by Kenneth Ang

Created on: January 17, 2010

How to avoid business scams

"Caveat emptor", which is Latin for "let the buyer beware" is the principle in commerce that the buyer alone is responsible for assessing the quality of a purchase before buying.

I would like to suggest that this principle does not only apply to buying merchandise, but also to business relationships.
When deciding on the people you want to do business with, it is imperative that you accept the responsibility of assessing the potential benefits and risks, beforehand.

One of the reasons many fall for business scams is that they allow themselves to be so overawed by the monetary rewards promised that they throw caution to the wind.

A business requires a lot of effort. In fact, most business owners put in more hours into their business than the average employee does. While a business offers greater rewards than a job does, it also comes with risks. Most employees are not aware of this because the risks are borne by their employers.

Unfortunately, many of the business success stories place emphasis on the results with little or no mention of the challenges faced. This is more evident when these success stories are used to recruit someone into the business.

These "success" stories, while giving hope of something better, tend to give people the impression that it is easy to make money in business.

This makes them easy prey for unscrupulous confidence artists, with their promises of great wealth, for little or no work. All that is normally required is an investment or payment of some sort, which the victim will gladly fork out later to find out they've been taken for a ride.

So, how do you avoid such business scams?

First, realize, as mentioned earlier, that a business requires effort, and that rewards and risks are part and parcel of any business. Any offer of great rewards that does not entail any effort or risk on your part should be kept at arms length.

Do your research. Study each business proposal in depth before you commit to it. Seek legal advice, if necessary, especially before signing any contract document. This is what all experienced business people do.

Keep in mind that there is no such thing as a "free lunch". Don't let greed cloud your judgement. Put yourself in the offerer's shoes. Ask yourself whether it makes sense for you to make a similar offer. 

Know the signs. When a stranger approaches you with a business proposal that promises you easy profits, alarm bells should go off in your head. Why choose you when he or she has family and friends who can benefit from such an easy deal?

A good example is the online Nigerian scam. A person receives an email "out of the blue" from someone they don't know, offering them millions of dollars in exchange for some help. It may sound absurd, but many have fallen victim to this scam and lost thousand of dollars.

Finally, trust your instincts. A good rule of thumb is, "if it sounds too good to be true, it usually is".

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