Avoid Business Opportunity Scams with These Tips
New business and job opportunities can be exciting. They can be especially enticing if they promise a lot of money very quickly or with little required effort or skill. But business opportunity scams are everywhere, and it’s important to verify an opportunity’s claims before joining. Knowing what questions to ask and what to look for can save you time and money.
See Questions to Ask when Vetting a Job or Business Offer with Jeff Lerner for a complete transcript of the Easy Prey podcast episode.
Jeff Lerner has been an entrepreneur since he was sixteen years old, starting a string of failed businesses before finally finding success in marketing. He now spends most of his day as the CEO of ENTRE Institute, an online entrepreneurial education platform he founded in 2019. ENTRE Institute teaches people how to thrive in the new economy and create a life you want now.
Jeff’s Journey from Dropout to Entrepreneurial Success
Jeff has always been an entrepreneur. At age sixteen, he dropped out of high school. Through his twenties, he was a full-time jazz musician and part-time entrepreneur. He started a lot of different businesses, but they never made much money or had much success. During his twenties, he failed almost a dozen entrepreneurial ventures and ended up $500,000 in debt.
In the late 2000s, he got involved in online marketing. There, he found considerable success. He was so successful, in fact, that he paid off all of the debt from his failed business ventures. He started a number of online and physical/digital hybrid businesses. Jeff was leveraging what he calls the “modern economy” and modern opportunities of entrepreneurship. His endeavors included affiliate marketing for a few years, a digital agency that provided marketing services for small and medium businesses, and an online training company.
In 2018, Jeff sold the agency and shut down the training company. He was thirty-nine years old and basically retired. But he wasn’t going to actually retire – he doesn’t even like golf. Instead, he started to put content on the internet to teach others about the opportunities of the modern economy.
Teaching His Success to Others
In the traditional path of how to be successful, Jeff did everything wrong. He dropped out of school and became a musician. He followed his creative passions and failed at eleven different businesses. But even though he didn’t do anything “right,” he was still retired before he was forty because of the power of legitimate modern entrepreneurship.
Jeff is deeply passionate about psychology, personal development, communication theory, and leveling up all areas of life through how we interact with the world. After his “retirement,” he started putting out content. He fused the entrepreneurial and business-focused aspect of what’s possible with the grounding and personal development that people need to be successful in the modern economy. Within a year, Jeff realized he had a potentially viable business training people in these skills.
In the summer of 2019, Jeff developed a course that’s now been taken by over 275,000 people. He created more courses, software, coaching programs, and live personal development events. ENTRE Institute is quickly growing into one of the largest platforms in the world to teach people go to into the modern world and create a life you want now.
Fake Jobs and Business Opportunity Scams in the Modern Economy
In Jeff’s parents’ generation, you worked fifty years at the same company and then retire. The people of Jeff’s generation work ten to fifteen years at a job and then move to a new job in the same industry. The average person now changes jobs every twenty-two months. Companies used to fire employees who had another job on the side, but now employers generally have no issues with that. This has led to the rise of the gig economy and entrepreneurial people who like setting their own schedule and doing their own thing. But it’s also led to the rise of fake jobs and business opportunity scams.
In the past, you either owned a business or worked for someone who owned a business. Now, there are four different paths you could take. Society is becoming more and more entrepreneur-focused. But that doesn’t have to mean getting a tax ID, opening a bank account, putting out your shingle, and having a traditional business. There are actually four different ways you can fit into this entrepreneurial economy.
You can be entrepreneurial – in fact, I think in the modern world, you have to be entrepreneurial.Jeff Lerner
The Four Ways to Be Entrepreneurial
First, you could have an entrepreneurial job. Many jobs can feel extremely entrepreneurial. Jeff employs two hundred people, and none of them report to an office because they don’t have an office. In fact, there are a lot of companies where having a job there is better than owning a business. You get a lot of the perks without a lot of the headaches.
Second, you could be a freelancer or part of the gig economy. This route has much more uncertainty, but also maximum flexibility.
Third, you can be a traditional entrepreneur. You start a business, put your own neck on the line, raise the capital, employ people, do payroll, and deal with all the details of a traditional business. This is what most people think of when they think about entrepreneurship.
Fourth, you can be an investor if you have the right know-how. This could be anything from trading penny stocks to owning vacation rental properties. Sometimes you don’t even have to put money down to acquire the investment. Jeff knows a person who leases cars, then subleases them to drivers who don’t have cars that meet Uber’s criteria. It is an investment, but in some ways it’s also business ownership – in the modern world, the lines can get fuzzy.
