telling unproven business owners just starting out.

That's not to say the dollar spigot is closed off completely, but the days of easy money are long gone. A strong personal credit rating is mandatory, but it won't be enough. Be prepared to front plenty of cash and collateral. Many entrepreneurs report that business loans are impossible to get unless they back them with their house.

"A few businesses that I've talked to over the last couple of weeks have had lines of credit canceled, even though they've been up to date on them," says Larry Bennett, a professor of entrepreneurial practice at Syracuse University's Whitman School of Management in New York. “That’s a little bit concerning to me, when even those with high creditworthiness are having problems.”

Still, there are opportunities. For those who come prepared, now can be a good time to launch – your rivals will be facing their own challenges and sales struggles.

"If you've done your homework and you see there is still an opportunity or a window of need, and your competition is not terribly with it, it can be a better-than-ever time," Bennett says. "But take the old saying: Take whatever you are forecasting for money [needed to get started] and double it. I'll say, take what you are forecasting for money and quadruple it."

Small business coach Jeff Williams of BizStarters, which specializes in the over-50 entrepreneur, warns potential entrepreneurs to be prepared, financially and emotionally, for a long stretch of economic turmoil.

"It takes footwork now and that eliminates a certain subcategory of buyers right there. This is not for the faint of heart," he says. "You are really going to have to look three years into the future. That's what smart buyers have always done."

One bright spot to consider: The economic crisis has some older entrepreneurs with solid businesses thinking it's a fine time for a graceful exit. And with the credit crunch, sellers might be willing to offer private financing.

Above all, Williams says, you need to take a long, hard look at the value of the business you're considering starting or buying. Does it fill a fundamental need?

Take industrial supplies. "Even if the factory goes from three shifts to two, they still have to buy these things," he says. "They still have to keep the plant running."

And don't be afraid to think outside the box. Even lawn care, a seeming luxury, can be a prosperous business in a downturn, Williams says. Downsizing means everyone is left working longer hours. Envision the suburban dad working from 7 am to 7 pm six days a week – he isn't going to be spending hours tooling around on the Cub Cadet anymore.

Sticking to the fundamentals was the key to Proskie's eventual success with his firm, Compass Health and Safety.

"The first year wasn't great," he says. "I had to have the resources behind me to survive [that initial loss] in income. I tried to position myself smartly. Why would you want to use me – a small fish in a big pond? I marketed myself as a seasoned professional and, probably more important, was the value proposition. I can do it for less, with better quality and better service than you've gotten in the past."

Eventually, that approach built up his client base. After all, even in a recession, work still has to be done.

One key thing to keep in mind: In any business climate, boom or bust, you can't let your emotions get the best of you.

As Bennett puts it: "I tell my students, fall in love with business, just don't fall in love with the business."

QUIZ: Are you ready to start your own business?