When Cary Catalano launched his marketing firm, Catalano Fenske & Associates, last year, it was clear that he and his partner would be quickly overwhelmed by the size of the to-do list. In addition to crafting boffo proposals to land those first clients, someone had to set up the office, create filing and billing systems, and take care of the myriad tiny tasks that come with launching a new company. Unfortunately, the Fresno, Calif., entrepreneur had hit his budget limit for payroll. So Catalano went out and got himself a couple of employees who were happy to work for next to nothing. In other words, he hired a few interns.

For start-ups like Catalano Fenske, internships are almost too good to be true. A young, eager-to-please student less interested in cash than in school credit and some shiny new bullet points for the resume can be just the solution when you lack the money to hire. But while interns may be a bargain, they're far from without cost -- and not only in terms of money. Finding, training, and managing an intern who will help your business grow takes time and effort. Do it right, and you'll have an enthusiastic helper -- as well as a potentially skilled and trusted employee should you need to hire someone down the line. Get it wrong -- and you'd be surprised at how many people do just that -- and an intern can be just another headache to add to the list.

Obviously, you want a go-getter who is determined to make the most of his or her time at your company. This could prove more challenging than expected: Just 11% of teenagers today (the hiring pool for interns, by and large) say their generation is focused on goals, while 50% say their generation is all about having fun, according to a survey by Peter Zollo, founder of Teenage Research Unlimited, a market research firm. Somewhat discordantly, Zollo also found that 71% of teenagers expect to be successful.

How to separate the driven and talented from the lazy and deluded? Enlist the help of the people who know students best: their professors, for example, or staffers at the career centers at local colleges and universities. The beginning of the school year is a good time to start establishing these relationships. Offer to participate in career fairs and brown-bag lunches and build ties with professors, especially those in the business department, by offering to serve as a guest lecturer, suggests Larina Kase, a psychologist at the University of Pennsylvania School of Medicine and a small-business coach based in Philadelphia.

Many colleges have internship training programs, which require applications and thereby weed out the less than motivated. Some programs even provide students with training in skills such as accounting, office management, and graphic design.

That's what Catalano found when he got in touch with the career center at nearby Fresno City College. He's hired four interns from the program so far -- each for an eight-week stint -- and he plans to bring on a fifth. His first intern, a 21-year-old participant in the college's office manager program, served as Catalano's office manager, creating the company's filing system and a mass e-mail system. His second intern, a 19-year-old bookkeeping major, helped set up a billing system. The third intern is handling marketing and website design and a fourth will start soon. "They've all been wonderful," Catalano says. "I am really lucky."

In fact, it was more than dumb luck that made internships work for Catalano. Before he hired anyone, he did his homework and made sure that he understood the way the college both screens and trains potential interns before sending them out into the real world. He also conducted rigorous interviews, speaking to seven candidates before settling on his first intern. "It's just like any job interview," he says. "You're looking for personality fit. Did we connect? Did they have the skills we were looking for? That's how you get the best of the best."

Keep in mind that the best of the best are in high demand and start-ups are often at a disadvantage. "It's harder for small companies to find high-caliber interns," says Kase. "Often, interns are attracted to large companies because that name is the one that will go on their resumes." Small firms must take extra time to craft an internship experience that will truly benefit the student's career. In other words, forget about getting someone to make coffee and do the filing.

At Chic Boutique, a Santa Barbara, Calif., designer of fashion dolls -- think Barbie with an attitude -- managing partner Sarah Nguyen almost always has an intern or two helping her full-time staff of 12. She promises an experience they won't find anywhere in their studies -- or at most other companies. Her two current interns, one a 25-year-old fashion student, the other the 14-year-old daughter of her creative director, are helping launch a line of cosmetics, pitching in on everything from brainstorming ideas to helping to create packaging.

In addition to being a source of inexpensive, enthusiastic labor, Nguyen looks at interns as potential future employees. Her current director of product development began as an intern nine years ago -- a fact that helps entice potential interns. Keep in mind that interns don't have to morph into employees immediately. "When they leave, they go back and study and learn more about the industry," Nguyen says.

Interns may be cheap, but they're not free. That's right: You need to pay at least minimum wage to remain within the bounds of the law, says Eileen Levitt, president of the HR Team, a Columbia, Md., company that provides outsourced HR for small businesses. "If someone is working for you and is not being paid, what's that called? Something that was outlawed in the 1860s," she says.

To be sure, many companies use "unpaid interns" and get away with it. But it's taking a chance, Levitt says. If the interns are not paid, they are not technically employees. As a result, if an intern is injured on the job, he or she may not be covered by your workers' compensation insurance, and you could be liable. What's more, if you are deriving a clear benefit from their work (and what would be the point if you weren't?) and if the interns are performing tasks you would otherwise have to pay employees to do, you could be sued for wages, according to the Fair Labor Standards Act. Nguyen pays her interns between minimum wage and $15 an hour. She considers it money well spent.

Once you've hired an intern, don't scrimp on training. After all, you're dealing with young people with limited, if any, real workplace experience. When a new intern joins Chic Boutique, Nguyen spends 60% of her own time during the first two weeks on training. That's an awful lot of time, she admits, "but the more you teach them, the more you're going to get out of them, the more they're going to give you what you want."

And the less likely it is that you'll wind up cleaning up after an intern-created fiasco. This past spring, Aliza Sherman, owner of Big Horn Marketing in Laramie, Wyo., discovered to her horror that a college student intern had given herself a bit of a promotion -- boasting to her fellow students that she was Sherman's "business partner" and that she, the intern, had the authority to hire employees. It took a month for

Sherman to discover that the intern was promising her friends jobs with the company. Needless to say, Ms. Big Britches is no longer with the company -- and Sherman learned an important lesson. "Be sure you draw boundaries for the interns," she says. "Define their role -- including how they can represent themselves regarding your company."

Training an intern does not have to be a chore. In fact, it can be a great way to develop management skills -- for you or for your employees. That's how it's considered at Development Counsellors International, a marketing firm in New York City that brings on about six interns a year. "We see this as an opportunity to train our junior staff to manage," says Julie Curtin, the company's vice president. One fledgling manager recently had to handle the touchy subject of an intern's inappropriate office attire (low-slung pants and high-cut shirt). The junior staffer handled it "with grace and professionalism," says Curtin. "It was a good experience for everyone."

Sidebar: Interns 101

  • Go to School
    Tap the best talent by forming strong ties with career center officials and professors at your local college.
  • Make It Meaningful
    Craft an experience that will benefit the intern's career. In other words, forget about filing and copying.
  • You've Gotta Pay
    Interns are cheap, but they're not free. Pay at least minimum wage to stay within the bounds of the law.