Broaden Your Thinking to Spot Business Opportunity Scams
ENTRE is currently doing a rebrand around a wilderness adventure theme. When Jeff thinks about the modern economy, he thinks of Yellowstone National Park or a jungle. Mountains are great because you can climb them and achieve great views. There are a million paths up them and a million great views to see. But there are also a million ways to die. You could fall in a crevice, get hit by a tree branch, or be attacked by a bear. The key is to have a guide, bring a map, and be equipped with the skills and knowledge to avoid these dangers.
Schools are not preparing students to venture forth into the modern economy. There’s a huge gap in the market that Jeff is trying to fill. There are a million ways to make a buck, but there are also a million business opportunity scams out there. Jeff sees students every day who are trying to do things right but have been burned by business opportunity scams. You need to have your guard up, and you need to be able to vet opportunities when they come.
Business Opportunity Scam or Legitimate Opportunity
Every time you are offered or find a new business opportunity, you need to vet it. If you can’t verify that it’s genuine, it’s likely a business opportunity scam. Here are a few things to look for to help separate business opportunity scams from legitimate opportunities.
If you can’t vet it, you shouldn’t trust it.Jeff Lerner
One big thing to look for is verifiable social proof. It’s unreasonable in this day and age for companies to expect you to take their word for things. They have an obligation to make it impossible for you to doubt their credibility. A great way to do this is video testimonials. A company could say that as part of the gig they’re hiring for, the freelancer or gig worker has to shoot a video testimonial about it and be willing to back it up if someone asks. The company can use that testimonial for marketing. And you can contact that person to make sure it’s not a deepfake video.
As a person looking at a business opportunity, it looks more legitimate when you see they want a video testimonial that it is legitimate. It also gives you someone to follow up with. If an opportunity provider hasn’t taken the responsibility to show you proof, just say no. Even if it’s not a business opportunity scam, look for something better.
You can look up an LLC or any incorporated entity through your Secretary of State. That registration information can help you make sure things check out. Also look at their website. How new is it? Is there a phone number available? Do the social media links in the footer work, and are those accounts active? It’s another layer of sophistication and common sense that you have to develop.
This is where entrepreneurship and being an entrepreneurial thinker is important. Even if you don’t own your own business, knowing what goes into owning a business will help you spot and avoid some business opportunity scams.
Even if you don’t own a business, understanding what goes into owning a business … [helps] you keep from getting scammed or screwed by people pretending to own a business.Jeff Lerner
Ask Questions About the Numbers
If you go to sign up for a program and it says that people who go through that program make so many dollars in their first year, that may sound compelling. But actually, that should be a red flag. Say someone took one of Jeff’s digital agency courses to learn how to set up a digital agency. How would Jeff know how much money that person made?
If Jeff has those numbers, there are three possibilities. Either he forced them to use his merchant accounts, he set them up as an affiliate for his products and they’re processing sales through an engine Jeff can view, or it’s really multi-level marketing or a business opportunity scam where their goal is actually recruiting. Even Harvard can’t tell you how much their students make. If you understand the mechanics of business, you can see through the numerical smokescreen.
Also beware of anything that promises a salary way beyond the required skill set. $250,000 per year sounds like a good gig to anyone. But if someone is promising that kind of a salary for an entry-level job or a position that requires only basic, everyday skills, that’s a red flag.
Just don’t go for it if it seems too good to be true, how about that?Jeff Lerner
Ask More Questions About Commissions
If they start talking about commissions but it’s not a sales-related opportunity, what are you earning commissions on? You’re probably getting recruited into something where your goal is to recruit others into the same thing. If your income will come through resale of their products, they have to be able to provide you with an income disclosure. Ask for it, and actually look at it.
The income disclosure clarifies what percentage of people who work with them make how much money. You can see how much most people make from this opportunity and how many people make a lot. It’s almost always terrible, with something like 0.2% of people making more than three hundred dollars a month.
These opportunities are almost always Multi-Level Marketing (MLM) companies or network marketing. Jeff doesn’t have a problem with MLMs or network marketing as long as it’s above board. But MLMs have such a stigma, especially in the US, that they try to call it something else. You may not realize that it’s an MLM company until you start asking for the income disclosure.
