Ten Ways to Spot a Business Opportunity Scam

business-scammer

Everybody seems to like lists, so here is one of mine….

Ten ways to tell if it’s a scam:

  1. If during the pitch you are shown pictures of people in front of huge mansions, luxury cars, gigantic boats or private jets, IT’S A SCAM!
  2. If during the pitch people in the audience begin saying things like “Amen!”, “Hallelujah!”, or otherwise begin acting like they are in an evangelical church, and they aren’t. IT’S A SCAM!
  3. If during the pitch anyone denigrates the value of honest labor, refers to people who work for others as losers, or uses derogatory language when talking about having a job, IT’S A SCAM!
  4. If anyone intimates that you will become wealthy without working very hard, and they aren’t your dead rich uncle’s lawyers, IT’S A SCAM!
  5. If you are ever told you have to sign up now or never, IT’S A SCAM!
  6. If you are encouraged to run up debt to present an appearance of success (Fake it ’till you make it), IT’S A SCAM!
  7. If you heard about the “opportunity” by dialing the phone number on an illegally placed roadside sign, IT’S A SCAM!
  8. If you are offered a higher position in the company or “secret insider information” in exchange for a higher buy in, IT’S A SCAM!
  9. If you cannot get straight answers as to what the company’s name is, what they do, or the what ACTUAL reported income (e.g. what’s on the 1040) of your recruiter is, the first time you ask, IT’S A SCAM!
  10. If all of the meetings seem to be about how to get more people into the program rather than how to sell whatever it is they are supposed to be selling, IT’S A SCAM!

I have more but these are the high points.

A real business opportunity seminar revolves around what that business does and what value it brings to the market, thereby explaining how to make money at it. They generally won’t start out by telling you how rich you’re going to get.

Profit is important, it is reason people are in business, but without true market value there will be no customers and no profits. Anyone who pitches a business by concentrating on the wealth you might obtain and the lifestyle you might enjoy, without focusing first and foremost on the product and its value in the marketplace is selling snake oil.

Meetings for these business opportunities are usually held in hotel ballrooms and the audience is often seeded with people who seem to spontaneously shout out agreement to the speaker in a way designed to create excitement.

Couple this with loud, exciting music, flashing light shows, and enthusiastic speakers, and the atmosphere can build to a frenzy pitch where normally cautious people rush to sign up and pay good money to enter a business they know nothing about.

This methodology continues in follow on meetings and is why these organizations are often accused of brainwashing recruits.

A big part of getting recruits to buy into the dream is about convincing them that they are on the wrong path. “You have not gotten rich yet so everything you are doing must be wrong.

Holding a job is wrong, why give your labor to benefit someone else when it could be benefiting you?” They convince recruits that the “plan” is the only way.

It’s all part of the system of absorbing people into a culture where they give up their money willingly and encourage others to do so, without seeing the reality of what they have become involved in.

Contrary to what many people believe, short of winning the lottery or inheriting money, getting rich is hard work. If you start a business, get ready to work harder than you ever have in your life.

I have a friend who runs a successful small business and he often jokes that he works half days – twelve hours a day, seven days a week. Contrast this reality with what is presented in the TV commercials for these business opportunities.

They always focus on lifestyle, claiming that everyone will rake in cash with little or no work.

This is the theme in the first meetings, but once the recruits learn the plan they also learn the real method to success in sales; make lots and lots of contacts.

Making all of those contacts is hard work. In the pitch they talk about how easy it is; after someone fails and quits, the leaders talk about how those people didn’t work hard enough and may even refer to them as “quitters” or “losers”.

It’s now or never! In any transaction, if you are presented with a contract and told you have to sign right there or the opportunity will be withdrawn, put your hand over your wallet and run from the room, you are about to get ripped off.

Legitimate entities using contracts do not mind if you take a few days to study it and think it over, it saves them trouble later.

The only reason to try to get you to sign immediately is to hide the fact that the contract is contrary to your best interests, never sign anything under these conditions.

Fake it ’till you make is a hallmark of many of these organizations. A while back I was called out of the blue by someone I had not seen or heard from for many years.

We met in a restaurant and he was wearing a tailored suit, a Rolex, and had a leather bound day book in which he scribbled notes all through our meeting, the key to a BMW was lying on the table.

I left first and as I was sitting in my car taking a phone call, I saw him drive off in his own car, which he had parked in the lot behind the restaurant.

He had a Beemer all right, an older, beat up 318i with a cracked window and red tape for a tail light lens.

Here was a guy in a $1000 suit driving off in a $500 car. The idea taught to recruits is that in order to be successful a person has to look successful.

