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A small business blog featuring tips to help entrepreneurs succeed in the small business world. Topics include family business, human resources, marketing, money, networking, operations, ownership, startup, taxes and technology.
Why Small Businesses are Gullible to Scams

What’s this world coming to that so many people are scamming others for money . . . and we’re falling for it? It really blows me away that so many people fail to do their homework and check out what their told by a random nobody who calls them up and says, “You owe us money.”

Granted, some of these scammers are good… too good really, but most of them prey on the gullible. And, unfortunately, small businesses can be far too gullible. They’re targets. New small businesses are hit by scammers because they have less experience in the ways of the business world and will probably assume everyone’s who they say they are.

Also, most small businesses are too small to afford a full-time legal staff to check out offers or claims. And many are in desperate need of investors and will jump at the chance of “free money.” And that’s what the scammers are hoping for.

There are endless scams out there, but if you own a small business, here are three common scams to look out for:

Overpayment
With this tactic, scammers order a product from you and mail in a check for payment, but they write the check for more than they owe, making look as though it was simply a misunderstanding, such as sending a check for $950, when the bill was $750, and claiming the seven looked like a nine. Your company sends a refund of $200 with the shipment of the items purchased.

But, a couple weeks later, the check bounces because the account is closed or doesn’t exist. And you’ve just given away your product, been stuck with the bill for a bounced check, and are out $200.

What makes this work is the fact that the small business owner is gullible enough to trust that the check will clear, and that should never be the case, not even with your regular customers, and MOST ESPECIALLY not with a new customer. Give the check 7-10 days to clear the bank before you even ship the product. And, if the check is written for too much, return it and require the correct amount. Make it part of your payment policy and you’ll avoid the scammers.

Disappearing Act
A common example is a fax received asking if you are interested in selling your business. If you are and you contact the company, they charge you several thousands of dollars (we’re talking $5-10K) for that company to determine what your business is worth. The problem is, you pay them and they never return. Poof, they disappear.

The best way to avoid this type of scam is to check out any business, whether you hear of them by fax or word of mouth, before giving them your money. Check their registration with the Secretary of State and the Better Business Bureau. Ask around and see if anyone else has heard of them. Even do a Google Search. Chances are, if they’re scammers, you’ll find out real quick. And unless you can find a solid gold list of references and validation, don’t even both.

Directory Listings
Fake invoices have been around for awhile, but an added twist to this fraud is that many scammers are claiming to be directory listings, whether in print or online. They typically call and tell you that your listing is about to expire and convince you to renew. Then they send you a bill for several hundred dollars.

Generally, however, there is no directory to begin with and you’ve just paid to have your company name listed nowhere. As a rule of thumb, if you’ve never heard of or even seen the directory, it probably doesn’t exist.

A great way to throw the scammer for a loop is, when they call for your renewal, ask for a copy of the previous directory so that you can make sure you like they way your company is listed before it’s renewed. They’re sure to hang-up at that point.

Again, always check to verify the true existence and good standing of a company before you do business with them. I have listed helpful resources below. Don’t give the benefit of the doubt — that’s what makes you gullible in the scammer’s eyes. I guarantee, anyone who is a legitimate customer will understand your skepticism and wait patiently for you to verify their company or funds.

Resources:
National Fraud Information Center
Better Business Bureau
BBB Online Reliability Seal Program
Federal Trade Commission
Internet Crime Complaint Center


Related Readings:

• Entrepreneur.com: Common Small-Business Scams
• Systematic, Inc.: How to Steer Clear of Internet Scams


Related Small Business Buzz Posts:
Small Business Scams
Recruitment Management Software
How Accessible are You?
Professional Employer Organization Services
C|net Launches Small Business Site

By Michelle Cramer
Sunday, July 10th, 2016 @ 12:00 AM CDT

Money, Operations, Technology |