Educational Consumer Tips

Business Opportunities

Author: Better Business Bureau
Category: Service

Before investing in any business opportunity, BBB suggests that consumers:

1. Look at the ad carefully. If you are being promised lots of money for little time, little work and little experience, there is little chance that the ad is legitimate! If it claims buyers can earn a certain income, it also must give the number and percentage of previous purchasers who achieved the earnings. If an earnings claim is there - but the additional information is not - the business opportunity seller is probably violating the law.

2. Get earnings claims in writing. If the business opportunity costs $500 or more, then the promoter must back up the earnings claim in a written document. It should include the earnings claim, as well as the number and percentage of recent clients who have earned at least as much as the promoter suggested. If it is a work-at-home or other business opportunity that involves an investment of under $500, ask the promoter to put the earnings information in writing.

3. Scrutinize franchise offers. If the business opportunity is a franchise, study the disclosure document. Look for a statement about previous purchasers. If the document says there are no previous purchasers but the seller offers a list of references, be careful: the references probably are fake.

4. Interview each previous purchaser or investor. Do so in person, preferably where their business operates. Beware of paid "shills." The FTC requires business opportunity promoters to give potential purchasers the names, addresses and phone numbers of at least 10 previous purchasers who live the closest to the potential purchaser. Interviewing previous purchasers helps to reduce the risk of being misled by phony references.

5. Check on complaint records. Contact the attorney general's office, state or county consumer protection agency and BBB -- both where the business opportunity promoter is based and where you live to find out whether there is any record of unresolved complaints.

6. Is a well-known company involved? If the business opportunity involves selling products from well-known companies, call the legal department of the company whose merchandise would be promoted. Find out whether the business opportunity and its promoter are affiliated with the company. Ask whether the company has ever threatened trademark action against the promoter.

7. Consult experts. Talk to an attorney, accountant or other business advisor before you make the deal.

8. Take your time!