Beware of Startup-Business Scammers

Online start-your-own-business scams are getting more and more sophisticated, and unsuspecting would-be entrepreneurs looking to start cyberbusinesses sometimes end up shelling out thousands of dollars and getting nothing in return.

Just ask V.M. from the Austin, Texas, area. A longtime entrepreneur in the home-building industry, he had visions of launching his own online travel and health-care insurance business but ended up out nearly $5,000. He didn't want his name used because he's still fighting for a refund from the company that scammed him, but his experience is a cautionary tale for anyone desperate to start a business and tempted by Web-riches hyperbole.

"The sites and their pitches are reminiscent of snake oil salesmen, and yet people from all walks of life are drawn in by the hype," notes Christine Durst, co-founder and CEO of RatRaceRebellion.com. Added Alison Southwick, a Better Business Bureau spokeswoman, "Because of the Internet, it's a lot easier for schemers."

V.M. was initially contacted via telephone by a representative of an Internet-based company that claimed it could set up Web sites for him and that he'd be able to make more than $3,000 a month from people going to the sites. He immediately checked out the company online, coming to the conclusion that "the site looked pretty decent."

Even though he had been a successful entrepreneur and retired several years earlier, the stock market decimated his savings and he decided to start yet another business. An Internet company seemed ideal because he wanted to work from home — and the concept seemed simple enough.

In May, he signed up for the service and the Web firm set up three sites for him that aggregated insurance quotes and travel deals. The way it was supposed to work was that whenever a customer filled out an application or booked a deal, he'd get $100.

V.M. has never seen a penny, even though he said customers did use the site. He contacted the Better Business Bureau and found out the firm had a long list of complaints against it. And when he complained to the company and threatened to sue if he didn't get a refund, he said a company representative told him, "You can sue us but no one has ever gotten money back."

Indeed, given the level of intelligence of some of these scams, the government often has a hard time getting the perpetrators to give back the funds, says Durst. So the best thing, she added, is to educate yourself and steer clear of them in the first place.

Popular scams currently making the rounds, Durst explains, "are what we call 'biz-in-the-box' opportunities, those that offer 'guaranteed success,' 'turnkey solutions' and 'proven systems,' all for what appears to be a reasonable buy-in fee."

Startup business scams have always been around, but they're now evolving, said the Better Business Bureau's Southwick. "You have assemble-stuff-at-home and stuffing-envelope scams, then Google money-making schemes, and now we're seeing Twitter ones," she added.

Durst offered some warning signs:

- Sites that require you to enter your e-mail address, name and phone number in order to get deeper into the site. These set you up for aggressive phone calls and a rash of e-mails.

- Offers that never REALLY tell you what the opportunity is. Real businesses have a real purpose, a real product or service, and real information - not just fluff.

- Sites that use catchphrases like "Turn your computer into a money-making machine" and "Make money while you sleep."

- "Opportunities" that claim you will make huge amounts of money with very little effort. (Successful business owners will be the first to tell you that success does not come easy, and money comes even harder.)

However tempting these sites may appear, put your skeptic's hat on and go beyond cyberspace:

- "Call the company and find out who the founders are," advises Amy Robinson, a spokeswoman for the Direct Selling Association. "If you can't get a hold of someone at the corporation, it's not someone you want to be affiliated with."

- Check out the financial viability of every company you consider. If they've only been around for a few months and there's nothing written about them in reputable publications, you'll need to talk to individuals who have started businesses with the firm and have had proven results. (I'm not talking about testimonials on a Web site. Those can be fake.)

V.M. said he learned his lesson: "In hindsight, I would have went back to the building business where I knew what I was doing."

Known online as Careerdiva.net, Eve Tahmincioglu is the author of “From the Sandbox to the Corner Office,” an in-depth look at top U.S. CEOs and the lessons they learned on how to succeed in business, as well as a career columnist for MSNBC.com.