From the March 1997 issue of Entrepreneur

Q: I want to start a telemarketing business, but I don't even know how or where to begin. What are the most important things I need to know?

Name Withheld

A: Larry Kaplan is president and CEO of Northbrook, Illinois-based Tele Business USA, an award-winning firm that has provided telemarketing companies with professional services for more than 20 years:

So you think you want to be in the telemarketing business. It's hard to overlook an industry that has grown between 25 percent and 50 percent a year for the past 10 years, has made a lot of people very rich, and seems to have no end in sight in terms of demand.

However, going into the telemarketing business takes more than just renting some office space and installing a few telephone lines. The days of easy money and great response rates are over. Good account managers don't work for less than $40,000 to $45,000 per year, plus benefits. State and federal regulations, privacy issues, and just the fact that many people feel they already get too many telephone calls have given the telemarketing industry a negative image.

Most of the people who have become tremendously successful with telemarketing services got into the business before 1990, when there was a large influx of companies into the industry. Most of them fell into the business as a result of a part-time job. Maybe they were making phone calls as a means to an end, selling something or doing surveys; maybe they got a request from a business contact for telemarketing-type services.

There is no standard way to get into this industry and no easy means of determining demand for your services. But if, despite the challenges, you still want to start your own business, the following 10 suggestions should set you on your way:

1. Become educated about direct marketing. Telemarketing is a direct marketing medium, just like direct mail, with the same rules and principles. There are numerous books available about direct marketing and telemarketing to use as resources: Jim Kobs, Ed Nash, Murray Roman, Steve Edleman, Art Sobzcak and Joan Throckmorten are just a few of the experts who have published helpful books on the topic.

2. Read the trade journals. Teleprofessional, Telemarketing and Call Center magazines provide an excellent understanding of the marketing, management and technology issues that are necessary to know if you are going to be in the telemarketing business. There are also professional networks that are a great source of contacts and information.

3. Investigate the American Telemarketing Association (ATA) and the Direct Marketing Association (DMA). There may be a local ATA or DMA chapter in your city; call them to find out how to become a member.

4. Get experience. Work a minimum of six months making calls for a professional telemarketing service or for an in-house call center if there is no telemarketing service in your area. You need to understand firsthand the difficulties of this job, how it's managed and what kinds of people make it successful.

5. Research the market for telemarketing opportunities. Are there businesses or organizations in your community that need help setting appointments, selling subscriptions, raising funds or selling advertising space? These commonly get outsourced to telemarketing firms. What are they willing to pay, and what kind of support do they need? Consider whether mailing list development, direct mail and product fulfillment are needed to make your service work.

6. Determine who your competitors are so you can differentiate your service from theirs. Despite the trend toward outsourcing, outside telemarketing services handle less than 10 percent of all telemarketing. This means your primary competition is more likely to be an in-house call center rather than an outside service bureau.

7. Read the prospectuses of as many publicly traded telemarketing companies as you can. Include the companies supplying equipment and services to the telemarketing industry. This helps give you an excellent overview of the companies' clients by in-dustry, management, market position and future growth strategy, as well as their earnings statements and balance sheets. Telemarketing is very much a numbers game; to win, you need to know the numbers.

8. Talk to telemarketing consultants. You can find them in the ATA directory, trade magazines and through your local telephone company. The major long-distance carriers can be a good resource for almost every aspect of this business since they all have on-site call centers and work with outside call centers as well.

9. Consider the pool of available employees. What is the job market like in your area? Who might be available to make phone calls, and when can they work? What is your competition for part-time help? How will you hire, train, manage and motivate your employees?

Labor costs tend to be high in this business. For example, out of the $30 to $40 per hour you might charge a client for your service, $8 to $15 of that goes to each employee you have making phone calls. Another $15 to $20 goes to overhead, management, the phone companies and administration--leaving you with less than an $8-per-hour gross profit. You will need a financial cushion to pay for hiring and training, and you will probably have to outsource the additional support services, such as scripts and product fulfillment, that your clients may want from you.

10. Give yourself time. Expect that it will take at least five years to grow your business big enough to weather major client losses, economic trends, 200 percent annual employee turnover, and the learning curve you'll have to scale to gain experience and knowledge of direct marketing, database marketing, telecommunications, personnel management, and all the various administrative and sales tasks that you and your employees will have to perform. Good luck!

Q: I own a few small businesses (a recording studio, a retail music store and a mail order music accessories business), and I want to advertise these companies on the Internet. How do I go about this, and what do I need to know to get the most effective results?

Name Withheld

A: Rosalind Resnick, author of The Internet Business Guide: Riding the Information Superhighway to Profit (Sams Publishing), is president of NetCreations Inc., a Brooklyn, New York-based Internet software and marketing company:

To effectively market your businesses on the Internet, the first thing you need to do is to set up a Web site. The cost for this will vary greatly, depending on the size and complexity of your site. Some companies spend millions of dollars building a Web site; others do the whole thing in-house for as little as $1,000.

Unless you opt for the do-it-yourself route, it will cost $10,000 to $15,000 to hire a skilled Web design firm to create or scan in the graphics for your site and code the text and pictures in HTML ("hypertext markup language," the code that enables words and pictures to be visible to Web users). You'll also need to pay a small monthly fee to host your site on an Internet service where users can find your page.

Once you establish a site, you'll need to promote it. That's because most people who surf the Web use it as a giant Yellow Pages directory. But unlike the real world where there's generally a single directory for an entire city, there are hundreds of directories on the Internet that list Web sites. The best way to market your Web site is to plaster your site's address everywhere--in newspapers, in advertising, even on the sides of buses.

For a cost-effective way to promote your site, consider registering it with the hundreds of search engines, directories, "what's new" lists, "what's cool" lists and publications that actively solicit new site announcements on the Internet. These include Yahoo!, InfoSeek, Lycos and Excite, to name a few. Generally, there's no charge to get listed in these directories, though you may want to pay an Internet marketing firm to assist you because doing it yourself could take a considerable amount of time. The services hire people to surf from site to site, typing information into the data-entry forms on each directory or search engine. Automated services use computer programs to accomplish the same goal, inviting marketers to visit their site, fill out a series of forms, and click on buttons to post Web site information to several hundred search engines and directories. Expect to pay $50 to $500 to have a service handle this for you, depending on the level of promotion you desire.

Another promotional vehicle is targeted direct e-mail. Similar to direct mail, this simply means sending electronic "pitch" letters to Internet users who are interested in the products and services you offer. NetCreations Inc. (http://www.netcreations.com/postdirect/) uses a direct response service to host more than 1,000 electronic mailing lists on topics as varied as music, real estate, food and wine, business, Web design and yoga. These lists contain the names and addresses of Internet users who have signed up to receive commercial messages about these topics.

Make sure to use only lists of users who want to receive mail--otherwise, if you send unsolicited junk mail, don't be surprised when you get bombarded with angry e-mail messages!

Contact Sources

American Telemarketing Association, 4605 Lankershim Blvd., #824, North Hollywood, CA 91602-1891, (800) 441-3335;

Direct Marketing Association, 1120 Ave. of the Americas, New York, NY 10036-6700, (212) 768-7277;

NetCreations Inc., (718) 237-1624, rosalind@netcreations.com.