From launching a business to doing business for less, stop and take a look at the first city on our nationwide tour—the Big Apple.

By Sara Wilson

Known as “the city that never sleeps,” New York City is home to more than 8 million people, all packed into a mere 301 square miles. With this in mind, it’s no wonder the action never stops. The countless restaurants and stores makes it a haven for any gourmand or shopper and can sharpen the taste buds and exercise the credit cards of even the most reluctant spenders. It’s the apple of America’s eye, and the place where trends are set.

It’s also the place where opportunities are endless for entrepreneurs to make their dreams come true. In fact, New York City has more than 200,000 small businesses, and more are launched every day. But what exactly does it take to become a successful entrepreneur in the city? We did research, spoke with experts and picked the brains of existing Big Apple entrepreneurs to get the inside scoop.

Million-Dollar Idea
In New York City, a successful business starts with a unique concept. The city is the epicenter of fashion, Fortune 500 companies, art, music and theater, so in order to distract a busy New Yorker, you’ll need to come up with a winning idea.

For Stephane Lemagnen, 31, and Laurent Lanneau, 33, founders of Room 4 Dessert, the right idea evolved with time. They originally thought of selling prepackaged takeout desserts, but they realized the idea wouldn’t generate enough profit to pay for the space. Then they thought of a traditional, full-service dessert restaurant but realized that they could make their business even more enchanting in a smaller space. Their current location, opened in January 2006, is 700 square feet, with a long bar that accommodates 30 customers. “You have to see if you can actually make money with the idea,” says Lemagnen. “We [thought up] 30 to 40 different business plans until we got to the point where we thought to have a sushi bar setting.” Room 4 Dessert projects $600,000 in 2006 sales.

Miriam Maltagliati, 34, came up with the concept of Knit New York, a full-service knitting store and coffee bar, from her experience shopping and working at a knitting store. “I was noticing the dynamic of the people coming there,” says Maltagliati. “I noticed that they enjoyed communing with other people and sharing not only what they made, but their lives.” Maltagliati launched her business in 2003 and expects 2006 sales of approximately $1 million.

Getting Started
So you’ve got your million-dollar idea. Before you hit the ground running, you’ll need to consider the following startup basics.

1. Structure: As in any city, when you start a business, you must decide on the business structure. In New York City, there are four primary structures: sole proprietorship, partnership, corporation, and limited liability company. According to the NYC Small Business Resource Center, the city of New York—unlike the state and federal governments—treats S corporations as true corporations. In other words, business owners face a corporate and personal income tax on the amount distributed to them. In addition, the owners of partnerships, sole proprietorships and LLCs are taxed twice on any corporate profit they earn—once as business income and again as personal income. More information is available on the center’s website, www.nypl.org/smallbiz. For those wishing to consult a lawyer, the New York City Bar Association provides attorney referrals at no cost (www.nycbar.org).

2. Licenses and permits: Before getting started, you will most likely need to get a license. Visit http://www.nyc.gov/html/sbs/nycbiz/html/starting/licensing.shtml to determine which agency to contact for your business.

3. Employer Identification Number: You will be required to file for one of these numbers unless you structure your business as a sole proprietorship and have no employees. You must file this form directly with the IRS. Do it online at www.irs.gov/businesses/small/article/0,,id=102766,00.html.

4. Zoning: New York City is divided into residential, commercial and manufacturing zoning districts. Before you settle on a location, make sure that it is in the right zone by contacting the New York City Department of City Planning (www.nyc.gov/html/dcp).

5. Patents and trademarks: Although it’s not obligatory, patents and trademarks provide protection and can be well worth the initial effort or expense of either filing the papers yourself or hiring an attorney. “If you feel strongly that you’re building a brand and coming out with a consumer product, then it makes sense to trademark your name,” says Rosalind Resnick, founder and president of Axxess Business Centers Inc., a New York City-based consulting firm for startups and small businesses. More information is available at the United States Patent and Trademark Office (www.uspto.gov).

Location, Location, Location
Location is important in New York City—and there are many prime spots from which to choose. Says Resnick, “One of the great advantages of New York City is that not only do you have the local population that goes to work every day in New York, but you also have millions of tourists who come here every year. So it’s hard to think of a street corner in New York that doesn’t get a lot of foot traffic.”

However, a great location doesn’t automatically spell success, and doing the research to determine where your business would fit best is crucial. “Neighborhoods are very different in New York, and they attract very different types of clientele,” says Lemagnen, who was certain from the beginning that he wanted to open Room 4 Dessert in Nolita or SoHo.  “People are laid back and cool there, and we thought that this concept would match well with that kind of person.”

