Spotting Home Based Business Scams

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Because of a growing interest in home-based business, a large number of individuals and companies have organized to meet the needs of budding entrepreneurs. Many of these are legitimate companies, however, many are simply interested in promoting a scheme.

The main targets of work-at-home schemes are people with young children at home, the elderly, the unemployed and individuals with disabilities. Fees for work-at-home schemes range from $5 to $30 on the low side, to more than $30,000 on the high side.

Two holdover schemes we have seen over the years involve envelope stuffing and assembly or craftwork. Typically, when someone responds to an ad for envelope stuffing, all they receive for their investment are instructions to place a similar ad. Assembly and craft work are also frequently advertised opportunities. These often require an investment in equipment or supplies. When the investor completes the work, they often find that they are expected to sell the finished goods on their own or they are told that the workmanship is not "up to standard." Unfortunately, no work is ever "up to standard."

"Business opportunities" which have become popular recently include products and services such as the sale of business and trading cards, medical billing, website design and hosting, vending machines, Internet marketing and pre-paid phone cards. The Federal Trade Commission has investigated many of these opportunities. Often the violation that is cited involves the misrepresentation of potential earnings. You can easily access cases the FTC has investigated at www.ftc.gov

A number of companies travel throughout the United States selling home-based business "opportunities" such as the sale of distressed merchandise, discount travel memberships, T-shirts, vitamins or scholarship search services. They usually sell the opportunity for a special price only at the time of the seminar and they are almost always are from out of state. Federal Trade Commission investigations suggest that "few, if any, consumers who purchase the business ventures make any substantial money."

An individual looking at a home-based business opportunity should ask the following questions before moving forward:

• Does this offer sound too good to be true?
• Am I being pressured to buy today?
• Can I afford to lose my investment?
• What do I really know about this individual or company?

If any of the answers to these questions are negative, buyer beware!

Barbara Cunningham, CunninghamB@missouri.edu
Business Development Specialist
Clay County, Missouri
University of Missouri Extension