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Here is a list of tips to help avid being taken for a ride by a bogus business
opportunity:
- Be skeptical about earnings claims that sound too good to be true
The "bait" on the "hook" of a business opportunity scam is that a
person with no experience may be able to work only a few hours a
week and earn $50,000, $100,000 . . . or more . . . a year. The truth is
that making money almost always requires hard work . . . and lots of
it.
- Exercise caution when it comes to newspaper and magazine ads
that contain little more than glowing promises and an "800" number.
This is very likely a "come-on" pitch to lure you into calling a high-
pressure telemarketing boiler room operation! Keep in mind that just
because an ad appears in a reputable newspaper or magazine does
not mean that the information it contains is accurate or legitimate.
- Obtain and review the required disclosure document before money
changes hands. Keep in mind that business opportunity and
franchise promoters are required to present you with a disclosure
document before you sign a contract or pay a fee. If this document is
not made readily available, beware!
- Make sure that the business opportunity has complied with
applicable state registration laws. Even if a business opportunity
promoter complies with the laws in your state governing such deals,
there is no guarantee that you will make money. However, it is one
easy way to screen out bogus operators who are trying to "fly below
radar" in order to evade detection by regulators.
- Talk to current investors . . and watch out for "singers." You should
always take the time to speak with several people who are current
investors in the business opportunity that you are considering. The
disclosure document must contain a list of the business
opportunity's current operators. But be on your guard! A scheming
promoter of a bogus business opportunity may line up "singers" who
provide phony testimonials. You should visit their business sites, as
well.
- Research the business and the market. Make sure that you have a
clear grasp of how the business opportunity will work and what
demand (if any) there is likely to be in your territory. Don't rely only on
glowing promises from telemarketers who claim that consumers are
clamoring to get your product. In one case where a business
opportunity claimed to have a "worst case" net return of $1,220 a
month, investigators found that the investor who was doing the best
only made about $200-$300 monthly.
- Get professional advice if you need it. Don't lose your life savings just
because you failed to spend a few hundred dollars to talk to a lawyer,
an accountant or other expert. These people will sometimes be able
to spot key details that you are missing. Since they are not caught up
in your dream and hope for success, outsiders are also in a better
position to review a business opportunity from a neutral vantage
point.
If you follow these tips you will substantially reduce the likelihood of being
taken for a ride. But remember, it is impossible to eliminate all risks and
these is always possibility that the business opportunity is fraudulent. Just
something you should be aware of.
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