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How To Avoid Home Business Scams

The True Story Of The “Millionnaire Maker”

Home Business Scams

“Don’t listen to negative people”, he yelled from the stage. “If you want to become a millionaire, you must be positive. Are you a positive person? If you aren’t, you might as well go home right now, because you will never be a millionaire.”

I was at my first internet seminar, listening to “The Millionnaire Maker” (not to be confused with the book of the same name) tell the audience that he was on a mission to “make 1000 millionnaires”.

Perhaps I am getting old and cynical, but my instincts told me that it seemed too good to be true. So, that evening I typed our millionaire maker’s name into a search engine and guess what? He turned out to be a church pastor who had fallen from grace, done penance for 4 years and then been reinstated to his evangelical calling. Trustworthy?

The next day I was sitting next to a lady who had bought the Millionnaire Maker’s product. She told me that she was having a dispute with him because he refused to honor his money back guarantee.

Although I have learned to trust my instincts, I wanted to be completely objective about this man. So, I did some more research and found an assessment by a lawyer. His opinion included “In short, Xxx Xxxxxx’s systems are likely best left avoided, as the promises they make are simply unrealistic and indicative of standard “work from home” scams that have been around for as long as money. Caveat emptor.”

At the same seminar I listened to another “expert” spruik a publishing product that would make you rich in no time at all. I checked him out and found many reports claiming that his scheme was a scam. When I raised my concerns with the organiser of the seminar, he dismissed the scam reports by saying that such reports were often posted by competitors or people who had not implemented the system correctly.

Over the next few months I digested what I had learned about scams and combined it with my decades of research industry experience.  I devised a simple method I use to avoid scams.

Our simple method is called “triangulation”.

How To Avoid Work From Home Scams Using The Triangulation Method

What Is Triangulation?

It is a method used by qualitative researchers to ensure the validity of their research results. If you are academically inclined, you can read about it in this University Of Florida article.

Triangulation involves assessing the evidence from several different sources. Here are some ways of triangulating potential scams:

  1. Browse scam alert websites, such as I’ve Tried That.
  2. Search Squidoo for a lens on the company or product. Does it reveal details about the product or are those only provided once you have paid?
  3. Search for news reports about the business opportunity.
  4. Check out online discussions by selecting the discussions option on the Google menu.
  5. Type the company or person name into Google and see what comes up. If people have been scammed, they are normally quick to broadcast it online. Add the word “complaint” to your search and see what complaints there have been.
  6. Scrutinise testimonials carefully. Are the photographs too good? Do they look like stock photographs?
  7. Search social media for discussions about the company or person.
  8. Search for forums about the topic and search the forum archives. If necessary, post a question of your own.

You should now have a good body of evidence on which to base an objective decision.

Questions To Ask Yourself To Avoid A Home Business Scam

It’s time to ask yourself some questions:

  1. Does it seem too good to be true? If so, it probably is!
  2. Are they selling blind, i.e. giving you the hype without the substance until you have purchased? Are they prepared to disclose everything beforehand?
  3. Does the company have “form”? In other words, are there negative reviews that are substantiated?
  4. Who are the people behind the company and what is their reputation?
  5. Do they promise quick riches with little effort?
  6. Does their selling style involve excessive hype? Whilst this may be subjective, most people know “excessive” when they see it.
  7. Does it bear the hallmarks of a pyramid scheme – needing to recruit others on the same basis as you were recruited? More about this below.
  8. Are there meaningful, fact-based, independent reviews?
  9. Are the testimonials from people who can be verified if you wanted to? Is their position and employer given (or some other evidence), so that you could ring if you wanted to verify their existence?

Common Hallmarks Of A Home-Based Business Scam

Pyramid Schemes

What is a Pyramid Scheme?
It is an illegal moneymaking scheme (scam) in which new people are recruited, forming the base of the pyramid, to make payments to those that recruited them while expecting to receive payments from people they recruit below them. Eventually the scheme collapses with most people at the bottom of the pyramid losing the money they paid in.

A typical pyramid scheme is one where you respond to an ad and pay for a home business opportunity. You are then asked to place an ad just like the one you replied to. You will then be paid by your customers who, in turn, have to advertise and get paid by their own customers. This is a pyramid scheme and illegal. You could be prosecuted for participating in a fraud.

Schemes Involving An Upfront Payment

Whilst being required to invest in a business opportunity or franchise upfront does not make it a scam, scams invariably require upfront payment. Fortunately, there are government regulations to protect you.

The most important protection is the fact that you must be given a detailed disclosure document before you pay any fee or commit to the investment.

It is important that you read this disclosure document carefully to ensure that you aren’t committing to payments or responsibilities that are unreasonable.

Some Common Home Business Scams That Involve Money Upfront

  • Stuffing envelopes and home assembly. You will be asked for an upfront fee and then be told that you do not meet their standards. Besides, these days envelope stuffing can be done cheaply by machine, so why would they outsource to a home business?
  • Medical billing is another common scam. You will be asked for a fee for so-called training and lists of doctors you can get work from. The list will not generate any leads as most doctors outsourcing claims will use a company and not a work at home business.
  • Scammers selling a list of companies offering work from home opportunities. Again, you will probably be paying for a useless list.
  • Home-based marketing opportunities. You will be required to pay a fee for a kit containing a flyer for a home-based business opportunity. Next you will be required to make copies of the flyer and post it on high visibility sites. You will then supposedly earn a commission on every kit sold via your flyer. Your chances of earning anything are very slim.
  • Check frauds. Whilst this isn’t strictly speaking a home business scam, it is by far the most common scam in the US and worth mentioning. You will be sent a check and asked to deposit it in your account. Then, you will be asked to make a payment, keeping a proportion for yourself as a fee. The fraud takes advantage of the time it takes for the bank to clear the check. Often, you will be asked to pay money into a Western Union account, because that is equivalent to paying cash. By the time the check bounces, your money and the fraudster will be long gone.
  • Multilevel Marketing (MLMs). Each buyer (you) becomes an independent distributor of a product for which they pay upfront and then sell for a commission. Whilst there are some legitimate companies that use this sales strategy, it is also frequently used by scammers, so it is important to differentiate between the legitimate MLM’s and the scams. You, as the distributor, may be buying poor quality products that are impossible to sell. Sometimes you will be required to sell a certain number of products before getting paid anything, or you may be required to recruit a certain number of people before you get paid. Some of these products are not approved by the FDA or are impossible to sell.

Protecting Yourself From Work From Home Scams

Doing your homework using the triangulation method may seem like a lot of work, but its value is enormous. Take the amount of money you are being asked to invest and divide it by the number of hours you will spend checking out the business opportunity. This is effectively the hourly rate you are getting paid to do your homework!

Final Tips For Checking Out Home-Based Business Opportunities:

  1. Check the Better Business Bureau website, which has an online registry of all legal businesses in the USA.
  2. Go to the Federal Trade Commission website, watch their video here and consult the Attorney General’s office in your state as well as in the state where the business opportunity seller is located.
  3. Ask for more information from the seller, such as their physical address, phone number and references and find out how long the company has been operating. If it is a very new company, it may just have closed its previous business and started operating under a new name. You should be able to find this out by researching online and checking out the people behind the business. If the seller is reluctant to provide additional details, smell a rat!

The overall aim in checking out business opportunities is to know who you are dealing with and understand the risk-reward profile of your investment.

If the opportunity passes the triangulation filters we have suggested, you are onto a winner!

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