A properly timed scam can derail a business heading for success. During an economic downturn, you may be even more vulnerable.
Phones Are Ringing
Regardless of how long you are in business, you need to beware of people who want to separate you from your money. Within the a recent 9-month span, I received phone calls encouraging me to spend over $120K on money-making opportunities.
In the early days of my career, when I specialized in designing company logos, each of my customers was a startup. Everyone wanted to offer me a share of future profits in exchange for designing the logo. Few of those shoestring startups are around today. So I would have been working for free.
Smell A Scam
Familiarize yourself with common characteristics of a scammer. As you execute your business or marketing plan, be careful of these claims from a stranger:
- Disproportionate flattery or praise.
- Boasts of success and prosperity.
- Urgent investment for high yield.
Flattery includes comments like: “I love your website.” “You have some great products. I may need to buy some things from you.” A scammer may try to bond with you: “I used to work in the same profession” or “I took some classes in that myself.” Beware of strangers trying to befriend you or circumvent regular business communication channels.
The caller can boast about personal prosperity by casually mentioning millions of dollars. He might say he cannot pay for your services because he just spent $250K on XYZ. After you finance upfront costs, the two of you can split the profits. Other times they use third-party testimonials: “Three months ago, a man invested $10K. Now he is earning that much every week.”
Another technique of scammers is to act like they think your company is much bigger than it is. The hope is that you will continue the ruse to take part in a large deal with a handsome payout. Even though a high percentage of calls are fake, there is the occasional needle in the haystack. So here are some ways to help validate the claims.
Find out what you can about the company. Many offers are made over the phone because email would likely end up in your SPAM folder. With a captive audience, it is easy to direct you to an impressive website or landing page. Take a minute to Google the business to get an idea of its web presence. How long has the website been registered? How popular is it? Is there a Yelp page? Are they listed in the BBB? Are there many bad reviews or warnings?
This is not foolproof because you may see little information that neither is positive or negative. The Better Business Bureau costs money for membership so not everyone joins. You might be the target of a big company with an impressive marketing department. So they are legit but not offering any tangible guarantees. One of the most intangible offers is advertising. Callers talk about high impressions, cost per click, conversion rates, and many other numbers without any specific guarantee of a return on investment (ROI).
Crunch the numbers on the offer. Is there any supportive documentation to the claims? Do the numbers add up or is there some hidden calculation missing to arrive at the bottom line profits? Before the pandemic, a prominent company had three salespersons call me. Each replaced the former who no longer worked for the company or department. They pitched a lucrative promotional opportunity for $10K per month. But I was told that I didn’t have to spend that much. Use this baseline for three months to realize the biggest return as the algorithm adapts to viewer response. That’s too much double-speak.
The reported ROI did not take into account cost of goods, profit margin, shipping, transaction fees, or labor costs. I calculated my out of pocket costs would be $70K for a net profit of $10K. When I asked for the data supporting their more inflated claims, the company stopped responding.
Establish Spending Limits
Don’t invest more than you can afford. If it is a marketing opportunity, does it fit within your allocated budget for the year? Will it save you money on marketing or become an addendum to it? If you do not have the money, do not max out credit on the dream that you will soon pay it off and have plenty left over.
Be willing to walk away from negotiation. One of the most powerful negotiation tactics is a willingness to walk away. The swindler knows a monetary investment follows emotional investment. Take emotion out of the equation and focus on the facts.
You might flip the expense back to the other person, “According my calculations, this requires an investment of $20K. How much are you willing to pay up front?” The other party may pour on more flattery or reiterate the potential gross earnings. But if the deal seems unfavorable to you, be willing to decline the offer and forget about it.
Respond with, “I need some time to investigate this.” Don’t give your social security number to a stranger on the phone. Keep your eye on your goal. Execute your well-researched business plan. There may be some unexpected expenses, so you may need to adapt. But do not get derailed entirely on something that drains your pocketbook.