How to Tell if a “Business Opportunity” is Really a Scam
When assessing a potential job or business opportunity to see whether it’s a scam, stick to the “Duck Rule.” If it walks like a duck and talks like a duck …
Hello, friend! No wait, don’t walk away! We have an intriguing opportunity we think you’ll be interested in. So you know elephants, right?
Yeah, those elephants, the ones with trunks and big feet. Well, we’ve been working with an animal scientist who has done research suggesting that “service elephants” would be more effective than service dogs. They can use their trunks to open doors and perform other tasks.
Now we know what you’re thinking: How can you get the service elephants onto airplanes?
And that’s where you come in. We’re gathering investors for a new business initiative. Our business, Babair, will make planes large enough for the upcoming service elephant boom we know is on the way. So would you like to write a check?
YOU JUST GOT SCAMMED. Fortunately, this was only a test, but that was one example of a business scam you might face. Which is why it’s important to recognize the signs for when a business opportunity is really just a scam.
Know the red flags.
There are certain terms that should set off the alarm bells in your head when you’re reading over a job opportunity.
“The most common types of opportunities that usually end up being some kind of scam, are ones involving working-at-home, investments, and mystery shopper jobs,” warned Stephen Hart, CEO of Cardswitcher.
“Where you spot the initial advert for the opportunity should tell you a lot about its provenance and whether or not you can trust it. Most business opportunity scams are advertised on the internet on general classified advert websites.”
Sometimes it’s less about specific aspects of the business offer, and more about what you aren’t being told that should arise your skepticism.
“The best way to evaluate whether or not a business opportunity is a scam is to take a step back,” advised Jonaed Iqbal, founder and CEO of NoDegree.com (@nodegreedotcom). “Often times when we are approached with a business opportunity, we get very excited and think of all the possibilities.”
“However, it is best to evaluate the situation as if you were a 3rd party. How credible is the person who is telling you about the business opportunity? Is it a random person? If you had a great opportunity, would you just offer it to a random person or would you offer it to someone with a specific skill set who can make the most of the opportunity? Wouldn’t you at least evaluate the prospect to make sure they are a good fit?
“Another thing to look for out is when people are vague. They just throw buzzwords in your face but do not go in detail. They just tell you that it is a great opportunity. If they are willing to give anyone who comes their way a chance at the opportunity, it is best to walk away.”
“Beware of vague answers. Many business scams come under a very thin cover. In fact, many Multi-Level-Marketing businesses (MLMs) will outright tell their employees not to ever say what the opportunity really is—just that you need to hear about a great opportunity. Red flag: If the pitch person can’t be honest about what the opportunity actually is, run!”
You can read more about the risks posed by MLMs in this blog post.
Use your gut and study up.
There isn’t a template you can apply to every business offer, so at some point, you’re going to have to use your common sense and research skills to make a determination.
“If it walks like a duck and quacks like a duck, it most likely is,” Lavelle laid out. “Use your gut. If something sounds too good to be true and feels suspicious, it probably is.”
“Many business opportunities, especially the MLM variety like to build lots of hype to get you hooked only to leave you holding the bag full of cleaning products, make-up, jewelry, skincare, or whatever it was that was going to be your ticket to riches.
“Do some due diligence. Research the company. Research the people. Research the product. Contact the Better Business Bureau and the Attorney General. A little homework can expose a world of wrong!”
Other contributors also subscribed to the “Duck Rule.”
“When it comes to spotting whether or not an opportunity is legitimate sometimes the old advice is the best,” explained Hart. “If something seems too good to be true, the chances are that it most likely is.
“An opportunity that seems to present you with the chance to make an awful lot of profit, very quickly, for very little, initial capital outlay should set alarm bells ringing.”
Take extra care to avoid the REALLY bad ones.
Losing money to a business scam is bad. But that’s not all you can lose.
“Keep in mind there are ‘business opportunities’ that can immediately be profitable but are almost always illegal,” warned identity theft expert and CEO of Safr.Me Robert Siciliano (@RobertSiciliano).
“These opportunities usually revolve around shipping products or transferring funds from one account to the other. These ‘opportunities’ mean that the ‘employee’ would be a ‘mule’ for an organized crime syndicate functioning as a web mob.”
Regardless of whether you’re worried about losing your money or your freedom, you should consult the proper person before signing on.
“Do not ever give out financial information to a prospective business or franchise without proper advice from an attorney, an accountant, or both to be safe,” explained Lavelle.
“Many scams will try and convince their prey that they are trustworthy and further questions and verification are unnecessary.”
OK, that’s enough negativity for now.
