How to avoid being scammed as an online business owner

How to avoid being scammed as an online business owner

How to avoid being scammed as an online business owner

  • The internet provides opportunities for business owners, but it also provides a place for scammers.
  • Real Housewives star Jennifer Shah has been sentenced to 6.5 years in prison for defrauding business owners.
  • Entrepreneurship professor shares advice on avoiding potential online scams.

The online business world is getting more and more complex. More and more founders are launching digital brands such as virtual assistant services, social media agencies and training companies. However, with the rise of online brands, there is also a wave of online scams.

This month, a judge sentenced Jennifer Shah, star of The Real Housewives of Salt Lake City, to six and a half years in prison for a telemarketing scheme that defrauded thousands of victims.

According to NPR, Shah was selling customer contact information she obtained as victims invested in bogus business opportunities and spent money on services such as web design and tax preparation.

“There’s a difference between business coaches and business opportunities,” Cynthia Franklin, assistant professor of entrepreneurship and director of the Berkley Center for Entrepreneurship at New York University Stern, wrote in an email.

Business coaches – a community that also thrives on social media – provide guidance and mentoring. Meanwhile, “business opportunities” that often focus on immediate financial success “have greater potential for abuse,” Franklin said.

With the rise of digital businesses and the growing number of people looking to earn extra income to prepare for a potential recession, Insider has compiled advice on how to avoid scams when starting an online business.

Beware of false promises and pressures that indicate fraud

When starting a business, it can be tempting to sign up for services and programs that promise more sales, more customers, or immediate growth. In fact, the hashtag “#businesscoach” appears over 5.3 million times on Instagram and has over 302 million views on TikTok.

But if the service makes promises such as “guaranteed income, big returns, or a “proven system,” it could be an indication that it’s a scam, the Federal Trade Commission said.

“The business opportunity is focused on financial performance over a relatively short period of time,” Franklin said. “The biggest red flag to avoid is if someone tries to get you to make a financial commitment the first time you meet them without giving you time to think it over.”

Legitimate trainers may offer incentives to “act fast,” but there will never be any pressure to do so, she added.

Moreover, “any product or service that doesn’t offer a trial period or an option to withdraw if you change your mind” could be a scam, Franklin said.

Potential vet trainers

Certainly, coaching programs can work for entrepreneurs looking for specific guidance on ideas they need help with, problems they want to solve, or missions they’re passionate about, Franklin said. If the goal is more than just making money quickly, a proven coach can help. But the online coaching space is unregulated, which means there is no set of required classes, courses, or credentials that coaches must obtain in order to work with clients. This makes finding a qualified coach difficult, Insider previously reported.

It becomes especially important to verify all customer claims and opinions for potential trainers.

“As with any transaction, you should always read the privacy statements, terms of service, or other documentation about how your data is collected, stored, and used,” Franklin said.

Then, testimonials and reviews should describe specific results and include the person’s first name, last name, title, and the company that the person founded, so you can look them up and determine if the testimonial or review was written by a real customer.

Finally, Google can help you find any legal complaints about a product or service provider.

If you are unsure about the digital coaching industry, there are alternative business development options. Franklin suggested that founders join support groups such as Business Network International, alumni networks, or industry trade associations to network with reputable people who can be trusted.

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