Is That Business Legitimate or a Scam?

Is That Business Legitimate or a Scam?: "The average business opportunity scam runs for 12 to 18 months, ropes in 100 to 150 people, and takes a total of $3 million, Webster says. The FTC has taken about 240 civil actions against business-opportunity sellers since 1990, according to Vaca. The government also prosecutes a handful of cases under criminal law when repeat offenders are involved. But many home-based business scammers are never caught or punished. When victims lose money, they're often reluctant to report the fraud. Instead, they blame themselves for their losses. 'One of the things that's tough about business-opportunity frauds is a lot of people have a hard time recognizing that they've been scammed. Everybody wants to live the American dream,' Vaca says.

Typical scams involve charging buyers up-front fees for materials, training, sales leads, or locations (for vending machines or kiosks). But the promised returns rarely materialize, and victims get stuck holding inventory they can't sell. Some home-based business opportunities, such as envelope stuffing, are outright pyramid schemes where the only revenue comes from recruiting new victims, not actual product sales. Others are more subtle, like offers to set up medical billing services, in which buyers pay for training and leads without knowing that most doctors use in-house services or established billing companies."