Avoiding Home-Based Business Scams

How to tell if a business opportunity is too good to be true

People start home-based businesses to create better and more flexible lives for themselves and their families. Unfortunately, financial independence for many is the last thing they achieve. Too often, home-based business opportunities are nothing but vehicles to rob you of your wealth and dignity. History has seen countless examples of scams dressed up as the deal of a lifetime.

However, there exist today many legitimate business opportunities that are worth exploring. Before you begin your search, you need to develop a list of insightful questions that you will ask each company about its specific opportunity. You're not looking for a guarantee here but rather evidence that the business generates real revenue by providing legitimate products and/or services. The answers you receive should satisfy any concerns you have before you consider an investment of your time and money. If a home-based business opportunity is for real, it won't matter how long you take to study it.

Here are some questions to ask when analyzing an opportunity:

How does the company make money?

If revenues are from anything other than the sale of real products and services, you should think twice about this business. Anything less isn't worth pursuing.

How do you make money?

Compare selling a product as an independent contractor to selling it as an employee at a retail store. In the case of the retail store, you receive an hourly wage from your employer to sell their products. Included in the price of the product are such things as the company's overhead, etc. In the case of the independent contractor, your profit margin is the markup you charge on the price you paid the company for their product.

If you can't sell the product for a retail price similar to what you'd pay in the stores and still make a reasonable profit, it's not a good opportunity. Often, multilevel marketing companies and their representatives sell products at prices substantially higher than what you'd pay for a similar item in stores. Long term, this type of sales model is bound to fail.

How do you find customers?

If a company tells you anything other than by hard work and lots of selling, then it's not a legitimate opportunity. Any business, home-based or otherwise, succeeds or fails based on its ability to sell. There's no shortcut around this reality. If you feel sales isn't something you can do, you'll definitely fail most of the time.

In the end, the best thing you can do when analyzing an opportunity is to take your time looking at the facts. If the opportunity appears too good to be true, it probably is. Common sense is rarely wrong.

Related article: Top 5 Home-Based Business Scams.

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