How to Spot Business Opportunity Scams - CrowdFunding help and assistance

posted Jun 10, 2013, 9:22 AM by   [ updated Jun 10, 2013, 9:23 AM ]

Too Good to be True?

It might be a scam There are a lot of opportunities available for people who are interested in entrepreneurship. Due to the economic downturns, more employees lose their regular corporate jobs, resulting to a drastic increase in the number of individuals who want to start and run their own business. Along with this, Crowdfunding Learning business opportunity scams have also become quite prevalent these days. How, then can you tell a legitimate business offer from a hoax? Many individuals resort to fraudulent activities to earn a crooked buck during these tough economic situations, and one of the most common practices is to run a business opportunity scam. With this, what are the necessary precautions that one needs to remember to avoid a business opportunity scam that might eventually appear on your pop up browser window and emails?

How to Spot Notorious Business Opportunity Scams

For you to know if a business opportunity is a scam, you need to put yourself in the shoes of a scammer fundraising online. Think about the promises you would most likely offer if you wish to scam a person. To target prospective entrepreneurs, scammers usually make their hoax opportunity appear plausible. A scammer also tends to targets a person’s greed or weakness in ways to raise capital. He may also prey on someone’s apprehension of missing out on an excellent opportunity. A scammer would want its prey to show and pay money up front. Finally, a professional scammer figures out a way to stay untraceable or anonymous once the scam is revealed or discovered.

Avoiding Business Opportunities Scam

Not all scams are perpetrated by a friendly stranger you happen to meet in a chat room online. There are numerous hoax business opportunities all over the Internet that are legitimate sounding. These scams can be franchises for sale or opportunities that state existing businesses for sale. The following are ways on how you can avoid business opportunity scams:

• Beware of the paperwork – Make sure that you seek the assistance of an attorney in crowdfunding websites to review contracts, business ledgers, disclosure statements, and sales documents. Also, hire a certified accountant to review bank statements and other financial documents.

• Demand for detailed documentation – The U.S. Federal Trade Commission requires a business opportunity for sale to have a detailed disclosure document to be forwarded to interested buyers not less than 10 days before a purchase agreement is signed.

• Be vigilant about misleading numbers – Beware of companies that do not want to divulge details on how they came up with the existing cash flow or earnings figures. Also, be wary of those that guarantee a minimum profit over a particular time period.

• Do thorough interviews with peer to peer venture capital – Make a point to talk directly to an owner of any existing business and don’t depend solely on communications via a sales agent. As for franchises, you should visit an operating branch to validate if the franchisees’ stories coincide with what you heard from the parent company.

• Be wary of exaggerated earnings claims – Always keep this rule in mind, especially if you are aiming to buy a franchise opportunity. Remember that the law requires all companies to divulge information regarding the number of franchisees who failed over a certain period of time as well as the actual earnings of these franchisees. Make sure that you go over this information and get corresponding evidence as well.

Other Precautionary Steps to Avoid Business Scams

It takes a lot of legwork and intelligence to stay away from business opportunity scams. Rushing to make a decision in buying a business is unnecessary, as this process requires tedious writings of claims and demands that all information is accurate. One of the known hallmarks of notorious scammers today is this high pressure tactic – “This deal is only good for today, and then it’s gone”. It is best to be cautious of business opportunities that sound like a bad deal, such as vending machine routes, chain letters, credit repair services, vacation awards, networking marketing, and work at home schemes. While not all opportunities under these categories are scams, there is a big chance that you will likely stumble into one, especially if you are not too careful in scrutinizing their legitimacy.