The Good, the Bad and the Ugly Truth About Homebased Business Opportunities

It’s sad but true that the Internet has become ground zero for all manner of scammers and spammers.  So how does a person go about determining whether a business opportunity, particularly one that is advertised as homebased, is legitimate?  Below are the good, the bad and the ugly facts about homebased businesses.

 The Good

It’s true Virginia, that there are legitimate homebased business opportunities to be had.  Today’s business environment is such that many businesses do not require an office or even a staff to operate.  This means that successful sales and/or service based businesses have determined how to take their concepts national by offering to either franchise or license their products and services to people interested in starting their own business.

 Such businesses will usually advertise in major franchise and business opportunity portals, such as Entrepreneur.com, FranchiseExpo.com, FranchiseOpportunities.com etc.  The majors won’t allow any fly-by-night company to operate for long.  While this doesn’t mean that all their advertisers are on the up and up, you will fare better with these outlets than by responding to spam.  A legitimate biz opp provider won’t rely on spam to get the word out.

Another thing that a legitimate franchise or business opportunity provider will give you are references, both from other franchisees/licencees and from their clients that you can call and speak with.  People that are already in the pipeline can let you know such things as how much time from the time you put down your franchise or licensing fee until the time you can start recouping your investment, to how easy or hard their products and services are to sell, to how they feel about the people behind the business. 

 Better yet, find out if you can visit the opportunity provider before getting involved.  There’s nothing like getting up close and personal to determine whether the business and the people operating the business are the kind of people with whom you can work.

If you do take the time to visit, you will have the opportunity to check out the business’ facilities, their staff and other facets of the operation.  While all successful businesses are not housed in gleaming office towers, I’d beware of anyone operating a franchise from a boiler room or mobile home.  Only by taking the time to visit an operator can you determine whether their offer has substance or is all hype.

Legitimate opportunity providers will also provide you with live training classes and post-training support.  I’d be leery about putting down money on a business that offered only online training, or that had little to nothing to offer in terms of support. 

Also be sure to read the fine print in any franchise or licensing agreement.  Some of the things to be on the lookout for are:

1. Other than the front fee, what are the other financial requirements of the business? (required advertising, payroll & the percentage of the gross that you will pay to the home office every month)

2. Will you use your own corporate identity, or do you have to promote only the parent company’s identity?

3. Do you have the right to sell your business in the future to another operator without any strings attached?

4. Other than training, specifically what kind of support can you expect from the home office?

5. Are their any other “required” purchases or fees that you must make from or to the home office and how often?

6. How many products and services do they offer and at what price?

7. What is the likely amount of time that it could take you to break even on your investment and how much money do they claim that their franchisors/licensors are making per annum?

A Good Biz Opp Provider will take the time to answer all your questions and will not pressure you into make a buying decision.  They will not hesitate to provide you with references that are easily accessible by phone.  Their contracts will clearly specify what it is that they and you will do and they will not hide fees and other financial details in the fine print. 

The Bad

The first clue that you are dealing with a potential scam artist is that the offer will sound too good to be true.  Overinflated promises of profitability (”Make millions of dollars…”), or ridiculously underpriced business offerings (”For only $99.95 you too can learn how to succeed!”) are  other dead giveaways that the purveyor of the opportunity is looking to line his pocket at the expense of yours.

Don’t be fooled by “testimonials” that are all too easy created at the drop of a hat, unless they include contact information for the person that provided the quote. 

Take the time to extensively interview the operator of any opportunity that you are considering.  Ask to speak to a number of people at the home office.  Underhanded operators will only provide you with their say so that their business is on the up and up.  They will try to change the subject when you ask for references, or will balk at your suggestion that you pay them a visit.  There won’t be more than one person that you can speak with at the “Home Office.”

The Ugly

The ugly fact is that legitimate homebased business opportunities are not always the cheapest, but they are out there.  They can range anywhere from $10,000 to $50,000 to get involved and are likely to take you longer than you think to build a realistic revenue stream, not to mention recouping the initial investment.  Do you have enough money set aside to pay your bills, not to mention run the business for six months to a year?  The ugliest of all truths is that most businesses fail because they fail to properly capitalize their business at the outset. 

If you want to achieve a pretty picture for yourself in the future, don’t put yourself in a position to be broadsided by any bad or ugly truths about operating a homebased business.

Carl Weiss is a franchise consultant and operator of http://www.businessopportunitychannel.info