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Sniffing Out a Good Business Opportunity

How to tell whether that opportunity is really too good to be true
January 13, 2003
URL: http://www.entrepreneur.com/article/58624

We are all a little vulnerable right after the holidays. After so much good cheer, our defenses may be down a little, especially if we have been unemployed for a while. All of a sudden, some of those spam e-mails offering "The Greatest Homebased Business...Ever" or "Raise Chinchillas in Your Backyard for Big $$$$" start to look just a wee bit attractive.

Many of these "come on" offers are actually quite legal. They are known to lawyers as "Business Opportunities" (note the capital letters). A Business Opportunity is like a franchise, except that you don't operate under someone else's registered trademark that has a recognized value in the marketplace. Common examples of Business Opportunities are:

Just because they're legal doesn't mean that Business Opportunities are always good deals. As with a franchise, the burden is on you to research a Business Opportunity and make sure it's on the level. Many states require Business Opportunities, as well as franchises, to register with a state government agency (usually the state's Bureau of Securities or Attorney General's office) before they may legally offer their program to state residents. Call or e-mail the appropriate agency and find out if the Business Opportunity that interests you is registered.

Then ask the Business Opportunity to furnish a list of people in your area who have bought into the program, with home addresses and telephone numbers. Get into your car, visit each one of them in person, and view their operation with your own eyeballs. Do not just call or e-mail them--many unscrupulous Business Opportunity promoters have "boiler rooms" of people sitting in cubicles pretending to be satisfied customers. Some even encourage these employees to bring their kids to work so that it sounds as if they are working from home!

Proceed With Caution

You should be suspicious of any Business Opportunity if:

When negotiating your deal with a Business Opportunity, make sure:

Finally, use common sense, and remember that if it's too good to be true, it probably is. Ask yourself, If the Business Opportunity is that good, why do they have to use spam e-mail or comic book advertising to spread the word?