From the February 2004 issue of Startups

Starting a business is a lot like jumping onto a fast-moving merry-go-round: It looks a little crazy to anybody watching, and it's almost guaranteed that you're going to stumble as you jump on. But you're also bound to have a lot of fun, and as long as you dig in your heels and are determined to hang on, you're likely to enjoy the ride.

If you feel a little scared at the idea of starting a business, take heart from the stories that follow. If these entrepreneurs could start businesses in 2003-when the economy was seemingly going nowhere but down-surely you, too, can find success today.

Laura Osborne, 26, and Sheila Dardashti, 25

Business:Treesje, a handbag business in Beverly Hills, California. The purses are sold to boutiques and have attracted celebrity fans including Liv Tyler, Kate Winslet and Sarah Jessica Parker.
Founded: May 2003
Start-Up Costs: $20,000 from their savings from previous jobs. And they continually reinvest in their company.
Revenue So Far: About $75,000
Employees: None

Osborne and Dardashti's Background: They both studied at the University of San Diego. Osborne dove into business and got her M.B.A.; Dardashti was in fine arts. They knew of each other but were not well acquainted until they met as bridesmaids at a wedding and started talking. Soon afterward, Dardashti began designing the handbags, while Osborne started marketing them. Today, they both contribute a bit of everything to the business.

Osborne's Top Three Tips for Start-Ups:
1. Love what you do. Whether the economy is good or bad, says Osborne, "you need to have passion. If you want to start a business just to make money, that's fine, but the money isn't going to keep you going. It's not going to cause you to wake up in the middle of the night with new ideas for the business. And if you're passionate about your business, you're going to swallow rejection much [more easily]."

2. Keep the quality of your product at its highest level possible. "Keeping a customer in a down economy is crucial. We've got to keep that customer for life, because there aren't a lot out there," says Osborne. "Their dollars are hard-earned, and they don't have a lot of money to place elsewhere. And we make it clear that if somehow the quality is lacking, we'll do whatever it takes to make it up to that customer."

3. Save money wherever you can, and concentrate on keeping the cash flow flowing. Says Osborne, "Penny-pinching has really helped us."

Dardashti's Final Two Cents: "Every day is so different than the next, which was initially frustrating and discouraging. But the daily volatility has taught me to stay focused on the light at the end of the tunnel."

Yana Drogobetsky, 25

Business:Bambini Design, a Brookline, Massachusetts, retail store offering European furniture, clothing and accessories for babies and young children
Founded: May 2003
Start-Up Costs: Around $70,000. Some was a loan from Drogobetsky's parents, but more than 60 percent of it was from savings she'd been socking away for a couple of years.
Revenue So Far: More than $100,000
Employees: One full-time employee

Drogobetsky's Background: During college, while earning a degree in early childhood education, Drogobetsky worked as a night nurse, caring for twins and triplets. She also spent a year as a kindergarten teacher before realizing that what she really wanted to do was own her own business.

Drogobetsky's Top Three Tips for Start-Ups:
1. Know your market. Drogobetsky did consider the risks of selling high-quality furniture in a low-quality economy. But she also believes that "no matter how the economy is doing, kids are always being born, and kids always come first in families."

2. Dare to be different-very different. "I have bright colors, furniture that changes as the child gets older, and exclusive lines that you can't get anywhere else in the United States," says Drogobetsky. "There's so much competition out there that you really need to stand out and be different, because clients do have a choice."

3. Understand your customers; they're tough to come by. When you meet them, be prepared to explain why you're their best option. Says Drogobetsky, "I know how to present my product to the parents [so] it almost seems like an investment."

Drogobetsky's Final Two Cents: "You have to be willing to take risks in business, but risks that you can validate for yourself."

Security Products and Executive Recruiting

Vimal Vaidya, 39

Business:RedCannon Security, a Fremont, California, developer of computer security software products
Founded: February 2003
Start-Up Costs: Significant, says Vaidya-at least a few million. Privately funded, he adds.
Revenue So Far: More than $100,000
Employees: 24, including some on-call consultants

Vaidya's Background: This is his fourth company, so he knows a thing or two about starting a business, no matter what the economy.

Vaidya's Top Three Tips for Start-Ups:

1. Is there enough distinction between what you're offering and what your competitors offer? "If I can clearly say 'yes,'" says Vaidya, "that's a good indication that I have a business."

2. Have a sound business model. "You need to know what you're going to build, how much will it cost, how much you are going to ask for each product," says Vaidya. "This is important to ask, no matter what the business or economy. But in a bad economy, if you can't answer these questions, you're going to fall with a harder impact."

3. You need conviction. "If I'm convinced I have a business, then I can say, 'Yes, the economy is bad, but it's never going to last forever.' It's that conviction that can get you through all of the rough days," he says. "And I have weathered a few of those rough days."

Vaidya's Final Two Cents: "You have to develop the best strategy you can. It's much easier to set the course than to turn back because you have a problem."

Julie Kampf, 42

Business:JBK Associates Inc., an Englewood, New Jersey, business that recruits executives for the health-care and consumer products industries
Founded: Incorporated in the spring, JBK was actually launched in late October 2003.
Start-Up Costs: $25,000 in the first month, for office rent, office equipment, Web development and various consultants
Revenue So Far: More than $75,000, even before she officially launched. There's a lesson here.
Employees: Two

Kampf's Background: Kampf spent 17 years in the fashion industry working in sales and marketing, and four years in the recruiting field at small and midsize firms.

Kampf's Top Three Tips for Start-Ups:

1. Build your infrastructure. Try to make sure everything-or almost everything-is in place before opening for business. Because Kampf took her time between incorporating and actually shouting to the world, "Hey, look at me," she was able to line up clients before opening, which meant income was already streaming in.