The reality is that those higher up the chain get their recruits to go into debt on expensive clothes, jewelry, etc… and then tout them to potential new recruits as success stories, even though they actually are going broke.

One of the consistencies of these opportunities is the obnoxious ways that people find to advertise them.

One of the current favorites is the roadside sign. These nearly indestructible concoctions of plastic and wire can be had for about a dollar each and are placed in medians and along rights of way anywhere that they can be driven into the ground.

They carry slogans like “CEO income from home!”, “Needed: 25 people who want to lose weight!”, and my personal favorite, “Millionaire seeks apprentice.”

When you dial the number you will most often hear an upbeat recording vaguely describing the opportunity and asking you to leave a message.

You will then be called by someone who will offer to meet with you in person. Even then they will avoid giving too much information, better to get you to a meeting with the throbbing music and enthusiastic crowd before you learn too much.

In some of these operations there are different levels that people can buy into. In one there were two entry levels, “Associate” which cost $98 and “Supervisor”, which cost $196. The only difference between the two was that a Supervisor got a monthly report of the activity of people they recruited.

Translated: it was a piece of paper that cost $98. The only purpose this serves is to increase the cash flow into the organization. If you can get people to pay twice as much for basically nothing, that’s just money in the bank.

No matter how you are contacted about these opportunities, it is rare for the person approaching you to come straight out and say what it is they are trying to recruit you into.

The largest of these companies have such bad reputations that the mere mention of their name sends people running for the door.

To avoid this they will use the name of their sub organization for example: Dreambuildingwealthsuccessentrepreneursyndicateenterprises inc., L.L.C., ltd., yada – yada – yada. They almost always have names that invoke images of success and the easy life that will surely come if you join.

It is nearly impossible to find out how much money anyone in these organizations is actually making. If you ask the person who recruited you the response will usually be, “That’s none of your business.”

In reality, because they used their supposed financial success as an inducement to get you to join, it is your business. If a person buys a gas station one of the first things they will be shown, no questions asked, are the books.

Not so in these organizations, some of them actually have rules prohibiting people from talking about the business with each other outside of controlled meetings.

Why?

Because if people talked they would find out that almost no one is making any money at all, and those few below the top levels that do show some income make only a few dollars per month.

In one study it was shown that the top .16% (that’s sixteen one-hundredths of one percent) of the people in one of these organizations received 56% of all of the profits generated, while the bottom 86% received no payments at all.

Those between the top .16% and the bottom 86% received an average of $28 per month, before expenses were deducted.

In a conventional sales organization the person who actually makes the sale receives the largest percentage of the commissions, with each succeeding management level receiving smaller percentages and there are usually only two or three succeeding levels.

In many of these unconventional organizations the opposite is true, the higher in the chain a person is, the larger their percentage of each commission, while the person who is doing the actual work receives a pittance, and there can be ten, twelve or more levels up the chain, all getting paid from that same commission.

This is why none of these schemes can possibly succeed; their structure will encourage recruitment of people rather than retail sales by design.

If no one is actually selling the soap to people outside of the organization, new recruits must constantly be churned to create revenue.

As anyone who has been employed in legitimate sales knows, there is always a certain amount of rah-rah motivation in the meetings.

But if the organization is supposed to be selling soap and no one ever seems to be talking about how to sell the soap, then they aren’t in the soap business.

There is usually a product but almost all of the talk is about getting excited about the business and growing the business, not by moving more products, but by recruiting more salespeople. This is the opposite of what a real business does.

A real business grows by selling more of its products; they then hire more people to support their growth, with someone, somewhere, constantly watching the market to determine how much is enough and turning the hiring process on and off at the appropriate times.

These “opportunities” hire as many people as they can as quickly as they can. Nobody knows or even cares what the market conditions are, or if they have the right amount of sales people, because no one ever seems to sell any products to anybody except to themselves and each other.

One of these organizations tells people that they can make money by “Buying from themselves!”

Imagine a child running a lemonade stand who charges 25ยข for a glass of lemonade. The parent watches in amusement as the child drinks eight glasses of the lemonade himself.

When the child comes in the parent asks, “How much did you make?” The child responds, I made two dollars by buying from myself!”

In summary, achieving financial security is part of the American dream, and there are plenty of opportunities out there for people who develop the skills, the attitude and make the right choices to attain that dream.

Unfortunately on the dark underbelly of capitalism are those who attain their dream by leaching off of people who are ill informed and ill prepared to make good business decisions. Can money be made through these “opportunities”?

For a very few people the answer is yes. But in order to do it they have to get in at the very beginning and make the Faustian decision to get their money by taking it from an endless chain of recruits doomed to failure by the very design of the “system”.

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