Biz Op or Biz Flop? Due Dilligence Makes a Difference

Each and every day, consumers are being lured to the vast commercial potential of the Web by business promoters. However, a great many of these business opportunities are nothing more than biz-flops — promising more than they can ever possibly deliver. These pitches can be extremely persuasive — promising big cash returns for little effort. And let’s be honest…what’s not to love about that? It would be a pretty sweet gig if you could get it.

And therein lies the problem, my friends.

These pitches can take many shapes and forms — web ads, infomercials, email solicitations, direct mailings, classified ads, seminars, and magazine advertorials. Regardless of the method they employ, they all have one singular goal in common — to separate you from your money.

Think it can’t happen to you? Think again. Here are a few popular examples:

Providing TV Access to the Internet
Here’s the setup: You are promised that by recruiting people to sell devices that provide television access to the internet, you can earn thousands of dollars, retire early, and lead a life of luxury. Sounds fabulous! Where do I sign?

But here’s the problem….the program claims to pay participants based on how many people they recruit into the program, not on their product sales. You know what that means? You’ve just joined a pyramid scheme, not a legitimate multi-level marketing plan. Oh, and by the way, pyramid schemes are illegal. And here’s another fun fact: mathematically, nearly everyone who participates in them loses their money. When there are no new recruits, the pyramid collapses.

Game over. Say goodnight, Gracie.

Selling Walk-Up Internet Access
Here’s the setup: A slick salesman wants to let you in on a lucrative opportunity selling machines or kiosks that provide walk-up Internet access — for a fee — in places like airports, hotels and shopping malls. While the machines themselves cost thousands of dollars, he waves off this concern by assuring you that the cost can be recovered easily, because the machines generate “amazing” earnings. The company will even help you identify locations where you can set up these would-be cash cows. You can almost hear the “ching” in your bank account, right? Wrong!

The company may have promised to help you find locations — but they didn’t promise that the locations would make any money. Rather than the high-traffic locations that the promoter promised, the buyer’s machines get placed where demand for Internet access is low. As a result, a would-be entrepreneur can’t possibly make the promised earnings.

Welcome to Scamtown…population, YOU.

Money-Making Internet Business Seminars
Here’s the setup: You answer an advertisement that touts you can earn more than $150,000 as an “Internet consultant” who sponsors free seminars to teach other consumers how to make money on the Internet.

While there are lots of variations on the plot of this movie, unfortunately, the ending is pretty much the same. These “free” seminars are often nothing more than springboards from which the promoters hawk their other, more expensive products. From money-making “systems” to exclusive coaching groups that can run several thousand dollars — you are always just “this close” to the last piece of the puzzle that will make you an overnight success story. Lucky for you, the promoter will always have that missing piece, and stands ready to sell it to you. Meanwhile, the only person getting rich off of this blockbuster is the promoter.

Now, there’s a shocker.

This is not to say that all programs are run in this manner — in fact, there are many very well-known business trainers out there that actually do deliver the goods. The key to finding one that will meet both your needs and your budget is to do your homework, do some research on the promoter and the program, and talk to past customers.

So, Here’s the Take-Away:
Consider every opportunity carefully. If it claims buyers can earn a certain income, then it also must give the number and percentage of previous purchasers who achieved the earnings. If an earnings claim is there — but the additional information isn’t — the business opportunity seller is probably violating the law.

Get earnings claims in writing. If the business opportunity costs $500 or more, then the promoter must back up the earnings claim in a written document. It should include the earnings claim, as well as the number and percentage of recent clients who have earned at least as much as the promoter suggested. If it’s a work-at-home or other business opportunity that involves an investment of under $500, ask the promoter to put the earnings information in writing.

If you are considering a franchise opportunity, be sure to carefully review the franchise disclosure document. Under FTC Franchise Rules, many business opportunity promoters are required to provide this document to potential purchasers. It includes information about the company, including whether it has faced any lawsuits from purchasers or lawsuits alleging fraud.

Look for a statement about previous purchasers. If their document says there have been no previous purchases but the seller is still able to offer you a list of references…get out your RED FLAG and start waving it! Those references are most likely bogus.

Conduct your due dilligence — interview previous purchasers in person, preferably at their place of business. The FTC requires most business opportunity promoters to give potential purchasers the names, addresses and phone numbers of at least 10 previous purchasers who live the closest to the potential purchaser. Interviewing in person will reduce the risk of receiving, or being duped by, phony references.

The best piece of advice is to take your time. Fraudulent business opportunities are often characterized by limited-time offers and high-pressure sales tactics to get you to buy in. If the business opportunity is legitimate, it’ll still be around when you’re ready to decide.

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Just as a guide would assist you as you navigate the terrain in an unfamiliar land, having a coach or consultant at your side can dramatically reduce the potential for falling prey to the dangers that claim many would-be startups. We’re talking about more than just treading lightly around the landmines — we’re talking about plotting a new course that will deliver you safely to your chosen destination.

Interested in working with Traci? Find out more about her coaching and consulting services.