Buying A Business: Identifying A Legitimate Business Opportunity Seller

How to find if a home-based business opportunity is a legitimate one. Tips for identifying scams.

With the uncertainty of today's job market, more individuals are looking to start their own work-at-home business. One of the easiest ways to do this is to join an existing company or purchase a business start-up kit, but how can you tell if the opportunity is legitimate?

Be Informed

First, find out all you can about the company selling the business, and not from the company's representative.

Contact the Better Business Bureau, the Department of Justice, and any government groups that are involved in that industry. For example, if the business involves legal services, contact a group that regulates the legal profession. If the business involves marketing products or services, contact the Federal Trade Commission.

The Federal Trade Commission also keeps information on known scams, and produces consumer alerts for such frauds.

If you know where the company is located, you can also contact the local Chamber of Commerce, and find out if the company is in good standing.

Also, try to find people that have experience with the business opportunity. Ask them how it works, how long it took to make their investment back, and how much time and additional money they have invested in business expenses.

Try to discover what your competition will be, and how competitive the company is. I have seen companies advertising import/export businesses, in which you are allowed to order products at "below wholesale" prices - but discovered that prices for the exact same merchandise was even lower on eBay.

Common Sense Rules

Here are a few tips to consider when investigating a business opportunity:

1) If they really are interested in helping you help them, they won't charge you.

This is not a hard-and-fast rule, but many home-based business opportunities rely on recruitment more than product or services to make their money. Is what you are paying comparable to the value of services you receive?

For example, some companies charge hundreds of dollars for "processing fees" or "background checks." Others charge less, but give you free product worth more than what you are paying.

2) If the company pushes more for recruitment than sales, stay away!

There are legitimate multi-level marketing companies (visit the Direct Sellers Association for information), but if you sign up with this company, will they want you to recruit more than sell their product? If so, their business model may be too focused on "team building" and making money from recruiting than actual sales of services or products.

3) Watch out for dangerous buzzwords!

Is the company promising "unlimited income potential," or "residual income opportunity" that will save you from financial uncertainty for the rest of your life? Such terms are often used in pitching business opportunities that are little more than recruitment pyramid schemes. Remember, if it sounds too good to be true, it probably is.

What to do if you have been scammed

If you have fallen for a business opportunity scam, there are several things you can do:

Contact the Federal Trade Commission - By alerting the FTC, you can help ensure others are warned of the fraudulent business opportunity.

Contact the Department of Justice - There may be ongoing legal action against the business sellers or the DOJ may be interested in pursuing such action if a large number of individuals have been cheated.

Contact the Better Business Bureau and the local Chamber of Commerce - These reporting groups can also warn others of the scam.

Get your money back - Try to negotiate with the business sellers to return your money. If they refuse, dispute the charges on your credit card, if you used one to pay for the startup fees.

© High Speed Ventures 2011