Spotting Home Business Opportunity Scams – A “Red Flag” Checklist

When considering any opportunity, I have come to rely on “red flags” (as in, red flags on the field = penalties).  Red flags are questions/concerns that raise their ugly heads during my review process.  If I see red flags, I become very skeptical about the opportunity.  If I see too many, I’m outta here.  Here are some questions to ask yourself if you are considering a “home business opportunity” from the Internet or other source (adapted from a publication of North Dakota State University).  If any of these are “red flags,” you might want to walk away.

• Success Criteria.  What will I need to do to be successful in this business?  Am I prepared to do that?  How do I know that success is possible in this business?   In other words, can you verify that others have been successful in this business?
• Payment.  How will I be paid?  How is my pay calculated?  Do I have an opportunity to verify payments or check the accuracy of payments? Am I on commission? If you are on commission only and you don’t have a way to verify that you are getting paid correctly, this could be a problem.
• Review by Trusted Resources.  What do others say about this business? For example, SCORE, my attorney and accountant, my banker?  (If your banker is skeptical about lending you money for this business opportunity, that might be a red flag.)
• Testimonials.  Be cautious in believing testimonials.  These can easily be faked, or people can trade testimonials in return for concessions or money.  Ask for a list of people in the business and select a few at random to interview for their experiences.  If the company is reluctant to give you a list, do some research on your own (Google it).  Attend a meeting or convention and talk to people in the organization.  In other words, do your own research to find out what others in the company think.
• Better Business Bureau.  The BBB has information on complaints against businesses.  You can check their data without being a member.  If the company is a member, it’s a good sign that they are reputable (but not always).
• Government Regulators.  Have you checked with government regulators about this company?   Here are some places to check:
  • U.S. Postal Inspector (for mail fraud)
  • Your state attorney general
  • The Federal Trade Commission (consumer protection)
  •  The consumer protection agency or office of the state attorney general  in your state

  If you go through all of these “red flag” checks, you might have found a legitimate business opportunity, but there is one final check that you should rely on – the “gut check.”  I trust my “gut” instincts and if something doesn’t look right, even though it may have passed all the tests, I would still hesitate to jump on board.