Spotting a corporate scam in the industry your investing in!

Roy McDoanld has given me one of the greatest gifts that I could ever receive, and that is the gift of learning, Roy said that in order to move forward you need to learn from the past. In one of Australia’s biggest corporate scandals there can be a lot of learning. The asbestos scandal with James Hardie Industries took a turn for the worse when in 1995 the chief operating company was quietly stripped of its assets. Trade names, patents, huge management fees  and dividends flowed to the parent company.

“GREG COMBET, SECRETARY, ACTU: This is one of the most morally and legally repugnant acts in Australian corporate history.” ABC’s 730 Report

If we are to learn from this we could be to look into to corporate scams and frauds, Matthew Johnston from the University of Melbourne has written a great article on how “study shows how best to bust corporate fraud” this with research form KPMG. They also have some grate articles on fraud risk management and Unmasking the face of corporate fraud. Will help you gain a quick grasp on what can really go on in the corporate world.

Roy McDonald mentions that corporate fraud and scams are driven by greed and this is a trait of the ego as you start looking and researching you will find far more information then you need or will ever need, though once you have a basic understanding of how to spot a scam in the industry then turn your research attention to the people in control of the company and the character traits of them. Once you have your research then you can paint a clearer picture of where the company might be heading and if you should go and invest your super or money into it.

Spotting a Business or Franchise Scam

We are really blissed when it comes to information online about spotting scams in businesses or franchises. Here is an example of some government websites;

Federal Trade Commission has examples of business scams:

http://www.ftc.gov/bcp/franchise/tsweep02.shtm

Australian Competition and Consumer Commission has the franchising code here:

http://www.accc.gov.au/content/index.phtml/tag/franchisingcode/

A great new one to me I just found is Fido, built by the Australian government, it gives you financial tips and safety checks:

http://www.fido.gov.au/fido/fido.nsf/byHeadline/Scams%20-%20types%20of%20scams

Also another site from a great business leader Brad Sugars:

http://www.actioncoach.com/bradsugars/how-to-spot-a-franchise-scam.php

The information is there so why are people continually scammed? Is it that they just don’t read this or is it that they are not really educated in how to spot scams or even how to spot a business opportunity? It’s a lot of both and can vary, Roy McDonald refers to a percentage of the population being 95% as having no or near nothing in the way of financial education. If Roy can say 95% with confidence we can say it’s that most people just don’t know and wouldn’t be able to spot the difference between a working profitable business, a working unprofitable business and a complete and utter scam.

Spotting a franchise or business scam is left to the government to police and they can be just as bad at spotting them as the general public. Have they ever had the experience of running businesses or doing the due diligences of investing in a new business opportunity on a on going basis? Not really and they shouldn’t need to! Everything should be fine people should not rip other people off and the world is perfect. Well in some peoples eyes that is the case because that is their point of view and that is where we can get unstuck as well. If you think any business or franchise will fit your personality then you will be in for a surprise when the business fails, because you don’t fit the role that supports the growth of the business. This has added another aspect to the equation and makes it even more complicated, you may be tearing your hair out right now though if your look at some of Roger Hamilton’s work  it makes the process of avoiding a scam simple. Roger Hamilton has a great system for budding business owners, its called the Wealth Dynamics Profile Test. This test will help you find out who you really are as a business owner and will show you where you are strong and where you are weak. As Roy McDonald puts it so gracefully; “If you understand yourself, then you can understand where best to excel in every endeavor”.

I’m going to be bold and say if you really don’t understand your personality and how you relate to others is business then you should not go into business, it is really that important to know yourself, if you don’t you maybe be left thinking that you have been scammed. So check out the Wealth Dynamics Profile Test and see how to best work in your flow.

Spotting a Business opportunity Scam

A Business Opportunity scam can come in many ways, from an email, a flyer in the post, direct mail in your letter box and so on, really what we are looking at here are businesses that require an up front amount that must be paid ASAP (as soon as possible). My mentor Roy McDonald said “You should always take you time with a business and evaluating that opportunity”. We want to be very present when we come across a marketing material with the wording “Business Opportunity”.

Check in with yourself, dose the product or service that the business will offer sound like something you would invest in?

Is there a actual address that you can go to and how long has that business been at that address?

How many references do they have and can you meet these people?

This is the real truth of it; You are going to be the one that will make the decision! You and only you!

Take control of your Life, your Time, your Money

– Roy McDonald

So if running a business is new to you then you will need to be sure that you follow a few of these tips:

1. If the business goes bad, will you have any working capital left to invest into another business or even keep living

Finding Solution to avoid a scam

your life style?

2. If the business needs amounts of money beyond what you have contributed, will you be able to make them?

3. If you are going to be the manager or if something happened to the managers of the business would you be comperdent and able to run this business in the same way or better?

4. How dose this really effect your life style; With the outlay of money. With your time involvement. With the possibility that all may go wrong, you lose all that you put in, the worst case possible.

A business is a vehicle that ideally will move you towards your goals. So dose this do that and what about the time frames for the good the bad and the ugly circumstances. Will you be working for the business or will the business be working for you?

Here are some great reference articles for you to check out on some government websites:

http://www.scamwatch.gov.au/content/index.phtml/tag/BusinessOpportunityScams

I love this site because of the video’s, you just can’t go wrong with a video;

http://consumer.gov/ncpw/business-opportunity-scam-artist/

In closing as my mentor Roy McDonald has always put, “If you don’t stand for something you will fall for anything”! Start creating your goals today, create success habits that will teach you how to understand what a business really is and how they perform. How businesses are bought and sold is pretty simple its a lot like a house, if there are no contracts, no buildings, no employees then that is a hint, spend the time and the money to do your research and you won’t get caught up in the business scams out there. Regards, Mark