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Small
businesses are prime targets for scams and rip-offs. Always be on the lookout
for walk-in salespersons ready with a sales pitch. Don't assume a salesperson is honest merely because he was
referred to you and you were expecting him.
Unless he was sent by a close friend, you should treat him the same way
you would a walk-in.
Never
sign an agreement or put money up front until you have verified that the
salesperson is legitimate. A
person's identity can be confirmed through a simple background check while he
waits in your office. While the
background check is far from fool proof, it should tell you if something's
fishy. Indeed most con men have
gaping holes in their stories. Trust
your gut and see if he passes your "smell test".
Begin
with the following: "I'm
sorry. I'd like to see your presentation, but these days we have to be careful
with whom we do business with. I'm
sure you understand. Do you mind if
I first get some information about you and your business?
(get him to say yes. Kindly escort him out if he balks).
Great!"
a. Get his
name, and a business card.
b. Ask him how long he's been doing business here locally. If it's been awhile then he may need to have a business license. Each state may have different requirements, so this is not a sure thing.
c. Ask for
a driver's license and write down the address.
Make sure the name on his license matches the name on his business cards.
d. If he's
part of a larger company get its name and phone number if such is not on his
business card.
e. Verify
his identity with his office and/or his parent company (if applicable).
See if your call is answered by a real person or by voicemail.
The latter could point to a small-fly-by-night operation.
If a person answers, does it sound like you've reached a residence or a
business?
f. If the firm name ends in "Co.", "Inc." or "Corp." check that it has registered with the Secretary of State. All corporations must list themselves with this agency. Even outside corporations or those incorporated in other states are often not exempt from these provisions.
g. Check
the BBB for complaints against him and his company.
(Find out the nature of these complaints.) If possible, talk to a BBB
operator, not the automated system. The
latter only checks up on telephone numbers which change frequently.
I. See
whether his business is listed in the business white pages. (new firms may have
missed the deadline) While some
small firms will not invest the $600 per year for a listing, fly by night
operations will almost never make this commitment.
By investing in local advertising, firms show they intend to stay in the
area. Those who advertise in the
community have a stake in the community and usually take greater pains to treat
customers fairly.
See Find Or Background A Business (Consumer-SOS)
Things
To Watch Out For When Signing Sales Agreements
If you see a sales presentation
and are asked to sign and agreement, Make sure to:
A. Look
out for the word "independent contractor".
Companies often call their agents independent contractors to avoid
liability for their mishaps. Check
the sales agreement for disclaimers that distance the company from any
wrongdoing caused by their representative. If the company won't vouch for their
agent then why should you trust him?
B. Be
careful when dealing with out of state companies.
Far away firms can be hard to reach when something goes wrong.
They're also less likely to ensure the quality and training of their out
of state representatives.
C. Read
all the fine print. Contracts often
have default provisions which allow the salesman to keep the money you give him.
Watch out for terms like "non-refundable" or "no
refunds" Don't be fooled when the salesperson claims a deposit is
required to "keep the offer open" or to show his company that you're
"serious". These lines
are just their way of parting you from your money.
And never rely on verbal promises from the salesman without first looking
at the contract. The contract will
almost always have a disclaimer which says such promises are void.
If the salesman promises not to cash your check, get him to put his
promise in writing. Otherwise it
will be your word against his and the contract will probably support his side of
the story.
See Find Or Background A Business (Consumer-SOS)
Determining
A Legitimate Business Opportunity
1. Listen carefully to sales
presentations. If it sounds too easy then it probably is. Earning
money usually requires hard work.
2. If it's a franchise offer, ask
for the disclosure document. Such is required by law and should provide detailed
information to help you
evaluate the offer.
3. Check out the firm with the
agencies listed in Sections A and B above.
4. Get all promises in writing.
Oral promises are probably no good.
5. Talk to current and former
owners and employees about their experiences. Don't rely
entirely on a list of references given to you by the
firm. They may be paid to say only good things.
6. Investigate all earnings
claims. Ask for documents that back
up these claims. Ask others
who have purchased the offer about earnings.
7. Before buying any offer, get
the firm's cancellation and return policy in writing.
8. Hire a lawyer, accountant,
financial advisor or other financially savvy person to read disclosure documents and
proposed contracts before
buying.