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If It’s Too Good To Be True – It Is Most Likely a Scam
Opportunities are everywhere for people who are anxious to go into business for themselves.  With the recent economic downturn causing more and more people to lose their jobs, interest is at an all-time high to go into business on one’s own.  Business opportunity scams are equally prevalent, but how do you tell a legitimate offer from a rip-off?  Especially when times are tough, one of the best ways for nefarious individuals to earn a crooked buck is to run a business opportunity scam.  Other than following the adage that introduces this paragraph, what steps can you take to avoid a business opportunities scam that strolls into your e-mail inbox or pops up in your browser window?  Read further for some valuable tips.

The Quintessential Business Opportunity Scam
The first step you might wish to take involves trying to think like a scammer.  What promises would I make if I wished to rip somebody off in this manner?  First, you will want the opportunity to seem highly plausible.  Second, you would probably appeal to a person’s greed or prey on his or her fear of missing out on a great deal.  Third, you will most definitely want the “mark” to pay money up front and, fourth, figure out a way to remain anonymous and untraceable once the fraud is discovered.

Five Rules For Avoiding the Business Opportunities Scam
Not every scam is perpetrated by a Nigerian prince or a friendly guy you happen to meet in an online chat room.  There are plenty of legitimate sounding business opportunities out there that mask what is really a bogus offer.  These could be franchises for sale or the opportunity to buy what appears to be an existing business.  Here are five things to keep in mind:

1. Beware the paperwork
Have an attorney review all sales documents, contracts, disclosure statements, and business ledgers.  Have a CPA or accountant review profit-and-loss and bank statements.

2. Demand detailed documents
The U.S. Federal Trade Commission requires that any franchise or business opportunity for sale be accompanied by a detailed disclosure document, to be delivered to the prospective buyer no less than 10 days before any money changes hands or a purchase agreement is signed.

3. Stay alert for misleading or inflated numbers
Remain wary of any company that refuses to explain in detail exactly how they came up with their earnings figures (if it’s a business with existing cash flow) or guarantees a minimum profit over a certain period of time (if it’s a start-up or franchise opportunity).

4. Conduct in-depth interviews
For existing businesses, talk directly to the owners rather than relying on communications through a sales agent.  For franchises, visit with owner / operators of up-and-running operations to see if their stories match what you’re hearing from the home office.

5. Remain skeptical of excessive earnings claims
This is especially important if you are looking into a franchise opportunity.  Companies are required by law to specifically divulge how many franchisees have failed over what period of time and what actual earnings have been, both system wide and for individual operators.  Make sure you get corroborating evidence, too.

Additional Protective Steps to Take
Staying away from business opportunity scams takes intelligence and plenty of legwork.  Besides getting all claims in writing and digging deep to ensure that they’re accurate, don’t feel you need to rush toward making a decision.  High-pressure tactics – “This deal is only good for today, and then it’s gone” – are a hallmark of the scamster.  It will also pay to stay away from business opportunities that are nearly always a bad deal.  These include vending machine routes, work at home schemes such as envelope stuffing or chain letters, credit repair businesses, guaranteed loan opportunities, vacation awards, or network marketing.  That’s not to say there aren’t legitimate opportunities among these categories, but the chance of you stumbling across one is unlikely at best.

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