Seasoned entrepreneurs know a good opportunity when they see it. They get an idea in their head, talk to investors or the bank, and before you know it, a business is born. However, there are fraudsters who take advantage of honest folk and try to talk them out of their hard earned money with the sweet prospect of huge investment returns. It mostly happens to people who are not too well versed with investments and business decision making. The easiest targets are people desperate to earn extra income. But even seasoned businessmen can be conned.
Business scams come in many forms. One example is when someone offers you a work-at-home opportunity, but asks you to send a nominal amount, allegedly as application. Another example is when someone invites you to invest in a mutual fund that gives returns of 100% or more. Or maybe someone will offer you an opportunity to license a franchise, for which you need to pay licensing fees.
The rule of thumb here is that if it sounds too good to be true, it probably is. And in any case, you should conduct due diligence to check on whether the business opportunity is legitimate.
Work at home offers. The likely targets of these so-called opportunities are individuals desperate to get jobs. These might be unemployed folks, or stay at home moms and dads who are looking into a telecommute position. There are a multitude of work-at-home opportunities such as freelance writing, web design, and even telemarketing jobs and businesses. But scammers will often ask you to pay them a nominal amount allegedly for membership, or to buy certain information.
Some scammers will direct you to a website filled with testimonials on how someone can get rich in a short amount of time. You would have to buy a sales packages, which would contain more information on how you can replicate this business model. But when the sale pushes through, you get cryptic information that is not at all easy to implement.
The trick to avoiding business scams is not appearing desperate. Avoid publishing blog posts, forum posts or Twitter feeds about you being desperate for money or a job. Scammers will often approach people who seek out jobs online.
Investment opportunities. Another form of business scam would be investment opportunities that guarantee 100% or better rates of return. Fact is that there might be such investment opportunities, but the risk factor is very high. It’s very likely that the mutual fund you are investing in might just run off with your hard earned money.
The trick to avoiding this kind of business scam is by looking into the fund that you intend to invest with. Are they listed with the securities and exchange authorities in your state? Check which investment bank or company backs them. If they cannot provide this information, or if the company looks shady, then avoid them.
Franchise opportunities. Sometimes, people posing as franchise owners approach an owner of land or a building with the aim of offering a franchise license for a certain store or brand. These might be from popular brands, and you might easily agree. However, you should do due diligence with the person offering the franchise, and whether they are really connected with the franchisor. Otherwise, you might run the risk of paying for nothing.
Avoiding business scams is all about being informed, taking due diligence and research, and not appearing to be vulnerable to such hard-to-resist offers. Learn to say no when the opportunity seems too good to be true.