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Scammed!

Cons targeting homebased businesses are on the rise. Here's how not to get taken.

Peggy Alderman knows the value of added spice. After all, she had been concocting salad dressings for 30 years before successfully starting a business marketing her homemade Russian, ginger and huckleberry salad dressings. But some spices in business life aren't quite so pleasant, as Alderman discovered when Coeur d'Alene Dressing Co., the Rathdrum, Idaho, homebased business she runs with her husband, Don, received an unwelcome little zing of its own.

Last July, Peggy received a call from a saleswoman who said she represented a Minneapolis-based Web site development company. Would the Aldermans like to have a presence on the Web? Certainly, Peggy said. She was interested, even though she had no idea how the saleswoman got her name or that of her business, which was barely one year old at the time. She was told to send a business card, and the company would create a rough Web page she could review.

Within a week, the Aldermans received a bill for $375, even though they had never given final approval for a Web page to be created and posted. They were also told that if they could get a check to the company by August 5, they would be eligible for a $50 discount. What's more, their homebased business didn't yet have Internet access. "I had no way of checking it out," Peggy recalls. "She said it looked really nice. I said I hadn't given the go-ahead."

The Aldermans refused to pay, even after receiving four bills. Finally, they told the company they would contact an attorney. According to Peggy, the company's representative indicated they would do the same. Only after threatening to alert their state's attorney general and a national consumer advocacy group did the Aldermans get the company to leave them alone. A call to the company in Minneapolis for its side of the story revealed the firm's number had been disconnected.

They Know You're Home

Scams and con schemes can come in the most innocent-looking packages, from a random unsolicited phone call or a fake invoice to an interesting offer of new work. Anecdotal evidence suggests scams targeting homebased businesses are on the rise. How can you protect yourself? Consumer advocates say the best way is to be assertive, vigilant and inquisitive when an unknown business entity comes calling with the prospect of a sweetheart deal.

"This is happening day in and day out," says Alice Bredin, a small-business advisor on the American Express Small Business Exchange, a community-based Web site. "A lot of homebased business owners have worked in corporate jobs where a lot of things have been taken care of for them. They're used to focusing on what they do well." When it comes to running a business, however, bookkeeping, client contracts, billing and new ventures all deserve equal attention, forcing homebased entrepreneurs to make decisions in unfamiliar areas.

"We're seeing more people starting homebased businesses," says Shirley Rooker, president of Call For Action Inc., a nonprofit consumer complaint hotline. "Any time there's expansion in an area, the potential for fraud rises."

According to a report from the Virginia Cooperative Extension, a joint program through which the state's universities help residents establish homebased operations, the National Consumer League estimates more than $200 billion is lost to homebased business scams and fraud each year. The Federal Trade Commission estimates the average individual who invests in such schemes loses between $5,000 and $10,000.

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