For investors, there are a diverse range of business opportunities to choose from, although not all provide you with a model and system to achieve a return on your investment.
What can prospective business owners do to make sure they avoid the scams? First, do your research, including getting information up front and in writing. Most legitimate business opportunities don’t hesitate to provide this information. Second, speak to as many people who have previously bought into the business as you can.
RECOGNISE THE SIGNS
Identifying fraudulent business opportunities is not always easy. However, there are signs if you look close enough. Adverts for rip-off business opportunities often appear in the classified pages of national newspapers, magazines and online. Most adverts use the similar lure of incredible earnings potential in a relatively short period and for very little effort. They promote the ability to set your own hours, be your own boss and work from home with minimal overheads. In other words, they sound almost too good to be true.
What the adverts don’t tell you is the ‘entrepreneurs’ behind these so-called opportunities aren’t interested in supporting you to run a successful business. They’re only interested in getting hold of your money. To get your buy-in they may mislead you about the earnings potential and promote an opportunity that has little chance of succeeding. They may limit your chances of success by providing low quality or outdated merchandise, poor quality equipment and locations with poor business potential.
DO YOUR RESEARCH
The internet can be a good source of information about a business opportunity and its owners. A simple Google search can often reveal consumer complaints, outstanding legal action, previous business failures and disharmony among investors.
Research all you can about the people behind the business. Have they been involved with other businesses and if so is there a track record of success or failure? Is the person running the business a director of the company? If not, are they disqualified from being so? Sometimes a family member will be listed as a director at Companies House, but the person disqualified will be running the operation.
If there are any potential earnings claims, ensure they can be substantiated by most of the network already operating under the model. Understand what the figures are based upon and whether they represent a true reflection of what you are likely to be able to achieve. Get earnings claims in writing and ask for supporting evidence.
Don’t let the owner cherry pick who you speak to by insisting on an entire list of the network. By asking a few carefully chosen questions you can quickly build a picture about the potential of the business opportunity you are considering.
Some dodgy business opportunities inaccurately classify themselves as franchises in an attempt to benefit from the pool of investors looking for legitimate franchise brands to invest in. There are, of course, some franchise opportunities that offer better opportunities than others to build a successful business. For impartial advice about the franchise opportunity you are looking at speak to Lloyds Bank’s team of franchise experts.
Investing in a well established and proven franchise brand is likely to offer you a better chance of building a successful business than selecting a business opportunity from an advert online or in a national newspaper’s classified section. The franchise brands that are members of the British Franchise Association and who meet its standards are likely to offer an even better success rate than franchises that haven’t achieved accreditation.
TRADING STANDARDS
Another check you may wish to consider is contacting Trading Standards, both in the hometown of the business and where you live, to find out whether there is any record of complaints that may indicate questionable practices. Unscrupulous dealers often change names and locations to hide a history of complaints, so a lack of them doesn’t necessarily mean there isn’t a potential problem.
Ask questions and ensure you are satisfied with the responses you get. Take your time before you commit. Promoters of rip-off business opportunities are likely to use high pressure sales tactics to get you to invest. If the business opportunity is legitimate, the owner will give you time to decide.
The new year can be an ideal time to realise your dream of running your own business, but ensure you do your homework to stop that dream turning into a nightmare.
For information on franchising visit www.lloydsbank.com/franchising