Beware of Selling Leads
If you’re looking at a business opportunity, one of the quickest ways to see if it’s legitimate or if it’s a business opportunity scam is to find out how you would be getting customers. Are they selling you leads or giving you leads. If they want to sell you leads, that’s a huge red flag.
That’s one of the quickest ways you can see if it’s legit or not: How am I going to get my customers for this thing you’re talking about?Jeff Lerner
If you work in a real estate office, they may print off a list of people thirty days behind on their mortgage and have you call them to try to get a listing. That make sense. Is this organization trying to sell you these leads? In business opportunity law, they’re not actually allowed to sell you leads for an opportunity they paid you to join. If there’s any talk about buying leads, you’re looking at a business opportunity scam.
The ONE Circumstance Where You Should Spend Money to Join a Business Opportunity
You should never have to spend money to make money from a business opportunity. The one exception is if the opportunity is a registered franchise or a registered business opportunity. If it is a franchise or a registered business opportunity (called a UFOC, or Uniform Franchise Circular), there is a disclosure that they have to provide it to you.
A legitimate business opportunity like this should be able to tell you what states they operate in, what states they are registered as a franchise or business opportunity in, and be able to show you the registrations. If there is an investment required to get involved, you need to ask if it’s a franchise or business opportunity and look at those registrations and disclosures.
It is reasonable to spend money to make money if it’s education. But force them to be clear about whether they’re offering education or a business opportunity. Some business opportunity scams like to obfuscate whether they’re education or an opportunity.
With education, it’s fine to have an attractive level of compensation as long as it’s coupled with skills you will need to learn. Jeff met someone recently who has a short training program to turn anyone with any IT knowledge into an Agile Scrum Master. Agile Scrum Master positions start at $150,000 per year. An IT technician making $70,000 can go through this course and double their market value, and it is legitimate because it’s a real position and there were concrete skills they had to learn to get there.
Define “Too Good To Be True” to Spot Business Opportunity Scams
We’ve all heard the old adage: “If it sounds too good to be true, it probably is.” And most of us can identify that a 300% return on an investment in one year is probably an investment scam and a business promising that you’ll make $10 million in your first year is a business opportunity scam. But what about something more reasonable? If they’re promising that you’ll make $25,000 to $50,000 in your first year with this business opportunity, is that too good to be true?
To find out, ask questions. Ask a lot of questions. Jeff used to hang out with a group of marketers in New York City. One of them was a cop, and every conversation with him felt like being interrogated. It wasn’t intentional, he had just developed a habit of asking an insane number of questions. To spot business opportunity scams that are too good to be true, be like that cop and ask questions.
So they’re promising $25,000 to $50,000 in your first year. Which is it? That’s a pretty big difference. Is it variable income? Fixed plus variable? What are the range of numbers? What will you be doing on a day-to-day basis? If they tell you, for example, that you’ll be doing medical billing and coding, you can verify that. The median pay for medical billing and coding is $46,000, so that’s reasonable. If you pause an interview to look this up, the interviewer will have one of two reactions. Either they’ll get annoyed and impatient, or they’ll respect your thoroughness and attention to detail. Either way, you win – you run off people peddling business opportunity scams and you get yourself noticed by legitimate opportunities.
Why People Fall for Business Opportunity Scams and Get Rich Quick Schemes
This problem is a symptom of the underlying despair in our world. We’re supposed to go to college, get a job, get paid, live a nice little life with the American dream, and have a nice retirement at the end of our careers. But the average person in the modern world feels like it doesn’t matter what they do, there’s no good outcome.
It’s not desperation, exactly. It’s more like existential recklessness. Whether they articulate it this way or not, whatever they’re losing is something they didn’t believe in anyway. This looks like a scam, but compared to what? The whole system is a scam now.
One of the greatest tragedies of modern society is that we’ve developed a toxic relationship with delayed gratification. The whole ethos fifty years ago was built on delayed gratification. But you can only build a society on that if after the delay, there is gratification. Now, people believe that when they’re seventy they’ll be living with their kids or a greeter at Walmart because their current job won’t help them retire. At that point, what is there to delay for?
In a society that has lost its sense of delayed gratification and in which a general existential hopelessness has settled in … if I wanted to be a scammer, this is a society I would want to do it in.Jeff Lerner
We’ve been told since we were kids that nothing worthwhile is easy. And the reverse is also true: Nothing easy is worthwhile. One of Jeff’s favorite quotes is from Jim Rohn: “Don’t wish it were easier, wish you were better.” If we can embrace that, we’ll probably become scam-proof.
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