Scam Protectors... Where To Find Out Whether A Business Opportunity Is For Real

In addition to the media assault on self-employed business opportunities, there are other groups that don’t want anyone to succeed outside the conventional work-for-someone-else environment. These naysayers have Websites, blogs, and media articles warning about what they call “scams,” which usually includes all kinds of affiliate, Internet, MLM opportunities, and sometimes even small local businesses like plumbers and electricians. Too often when someone is dissatisfied with a small business, they accuse them of “scamming.” Some of this happens, but it is unfair and unreasonable to lump every self-employed entrepreneur into the scam artist category, don’t you think?

We all need to know how to protect ourselves from losing our money to scammers, but as entrepreneurs, we also need to realize the media and other groups would really like to lump many of us together in this group and put us out of business. After all, conventional wisdom says nobody can succeed as a home-based entrepreneur, doesn’t it? Imagine how you might improve your sales and recruiting if you realize how people are thinking and have time to devise ways to defuse their objections. There is a lot of resistance to doing business with entrepreneurs working from home. They think you’re not a real business, don’t they?

Many groups and the media list a number of actions one can take to avoid losing money to unscrupulous business opportunities and proposals. These “guardians of the world” are paranoid for some reason and think everybody who does anything for a fee is scamming them. Here are some of the suggestions they have. Some are useful, but you should also know the not-so-good ideas as well:

• Take your time committing to a business or a proposal. This is good advice. A good opportunity to build a business in a home-based opportunity will not disappear in a day. If it does, you don’t want it anyway. Trying to be on “the ground floor” of any new venture is risky. Don’t take so long to decide that the opportunity goes away, but do investigate as well as you can.
  
  
• Seek other people who have dealt with the company; with a new opportunity this may be a problem. In such a case you must talk to your sponsor and see what kind of success they have had and how they feel about the company and its products. If they can’t tell you anything, go somewhere else. With a job solicitation, ask for references and check them out.

There are many possible sources of information about businesses listed in all the articles about saving yourself from the bad people. Not all of them give quality information so let’s look at a few common organizations suggested as your best defense:

• Angie’s List: http://www.angieslist.com. This is a site where you can get information about local contractors in your own area. Contractors do not pay to be on the list, and the site receives over 5,000 comments a month (good and bad) about plumbers, electricians, landscapers, etc. It’s limited mostly to large cities, but you still might get some useful information.
  
  
• Your local Chamber of Commerce. This is a questionable information source for several reasons. First, they only know much about businesses that are their members. A new business would be unknown as would an established provider that is not a member. Another problem is the Chamber is not a place where consumers lodge complaints, other than possibly local credit and collection problems. Don’t expect a lot of answers here.
  
  
• Local city District Attorney's Office, Consumer Fraud Division. This may turn up adverse information on some local companies but you won’t find anything about very many because most have not had serious legal problems. It’s not a good source.
  
  
• State Attorney General's Consumer Fraud Division. This is another case of only knowing bad things about a business. I have called several times and they have never been able to tell me anything. In fact, they won’t say anything unless it’s about some illegal operation.
  
  
• Federal Trade Commission (FTC). Unless there is some legal action brought by many people, you will not find information on individual companies. What you will find on their Website are several actions you may take to avoid a scam. Some, like “use common sense” are good advice. This should always be your guide. Another useful tip is to avoid any opportunity that pays for recruiting—these are always pyramids and illegal everywhere in the U.S. But there are some other pieces of advice from the FTC that need to be discussed because they aren’t entirely correct.

The FTC says to be cautious of plans that claim you will make money through continued growth of your "downline," the commissions on sales made by new distributors you recruit, rather than through sales of products you make yourself. What’s wrong with this is it is a prime part of the MLM business plan to recruit salespeople to work in your organization, your “downline,” and provide some additional income to you from their efforts. The way this is worded, it looks like “downline” is the bad word, but that is the heart of every legitimate MLM program and some affiliate plans. The problem would be if that were the only way you were paid, which would be paying you for new recruits only, an illegal pyramid.

Another tip on the FTC site says, “Don't pay or sign any contracts in an ‘opportunity meeting’ or any other high-pressure situation. Insist on taking your time to think over a decision to join. Talk it over with your spouse, a knowledgeable friend, an accountant or lawyer.”
You should certainly take your time and, perhaps, not sign up at a meeting. All of these are not any more "high pressure" than what you get going to an appliance store to buy a refrigerator. The salesperson shows the inventory and you can decide on the spot or later, your choice. Opportunity meetings are similar situations; just because you have gone to a specific location does not make it “high-pressure”—that’s in your head. And the idea of discussing the opportunity with a “knowledgeable friend,” accountant, or lawyer is—in my opinion—ridiculous. You’re just asking for a no answer. The friend will be jealous if you succeed and the professional people are going to cover their butts in the easiest way, which is to advise against something.

