Opportunity or Financial Scheme?

When considering business ventures, knowing how to recognize a financial scheme is critical. In some ways this is more vital than the ability to recognize good franchise or multi-level marketing opportunities because there are so many risky schemes and they often sound so great!

The number one rule that most people have heard, even if they neglect to live by it, is that when an opportunity seems too good to be true, it usually is. The problem is we all tend to believe that we have found the exception to the rule.

Multi-level Marketing Pyramid Schemes

Pyramid schemes are one of many proposed opportunities for making money that must be avoided. Simply put, these so called businesses are presented as legitimate business opportunities but they make money only for the originators of the program through charging startup fees and getting dealers to buy large inventories that are never sold.

One dead give away to a pyramid scheme is that it promotes making money primarily through your enlisting others to be dealers rather than through actual sales. For a thorough discussion of this dangerous trap read The telltale signs of a pyramid scheme, an article on the Federal Trade Commission web site.

Obviously you want to explore any business opportunity carefully. Make looking for the tell tale signs of a pyramid scheme one of the first things you look for. Learn from people who are successfully doing similar work what the pitfalls and opportunities are in fact, not just in theory.

Franchises Can Be Fraught with Danger

A franchise can also offer real risks. Some time ago Business Week published an article (a book excerpt actually) that should be an eye opener for any potential franchisee called Have I Got a Franchise for You! Be Your Own Boss, Easy Money.

Before getting into any franchise it is absolutely essential to investigate thoroughly including checking out successful operations. There are excellent franchises out there. But if you want to go with a franchise it is critical to check out the program carefully.

Unfortunately for the unwary there are many more unsound franchises offered than good ones. Some are outright frauds. A franchise promoter may be willing to promise anything to get your money but provide little or nothing to help you establish your business.

Choose Business Opportunities Successfully

Choose your undertakings carefully. Get full information about what the investment costs are in both time and money. Even the best opportunities are likely to require more than represented.

NOTE:
A carpentry teacher I know tells his students to figure materials cost, then double the number. That would give a number equal to half of the actual cost!

Of course he then proceeds to teach his students how to do accurate estimating, but he is making the point that most people underestimate the cost of doing almost anything they undertake.

When considering a franchise or multi-level marketing business (MLM) think long term. Unfortunately most people underestimate the time it takes to do something even more than the cost.

If you are unprepared to work at a new business long enough for it to become profitable you may have to quit after a large investment but before experiencing potential profits.

Know Management and Marketing

Whatever type of business venture (franchise, multi-level marketing, or otherwise) you may decide to undertake, whether large or small, there are two subjects you need to know well: management and marketing (selling).

You can delegate almost everything else, but every successful business advisor I have studied (including the master business guru, Peter Drucker) repeats this same advice. You must know a lot about how to manage and how to market or you will find it very hard to succeed in any business.

How can you get this knowledge? There are many sources available. One good source can be found online at the Small Business Administration.

Here you can find more that two dozen free training programs to help you develop your business skills, including many that deal with management and marketing. The good news is that these skills, once learned, will help with all business activities you may undertake.

How to Avoid a Business Scheme

If you first learn a little about management and marketing and then keep your eyes open you can avoid these pitfalls. You are sure to see many a financial scheme if you look for a franchise or multi-level marketing opportunity but you don't have to become a victim of them if you are prepared.