However, finding a prime spot in your neighborhood of choice can be exhausting. Lemagnen and Lanneau spent a year working with brokers, searching the real estate section of The New York Times and scouring Craigslist (http://newyork.craigslist.com), a website featuring local community classifieds and forums. They made four offers on different locations before securing their current Nolita location for $100,000 with a down payment of $30,000. “Whenever a good location comes on the market, a lot of people go to see it and offers are made very quickly,” says Lemagnen. “We look very young and [sound] inexperienced with our French accents, and [sellers] didn’t give us the priority.”

Other factors to consider are access to public transportation, nearby competitors and the amount of renovation needed. 

Doing Business for Less
The cost of doing business can be astronomical in New York City. Rents are high, and hidden expenses are always just around the corner—from electric and water bills to real estate taxes. Employees are expensive, too: With the cost of living being so high in the city, employees will not stay around long if the pay isn’t sufficient. However, there are always ways to pinch pennies. Consider the following:

1. Empire and empowerment zones: The city depends on small businesses to continue growing, developing and improving certain areas. Therefore, some incentives from the city, state and federal governments are passed on to business owners. The state, for ex-ample, has identified 72 areas as Empire Zones, 10 of which are in New York City. Qualified businesses in these zones are eligible for several benefits, including sales tax exemptions, credit for real property taxes, tax reduction credits and wage tax credits. More information is available on the Empire State Development’s website, www.nylovesbiz.com./ 

At the federal level, there are incentives for businesses located in Upper Manhattan and portions of the South Bronx. The Upper Manhattan Empowerment Zone Development Corp. (UMEZ) and the Bronx Overall Economic Development Corp. (BOEDC) are run independently but funded by a 1994 initiative designed to help sustain and create economic activity. The UMEZ offers tax incentives at the federal level as well as startup capital for small businesses. “We don’t exclusively focus on credit scores, we don’t exclusively focus on collateral, and we’re not scared of startups,” explains Paul Quintero, UMEZ’s senior vice president of business investments. “What we do focus on almost exclusively is cash flow. We’re [also] looking for folks who have a track record in the [industry] that they want to either create or start [in].”

The areas covered by the Empowerment Zone initiative are prime territories for starting a business. According to Quintero, the opportunities are greater and the competition less intense in Upper Manhattan, which has five times fewer restaurants and three times fewer retail businesses per household than the rest of Manhattan. Says Quintero, “The macro picture is that there isn’t enough real estate for manufacturers and commercial businesses in Manhattan, and if the residential boom continues, it’s just going to squeeze out those opportunities. That makes Harlem, East Harlem and Washington Heights that much more strategic because [the rest of the city is] still just minutes away.”

During 2005, the UMEZ offered assistance to eight businesses. At press time, Quintero was working on the completion of six more transactions. Visit the UMEZ’s website at www.umez.org.

2. Free publicity: New Yorkers love action, especially grand openings. “New York is very much a media town,” affirms Resnick. “It’s driven by PR, and there are a lot of media outlets that small businesses can get listed in at low cost or even for free.” Resnick recommends checking out local papers and Citysearch (www.citysearch.com), a local search service providing up-to-date information on businesses, from restaurants and retail to travel and professional services.

If the idea is original enough, free press will come on its own. Maltagliati of Knit New York has a press book showcasing the press coverage she has received, which was not only free, but also unsolicited. “We were fortunate to get so much press and excitement,” she says. “It was new at the time, so people were really interested in it.”

3. Working with contractors: One way to avoid the cost of paying full-time employees is to work with contractors. “There are a lot of people in New York who work for themselves, whether they’re web designers, graphic artists or freelance writers,” says Resnick, who hires out contractors for her business. “Those people are available on a freelance basis because they have their own small firms or they work for themselves.”

To find such contractors, Resnick recommends using Craigslist. “I’m a big fan of Craigslist,” she says. “We’ve recruited several of our business plan writers from there and used it to recruit people for clients. To post a job ad in New York is $25 [on Craigslist], so it’s a whole lot less expensive than posting on any of the job boards or in any of the newspaper classifieds.”

Right Attitude
Being mentally ready to deal with any obstacles that come your way will get you successfully over the bumps in the road. “Whenever you open a business, you’re opening yourself up to potential [difficult] situations,” says Maltagliati, who had her fair share of drama when the grand opening of Knit New York was delayed by five months due to renovations that took nine months to complete. “You’re going to have to learn to go with the flow.”

New York City may not be the easiest place to start a business, but you can be sure that if the business proves to be a winning one, then the opportunities are endless. Lemagnen and Lanneau are testing their idea in New York City but plan to expand to other cities if the idea takes off. Says Lanneau, “If you succeed in New York, you can succeed anywhere.”

Sara Wilson is a writer for Entrepreneur magazine.