• Another FTC tip is to check with the Better Business Bureau (BBB) or the state Attorney General. We’ve already discussed the downside of the Attorney General so let’s look at the BBB. The first thing I would tell you is to join this group (http://www.bbb.com/) if you are an entrepreneur and can afford it. I personally have never found any information, good or bad, about new opportunities I wanted to pursue. If the company isn’t a member or is too new or too good to have had any complaints you will find nothing. The reports they have do list company information about members, but the only other thing you can find is complaints and how the BBB says they are resolved. Read a few of the sour grapes Websites I will list and you will see that others also believe there are conflicts of interest on reports of members as opposed to non-members. You won’t find any information about specific products or investment required. Everything is stated in a general way and not very useful for what you want.

One group that doesn’t like the way BBB operates is the National Academy of American Scholars (http://www.naas.org). They cite a lawsuit brought in Beverly Hills, CA, on behalf of a company that alleges Intentional Interference with Prospective Economic Advantage; Negligent Interference with Prospective Economic Advantage; Slander; Trade Libel; and Invasion of Privacy. Draw your own conclusions.

Additionally, Better Business Bureau Scam, describes many inconsistencies about BBB. It ends saying one can’t file a complaint about the BBB with the BBB, and the BBB is not a member of its own organization. This may not be unusual for membership organizations, but it raises a few questions, not the least of which is where would you file a complaint if you had one?

This report (not very well edited) by Rip Off Report raises one of the main issues with the BBB—how can they effectively police their own members who pay BBB salaries, expenses, and profits? Nearly impossible, wouldn’t you say? The article points to some bad experiences consumers have had relying on the BBB.

The final BBB misconduct we’ll mention is listed on the Complaints Board site. These people cite a response to a consumer complaint and allege the BBB only sent a letter saying the company being complained about no longer wanted the customer’s business! This supposedly resolved the complaint. If you wish, search Google for BBB complaints and you will find many.

After saying all this, I still believe you really should check the BBB; if there are many unresolved issues, do some more research; and you should join BBB if you can afford it. It’s a good way to protect your reputation, as we have seen.

• One final reference to MLM bashing comes from the National Fraud Information Center. Their information regarding pyramid schemes is all true. But according to their introductory paragraph, “all such schemes are losers and collapse when members realize they’re not making the money they were promised.” This implies that every opportunity involving multi-level marketing is a scam and you will never make any money. The next paragraph explains there are legitimate MLM programs, BUT, the MLM bashing damage has already been done. Every “authority” I have ever seen on this subject, including government agencies, leads with all the bad points about pyramid schemes and only slightly mentions that MLMs are often legitimate business structures. This shows the general mindset against trying to work for yourself. American industry needs you and if you are successful as an independent entrepreneur, you will never be available to make others wealthy!
  
  
• In my own experience the best place to get reliable information on a business is Dun & Bradstreet (D&B). They have several Small Business products, such as reports on other businesses for varying charges; a few are free with a subscription which starts at $22 per month. They have frequent special offers and you may be able to get in one, perhaps on a permanent basis. Anyway, they are a solid and reliable resource. If you can’t find a company on D&B, search Google using “review” (without quotes) in front of the company name and search for “complaints.” This usually churns up the bad stuff off the bottom.

As the time of writing, it appears Amway and some other well-known MLMs are having current legal problems—a business should always be built on products or services of value, not on recruiting, forcing people to buy unsalable stock, or promising impossible results. This is reported on the Website of an anti-MLM group, Pyramid Scheme Alert. They say a class action lawsuit has been filed against Quixtar (Amway) by plaintiffs who are at the bottom of the Amway/Quixtar pyramid. These charges against Amway/Quixtar go to the heart of the company's business practices and most other multi-level marketing (MLM) schemes, that there is no retail "direct selling" opportunity, only an endless chain recruitment program.

The suit was brought by Boies, Schiller and Flexner. David Boies of this firm represented Vice-President Al Gore in front of the U.S. Supreme Court in the famous case, Gore v. Bush, that contested the vote counting in Florida after the 2000 election. Boies lost that one, do you suppose he might win this one?
The site also mentions Usana, Mary Kay (says disgruntled distributors are finally coming forward), and others. The mention of disgruntled distributors indicates some entrepreneurs are unwilling to accept responsibility for their success or failure. MLM is a reasonable business model, but exorbitant claims, unsavory recruiting techniques, and not explaining that every business profits as a result of risks, have given this opportunity a bad name. Couple this with the human desire to blame someone else for mistakes, and you can see why so many are down on every self-employment opportunity, not just MLM and e-Commerce.

There certainly are many scams that are ALWAYS dangerous. Always avoid phishing attempts to get your personal and financial information, any Nigerian scheme or a similar one where an unknown party wants you to help them receive a lot of money from an estate or a government which holds their funds illegally, a lottery you have won where you never entered, a check out-of-the-blue where you are supposed to send a little bit of it back and keep the rest, or an unknown telemarketer wanting to sell you this unbelievable stock you must purchase right now or forever lose the opportunity.

It’s up to you to see what is legitimate and what is just sour grapes among both complaints or endorsements of any opportunity. By being aware of the biased way information is presented everywhere, we hope you can craft your presentation in ways to reassure your prospects and sign more of them.