How to Avoid Business Opportunity Scams

Beware of Business Opportunity Schemes and Scams
Tips to Recognize Rip-offs in Buying a Business Opportunity

Beware of most small business opportunity offers. Most are artful believable scams or over-enthusiastic portrayals not mentioning the downside. The key to your success is to assume that most are lying, compare how many of the below indicators apply, ask many hard questions and don't buy quickly or under pressure. Never risk over $20 under some deadline or pressure (even an Ebay auction) without a careful review and thinking period.

Read all the offering and small print carefully. Look for what it omits about costs to you, such as promotion costs and your time. Beware if it locks you into anything from them, unless it is a well-known franchise with exclusive territory, exclusive product and high demand. "Biz-Op" scams and schemes have some of the following elements. Watch for these tell tale indicators of a scam. Note that not all these are always sure indications of a scam, but merely words and characteristics to alert your caution:

1. Words like "turn key" "automatic", "easy", "a fast way", "no (or little) effort (or work)". If an opportunity promises a big profit with little or no work, it may be illegal as violating security offering laws. If it says they set up your marketing, help you promote, build your down-line, or needs no effort or intervention, such as automatic "drop ship", be careful.

2. Words like "income stream(s)", "cash flow", thousands of dollars (weekly or monthly) "possible", "money machine", new lifestyle, network marketing, of if it promises or strongly suggests fast or easy big money, beware---be careful.

3. Vagueness as to products, their value, demand and uniqueness. What are the real products or services that are only available from you in your exclusive dealer territory? Probably nothing.

4. Scams have little uniqueness nor competitive advantage of the business: Is your business and product going to be exclusive as to products and territory, and will you have competitive advantages over few competitors? Really profitable businesses have a focus and niche in a territory with unique high demand product offerings with barriers to entry of competitors.

5. The seller prays on your desire to believe by projecting high possible sales, examples of high earners, and may shame you if you dare to doubt or don't feel you can sell, or they claim tremendous results and benefits possible. You never bought from them and you are not sure why you would choose you as a dealer or agent over a cheaper or better good alternative.

6. Analysis of the profit source does not make clear sense: The question is where they get money, such as saying you are a representative, but charging you for everything, such as the application, for training, for advertising, for a web site, for hosting fees (for a site that will only run on their host) and for stocking inventory or sales packets. Compare that to how Walmart recruits, trains and pays its' people, charging them nothing because the company needs them for its main business, its advantage being size, buying power, locations and broad offerings and reputation.

7. Their warranty, if any, has serious loopholes. The promises may use "can", "may", "possible", "potential" with disclaimers in fine print, but this is not decisive, because some scams have great sounding guarantee policies as written. There is usually some requirement of you that you are unable to fulfill.

8. They have an expensive training, workshop, hosting, inventory or product setup which you are locked into. Or, the scam costs just enough, around $100 to $300 that they know you will never file complaints when you get nothing of value but me-too inventory or a me-too web site or Online Store that doesn't sell. Be extra careful about the "affiliate program", selling space in an "online mall", an "automatic online retail store". They make money on charging you hosting and for your site which you can't move. Look for and add up all the costs, especially on-going such as advertising or hosting fees. If you pay to be in the "program", be sure you add up what you have to sell and whether people you touted this to may later say they did not get their money's worth.

9. They are partly in some other country, such as an island thousands of miles away. Even if you had a nice website or product but part of sourcing is from far away, many people will not buy through a foreign site, and there is no recourse, no way to move, no way to complain or sue. (You can't even likely sue in your own state.

10. The promoters want you to do the promotion, recruiting, storing product, go to meetings, do mailing, typing or stuffing, data entry, the assembling to "earn big money at home" or by making crafts, selling your recipes or manuscripts, doing medical billing, taking photographs or placing and restocking vending machines.

11. Beware the work-at-home or internet or turn-key opportunity that touts that you will "make big money" in "your own" business, especially if it touts the internet as something magical. Avoid "link exchange" programs which were never any value and now are delisted by Google. These internet opportunities are usually short on details and long on pressure (see the FTC warning). For example "link exchange" "affiliate" businesses that might have been marginally viable 5 years ago now suffer from major changes by Google downgrading ranking of websites connected to link exchanges and some affiliate networks. Remember that just like the MLM network marketing scams, those that help you "set up your own internet store" still offer "me-too" products that usually don't sell in any amount worthwhile.