The good ones.
Now that you know how to spot a bad business opportunity, what are some signs of a good business opportunity?
“People with good business opportunities generally target people who have something specific to offer,” Iqbal told us. “For example, is the opportunity present to you because you have a specific background and can offer your expertise? Does it make sense? If you can make sense of how it works, that is a good sign. If it doesn’t make sense to you, walk away.”
“If you have to make an investment, figure out exactly what the money is for. If they tell you that you have to sign up for their program in order to sell, walk away. You shouldn’t have to pay to sell things for someone else.
“Also make sure that they are comfortable with you taking some time to think about the opportunity. They should be open to criticism and they should understand that you want to do your due diligence. If someone is trying to rush you, that is not a good sign.”
- “They have a legitimate online presence on social media, review sites, BBB, etc.
- “They go through the steps of investments or mergers with legal teams and contracts.
- “All financials are disclosed, and both parties feel good about the discussions.
- “You have heard others having positive experiences or read reviews and recommendations about the company or investment.
- “They are not scared to answer questions.”
“Good business opportunities take time. Always ask yourself: ‘Why am I being offered this?’ If you receive some grand promise, consider why the current owner or the person introducing you to the idea isn’t doing it themselves. Surely everyone wants to have a business that can double their money. A good business opportunity will likely take time to develop and grow, it won’t be handed to you brand new and ready.
“Look for past success. Many people prefer going for a business model with proven success. This reduces their risk of failure and the number of things they need to consider. The best example of this is a franchise. Although everyone knows about McDonald’s, there are thousands of franchises that require far less capital and cover industries from dry cleaning to bicycle repair.”
This advice should give you a good starting point when considering a new business opportunity. Now that we have that out of the way, there’s this great bridge that you can get for cheap right now …
To learn more about how you can keep your money and your identity safe from potential scammers, check out these other posts and articles from OppLoans:
- 5 Steps You Can Take to Prevent Identity Theft
- Never Trust and Always Verify: How to Avoid Getting Scammed Over Email
- 10 Common Scams: How They Work and How to Avoid Them
- Dating App Dangers: 7 Tips to Avoid Getting Scammed by a Fake Romance
|After working in the financial industry for several years, Stephen Hart left his role as Chief Financial Officer at WorldPay to launch the UK’s first payment processing comparison site, Cardswitcher. Nowadays, he helps SMEs save money on their payment processing costs.|
|Jonaed Iqbal is a New York native who graduated from Queens College with degrees in applied mathematics and economics. He later attended Columbia University for their master program in actuarial science. Jonaed worked as an actuary for a couple of years. While working as an actuary, Jonaed started NoDegree.com (@nodegreedotcom). NoDegree is a career resource for those without college degrees. He saw that there were plenty of opportunities for those without college degrees and that the rising cost of tuition made it a challenge for many to afford college. He also saw that college wasn’t for everyone. He continues to work on NoDegree.com and hopes to educate people about opportunities and help those without college degrees.|
|Justin Lavelle is a Scams Prevention Expert and the Chief Communications Officer of BeenVerified.com (@BeenVerified). BeenVerified is a leading source of online background checks and contact information. It helps people discover, understand and use public data in their everyday lives and can provide peace of mind by offering a fast, easy and affordable way to do background checks on potential dates. BeenVerified allows individuals to find more information about people, phone numbers, email addresses, and property records.|
|Dennis Shirshikov is a Financial Analyst with FitSmallBusiness.com (@FitSmallBiz). Dennis earned an MS with an emphasis in Financial Risk Modeling and spend most of his career working with startups. When not helping small businesses and teaching Economics to college students at CUNY Queens College.|
|Robert Siciliano (@RobertSiciliano) is a #1 Best-Selling Author and CEO of Safr.Me. Safr.Me is funny but serious about teaching you and your audience fraud prevention and personal security. Robert is a United States Coast Guard Auxiliary Flotilla Staff Officer of the U.S. Department of Homeland Security whose motto is Semper Paratus (Always Ready). His programs are cutting edge, easily digestible and provide best practices to keep you, your clients and employees safe and secure. Your audience will walk away as experts in identity theft prevention, online reputation management, online privacy and data security.|
|With over ten years of experience in the private investigation industry, Whitney Joy Smith has seen it all. Having worked through over 1,700 case files, she understands what it takes to get effective results, and expects only the best from her team of qualified investigators. Whitney not only operates an award-winning company but is also the recipient of the International AI- Influential Business Woman Award for the Best Woman-Owned Private Investigative Agency in eastern Canada and the Most Innovative Woman in Executive Protection.|