2. You've got to have passion. "I love what I'm doing 24/7, and I couldn't say that about anything I did before this." Even if the phone rings less when the economy is down, as long as you love your business, you'll usually feel good. Since Kampf apparently realizes you can't pay the electricity bill with your winning smile, she adds that whenever it's feasible, you should sock away money into a "rainy day savings [account]."

3. Understand your chosen industry. Even when the economy is going backward, the health-care industry moves forward, albeit slowly. Kampf admits, "If all I knew how to do was recruit executives in technology, I might not have started this." All the passion in the world can't force an industry to grow.

Kampf's Final Two Cents: "Starting a business is like having a baby. There really is no good time."

Saving Grace
Saving money is always important, but especially when you're starting a business. We asked our 2003 entrepreneurs for ABCs on how to penny-pinch, and here's what they had to say:

A is for Auction. Alan Crancer saved a lot of money by buying equipment and office furniture at local auctions. Plus, "They're fun and interesting to attend, and most are on the weekend," he says.

B is for Buck. "Before I spend one dollar outside of the basic expenses, like payroll or recurring expenses," says Vimal Vaidya, "I need to be convinced that by spending it on an employee or department, it will either generate or save the company [money] in sales or productivity or costs."

C is for College Interns. "Whether it be for graphic design, production or clerical work, students are usually hungry for resume- and portfolio-builders," observes Laura Osborne. "More important, they are usually talented, hardworking and incredibly energetic. Not to mention very cheap, if not free."

D is for Divvying It Up. Julie Kampf uses her accountant only for the big things, while she handles the payables, receivables and other accounting responsibilities "until such time [as] it is more cost-effective for someone else to perform these functions." She's also not shy about asking friends or family to occasionally throw in a free helping hand.

E is for Embellishing Your Store. You want your store to have some style and class, but you don't have the money? Yana Drogobetsky says, "Instead of investing money in artwork for the store, we had a display of a local artist's works exhibited throughout our showroom." The plus? Not only did Drogobetsky save money on decorating, she also found a way for her store to become involved with the community, which is always a good thing.

Home Restoration, Plus Startup Tips

Alan Crancer, 45

Business:Paul Davis Restoration of Central Mississippi, a home-restoration franchise in Ridgeland, Mississippi, for structures hit by disaster
Founded: January 2003
Start-Up Costs: $100,000 from savings
Revenue So Far: $350,000
Employees: Four

Crancer's Background: Alan Crancer spent about 10 years in telecommunications, much of it as an executive vice president, and some of it working at a start-up where he was briefly a millionaire "on paper" before the dotcom boom blew up in everybody's face.

Crancer's Top Three Tips for Start-Ups:

1. Do your homework. Says Crancer, "Make sure there's a need for the business, but more important, that that need is where you live or have established the business. You always see people saying, 'This is what they're doing in California and New York, so I'm going to do that here.' But great ideas don't always work [the same in a different] place." Crancer suggests interviewing people in businesses similar to yours. Pretend you're an everyday customer, strike up a conversation with somebody who works in the industry, and learn some of the nuts and bolts of the industry. Says Crancer, "It's amazing what salespeople will tell you."

2. Have confidence in yourself. And if you have a family, as in a spouse and children, you need their confidence, too. Whether or not the economy is uncertain, you can be pretty certain that you're going to be in for some tough times as you start the business, like "extremely long hours and financial adjustments in the monthly budget," says Crancer, who bought his business in January 2003 and then spent several income-free months learning his craft before opening the doors.

3. Surround yourself with the best people you can find. "I can't afford to go out and hire the best people; it just [wouldn't] work," says Crancer. "But I put together an informal advisory group of people I knew I could talk to-an accountant friend of mine, a banker, a friend who is an HR director. I tell them, 'I want to pick your brain; can I buy you lunch?' I get a lot of free advice for the price of a lunch."

Crancer's Final Two Cents: The best way to ride out economic ups and downs is to have a business that isn't affected by the economy. "I knew there would always be a need for what I do," says Crancer. "There will always be kitchen fires [and] tornadoes, and that has nothing to do with the economy."

Hit the Ground Running
To-do lists are crucial once you have a business, but it's not a bad idea to have one before starting a business, either. If you're thinking of taking the plunge, financial planner Doug Charney has a few items that should go on your list.
  • Do you have a market survey? In other words, do you know the customers are out there? Any idea how much they'll pay? How much you'll make? Charney, who owns the Charney Investment Group of Wachovia Securities in Harrisburg, Pennsylvania, says you can do your own market survey in theory, but it's better to find professional help. "Chambers of commerce will have lists of survey companies, and some colleges will do it using their students, and those prices are very reasonable," he says. "You can spend as little as several hundred to $10,000 to $20,000, although for a new business, you don't need anything like that. A few college marketing majors would be fine. You just need somebody who is neutral."
  • Have you plagiarized a business? Relax, it's not as creepy as it sounds. Charney suggests visiting somebody who has a business in the same field you're in, but in a far-flung location. If it's clear that you will never compete, "most businesspeople will be happy to help," says Charney, who knows of one burrito entrepreneur who went to a more successful one, who "wanted to brag about his business and laid out everything."
  • Have you tried what you're doing in the little leagues? When it's possible, Charney suggests conducting your business as an experiment in a small setting. "For instance, if you're going to make pies, sell them at the farmers' market, and see how they do. It can save you a lot of time before jumping in whole hog."

Geoff Williams is a writer in Loveland, Ohio.