12. Especially beware of High Yield Investment Programs (HYIPs) (also called High Income Investment Opportunities and anything with "Bank Debentures" or "Off Short Investment Trusts"). These are usually unregistered schemes which promise a high return above 5% per month, such as 2% per day. All the ones we read about have had signs of scam or fraud in the classical illegal pyramid scheme. The most recent of these schemes relate to the internet and your being in a special group that helps each other. Those are mostly obsolete even at best, even for experts with years in the field. Note there is no real unique product.

Remember, the hallmark of real investments is there must be a real high-demand unique product that sells for a high margin, or stock in a company that is registered with formal Offering Statements, or a real "Hedge Fund" well-known to experts in financial markets. But YOU don't have to worry about those soliciting you, because they typically do not allow investments under $1 million per unit, and usually sell only to "high net worth individuals" (read royalty, movie stars, top investment bankers). The best of those hedge funds yield about 2% per month, in their best years. High yield for average investors is about 10% annually.

Summary of Weak Businesses:

Any business opportunity that does not talk about great products and exclusiveness or a great brand and its proven value first, and modern marketing second---is suspicious. You may find a real opportunity that may have a great product but be weak on marketing, which now usually must include the internet. (Usually it is the other way around, with me-too products.) But the internet has become crowded; It is very difficult, expensive and time-consuming to really compete on the web, especially if your business is not local.

The smarter scams and marginal business opportunities sound better than most of those above, but still lack the unique high-demand product or service with competitive advantage, and products usually are over-priced. You should consult experienced friends and business experts, such as a business professor at a local college, or the ARE, Association of Retired Executives through your local chamber of commerce or SBA office. Even if Donald Trump touts his network of better products, be cautious. The "hope" of making big money is the icing on the cake that keeps people buying opportunities and if the products are pretty good, people usually just end not feeling totally "taken" because they got some product to keep.

We would not cough up a cent until we met at least two or three persons who independently attest to their success in such business opportunity, and who have no interest in the sale to you. If the opportunity costs more than $400, some states require a registration or disclosure statement. If the opportunity could cost you near a thousand dollars in time, effort, costs and for the opportunity, consider paying a consultant or a CPA or business lawyer to look it over, one who is experienced in such opportunity matters and possibly fraud litigation.

Be especially wary of opportunities that can cost from $600 to $20,000 from someone not in your state. Your obstacles and costs to sue on such amounts interstate will likely prevent you from filing suit, except possibly small claims court only for in-state. Federal actions must exceed certain amounts and the lawyers usually won't touch a Federal case under at least $30,000 in provable claims. Your only remedy might be fraud charges with restitution in your favor after a couple of years, which could have very serious repercussions as your own activities and credibility come under intense scrutiny.

All in all, this is why some people eventually start their very own business.

If your business is going to market on the internet, be sure to learn what is really involved before you throw away thousands of dollars and two or three years of your life. Any modern business manager must know what is a reliable portable professional website that sells, and how to create such a website. If the title "business manager" scares you, then decide to do a crash course in real business. That will help you whereever you go, even as a sub-contractor, sales or support agent or employee.

If your business will be internet-focused (a web business), learn how to correctly create and start a new website. The steps are crucial to a new website's success. The planning and design are integral to your business strategy and help define and refine the business. Knowing how to create a successful professional website that sells is an essential skill. DO NOT believe that a "website builder" program offered by a hosting company is all you'll ever need, even if that might aid in getting started. The research needed for proper website design and operations will help you start and refine your business, and teach you how to test appeals and offers with website promotion essential to success.

All that said, you can succeed with good products, a local or regional emphasis, with strong specialization skills and business and internet marketing knowledge, knowing what really works. That gives you a competitive advantage which is what business is really all about.

The other point of all this is to "get real", "grow up", and realize ... there is "no free lunch" or "quick and easy" business that automatically sells and makes thousands of dollars a month for you without YOU doing any research, study or work. Any offer that says otherwise, get on your tennis shoes and run, not walk, the other way.

Good Luck.

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