I have a successful home business and some of my friends and I have put together a free website to help others start their own business (and avoid scams). If you are looking for more information check out our Great Home Based Businesses site. We have specific pages on: hundreds of great ideas for home based businesses by category (including information on kit businesses and franchise businesses); resources for selling from home; resources for providing services from your home; avoiding scams and a lot of other pointers. PLEASE NOTE: we do not have a business or product that we want to sell you - our site is all about providing information.
When it comes to avoiding scams - here are some things that we have learned - if you are unsure then you need to ask yourself the following questions:
1. What is the value that you have added to the product or project?
2. Would someone pay you to perform this service in person?
3. Do they need money upfront?
Some legitimate businesses may require that you pay a franchise fee or buy a business kit in order to start your business with them. The presence of an upfront fee is not a definite sign of a scam - many businesses have legitimate reasons for requesting upfront fees. Reputable franchises spend a lot of money on advertising, research, branding and other items. They charge a franchise fee in order to cover these costs and in order to earn a profit from the companies operating under their banner. Chances are decent that if you have heard of and seen the franchise in your real life (other than from the person "selling" it to you!!) then it is legitimate business. Kit based businesses can collect fees for the same reasons and also to cover the cost of your business start-up kit. Again this is a mixed bag - some companies charge fees that merely recover their costs of material - knowing that they will make their money off the mark-up on their products. Other (less reputable) companies often sell "kits" that are made up of books and other materials that provide little or no value to the person purchasing it - they do not care if you sell any of their products - some do not even have real products - they make their money from selling these "kits". Again it is important to go for businesses that you are familiar with or do your research.
4. Do you KNOW anyone that has successfully made money with this business?
5. Does the person "recruiting" you make money just by signing you up?
Beware of "pyramid" schemes - schemes in which people are paid based on how many people they sign up not based on sales or other indicators. Finders fee or referral fees are very common in all businesses but they are not the main source of money in a legitimate business. Not only are pyramid schemes illegal in most places but only the first few people in a pyramid actually make any money - the people in the centre are lucky to recover their initial investment and the people at the bottom are the ultimate losers - they lose their full investment.
and the main question:
6. Does it sound too good to be true?
Because if it does - then it probably is!!
You need to RESEARCH all aspects of starting a small business. This means checking with your local and federal better business bureau or other business verification agency. BTW - seeing a "Verified" or "BBB" (Better Business Bureau) logo on their website does not mean that they are actually registered with any qualified agencies. Many sites will put a dummy logo on their sites and some go as far as providing a link to a dummy verification page on their own domain!! You should be able to go directly to the agencies site and lookup that business there. If you find such a logo on a website then find that they are not members in good standing with that agency - then they are SCAMS!! Run away from this business, pausing only to report the site to your local fraud bureau.
Some of the more common scams are:
i. Stuffing envelopes: this common scam has you "buy" envelopes and flyers from a company - once you have stuffed the envelopes and submitted then the company will often say that the quality is below standards and do not pay you for your work - worse you never get your initial fee back.
ii. Home assembly: this is very similar to the scam discussed in (i) - you pay for the raw material - make the products and company rejects them - leaving you out both money and time.
iii. Medical billing: some reputable companies provide medical billing services from home and look for new typists all the time. Unfortunately, scammers have caught onto this and are trying to get people to pay hundreds of dollars to special equipment and software to do this from home. Most legitimate companies looking for workers will NOT charge the person any fees upfront. They will sign a contract with the person and provide a license to their existing software - they will also provide all of your work - you do not have to (and usually can not) try to get jobs directly from medical clinics.
iv. "E-mail processing", "typing from home" or claims to "use your computer to make millions" or to help you "make money online": your return for investing in these scams? a half-baked summary of how you can scam others the same way you have been scammed. There are ways to earn money typing from home - but again - legitimate companies will not ask you to pay up front fees - they will not offer to sell you "customer lists" - they will provide you work directly.
v. "E-mail us for more information" or "call us at 1-900 for more information": these scams collect contact information for legitimate and scamming marketing lists. Further 1-900 phone numbers cost you money - money that goes to the scammer. The other concern is that these scams often request additional information to sell to other scammers or to engage in identity theft.
vi. Chain letters / e-mails promising that you will "make money fast" or requesting that you send them personal or financial information or send money: these scams collect contact information for scammers, facilitate identity theft and take money from those unwitting enough to send it.
My key pieces of advice in picking your business:
1. Do what you know and love.
2. Follow your instincts.
3. Figure out how to provide value to your clients.
4. Talk to successful home business owners that you know and trust.
5. Whatever you do - try not to limit yourself to one income source - one of the best ways to grow your small business is to open yourself up to other income streams. If you start a catering business maybe you could also teach cooking classes in your house, or if you start a typing business then you could also do legal transcription for sale. This approach has been invaluable to me - allowing me to get through slowdowns in my "core" business.
6. Accept that "get rich quick" schemes only work for 1 in every million people and generally require illegal activity - instead try to build a lasting business that will continually pay you a reasonable amount.
As for specific ideas - there are hundreds - most of the ones we discuss on our site relate to you selling your own products (e-books, crafts, antiques, designs, CDs, DVDs, knowledge via website) or selling your own services. We generally recommend that you not pay someone else for the right to promote their products but develop your own. Contrary to popular belief - everyone has some skill or knowledge that is valuable.
Also - if you are interested in a "kit business" such as Pampered Chef, Mary Kay, AVON, etc... or a home based business franchise such as ActionCoach, Coffee News, WSI corporate, Candy Bonquet, etc... - we have a pages dedicated to these businesses on our site.
Anyhow - that's my two cents - Good luck with your business - I'm sure if you do your homework you'll be very successful!!