Is That Business Opportunity Legitimate?
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John Tozzi, writing at Businessweek, has a neat article on home-based business opportunities:
"The Internet is littered with offers for home-based business opportunities that promise big profits for easy work.
But many of these offers, which range from envelope stuffing to medical billing, are really scams that prey on people's aspirations to work for themselves."
When someone expresses the desire to "work for themselves" are they risk seeking or risk adverse?
We usually think of self-employed or entrepreneurs as taking on a risky assignment - forgoing the usual comforts of a corporate job to strike out on their own.While this may be true, it depends upon why the person is looking to "work for themselves". If they have been working for a large corporation and have been fired, then the overwhelming desire is for protection - protection from being fired again.
These corporate boat people are not risk seekers - they are risk adverse to being fired again. Which is why they are in the perfect position to be scammed.
The pitch "be your own boss", no matter what fraudulent scam is attached to, resonates deeply with these individuals.
What is the FTC doing about this?
Tozzi writes:
"The Federal Trade Commission regulates many business opportunities under its franchise rule.
But for the first time, the agency is drafting regulations to cover home-based business opportunities and schemes that require investments under $500.
The new rule would apply to about 3,000 business-opportunity sellers, including 500 not currently covered by the franchise rule, and the FTC estimates that about 250 opportunities pop up each year. (That number doesn't include opportunities that drop out.)
FTC attorney Monica Vaca could not estimate how many are scams but said in an e-mail that the industry "is fraught with unfair and deceptive practices." The rule change would require sellers to disclose information to potential buyers, in much the way franchises must. It could go into effect in 2009 or 2010.
Unfortunately, this new disclosure law will not tell people what they need- that they are looking for a phantom dream. The new law will simply make it easier for the FTC to bring civil actions.
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