It is no surprise that when the economy is on the decline that business fraud will rise.  Franchised business opportunities are being strongly marketed as a way to beat the recession, as are a number of business opportunity scams.  The Federal Trade Commission has issued a new warning video to help prospective business owners separate the scams from the legitimate opportunities. 

FTC Fraud Alert on Work From Home Scans (video)

The best advice I can give in evaluating business opportunities is:

• If it sounds too good to be true, it probably is.  There are no easy ways to make money and there are no businesses with guaranteed results. 
• This is a good time to have an attorney and accountant on your team to help you evaluate the opportunity.
• Ask for a disclosure document, which should be filed with either the FTC or the North Carolina Secretary of State. This will list company information, a list of previous purchasers of the opportunity and a list of lawsuits filed against the company. 
• If there are any representations about earnings, get these in writing.  This is usually a separate document from the disclosures.
• Interview previous purchasers in person, even if they work from home.  Scam opportunities give you references who are part of the scam.  You need to look them in the eye and evaluate their trustworthiness.
• Resist high-pressure sales tactics.  Scammers will often say there are limited opportunities in your market, this offer is only good for a short time, there are other people who are serious and who won’t waste their time investigating.  Does it really sound reasonable to respond to an internet ad, television ad or email, talk to someone for 30 minutes about your business and financial security, call some people recommended by this person, and write a check for $50,000?
• If you are suspicious, contact the FTC, the Secretary of State, the Better Business Bureau and research the company extensively online. 

Tags: business opportunity, Business Opportunity Act, Federal Trade Commission, FTC, scams

This entry was posted on Monday, July 13th, 2009 at 1:44 pm and is filed under business law, franchise, recession, small business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.