Beware of Startup Scams - Tips for Avoiding Them
by Larry Slusser on February 28th, 2008
You’re tired of working for someone else, telling you what to do and when. You’re an entrepreneur by heart and want to work for yourself, rather than padding the pockets of your boss. But how do you avoid the scams that are out there, which will only lead you back to padding the pockets of a boss?
Some of these “too good to be true” money-making ideas are plain and simple-scams. One way to verify if this business idea you are interested in is in fact a legitimate business with quality money-making opportunities, is to visit the Better Business Bureau’s website. However, below are a few tips to help you avoid scams so that you can land yourself a true treasure, making your dreams a reality.
1. Free Money! The first such scam you may run into is a free money scam that guarantees a list of where to obtain funding that does not have to be repaid. Unfortunately, those who fall victim to this scam will have spent hundreds or thousands of dollars to obtain a list of funding sources, only to find out it is not a list that they are eligible to use, since the money is either earmarked for nonprofit organizations or scientific research, or does not exist. Plus there is no legitimate way of getting any money back, thus the entrepreneur is out that money. In essence, there is no such thing as free money.
2. Pay us to Patent Your Idea! Another scam that is out there is the patent and invention service. You have submitted your idea to a business expert who is evaluating your idea, and identifies your idea as the next best thing and requests money in order to secure protection of the intellectual property. Plus they promise to help you find a manufacturer and help with the marketing. When you ask for business references, you are told that is proprietary information. Of course, that seems reasonable, because would you want your information or idea to be given out to a stranger? No of course not, but this is not realistic. You need to ensure that the business expert is conducting a legitimate business and that his/her clients are happy with their results, or at least service.
This is a very complex business undertaking and there are people that specialize in this type of consultant work; however, a company of integrity will have no problem giving you references to contact. Another tip is to contact the Federal Trade Commission for any information about patent scams. This will help you make a more informed decision prior to hiring a consult to help you manufacture and market your product.
3. Advance Fee Loans. This scam promises entrepreneurs loans for those who are unable to obtain capital from investors or banks. These companies promise that anyone can obtain financing regardless of their credit history, past bankruptcies, etc. What is asked is to send in money for the loan processing fee, transfer fee, and bank charges before the loans will be funded. Once the fee is received, the entrepreneur never hears from the lender again. Thus, their money is gone. If someone promises you this type of loan, be suspicious about someone offering a loan to someone guaranteed. A reputable and legitimate lending institution would not require money up front.
4. Work-at-Home Scams. You want to work from home because of the flexibility it affords. You’ve seen all the TV commercials and marketing for work-at-home businesses, and you’re sure that you have found the right business for you. Plus they boast that you do not have to invest a lot of money or work hard in order to make a lot of money. The best advice prior to investing in a home business is to do your homework. There are legitimate home-based businesses, but nothing is easy and a business always requires hard work and research prior to investing your hard-earned money. You cannot afford to lose the money you could put into a legitimate business that will help you to earn a living.
5. I’ll Help You Make Money…for just $1000! The last tip is to watch out for the wealth building seminars that come to your town. Since you are an entrepreneur at heart, you are lured into the grasps of the people holding the seminars offering great tips on how to get rich quick. While some of the information is good, a lot of it is surface-level advice, which you could have obtained on the internet by doing a little research and without spending your time, gas, and money to go to the seminar. Plus these seminars will sell books that promise to hold the key to building wealth, which can cost you thousands of dollars more. The only people guaranteed to get wealthy from these seminars are the people holding the seminars.
There are a lot of resources available to those that want to start their own business. A good place to start is the Small Business Administration, followed by the Better Business Bureau to ensure that the business idea you are being presented with is not a scam. Using common sense and trusting your gut will go a long way in helping you to keep the money you have and potentially finding a business that suits you with hopes of a better and brighter future working for yourself.