In short: The best protection against business scams is asking hard questions before you pay. Before you put money into any business opportunity, ask who is selling it, what written proof stands behind the income numbers, what happens if it doesn't work, and whether you could survive losing every dollar you put in. This scorecard turns those questions into a number you can act on.
When Brad Lea asked me what I'd tell his audience if I could tell them only one thing, I didn't have to think. Be careful. Don't fall for the scams out there. Don't put hundreds of thousands of dollars in anyone's hands. Start low, reduce your risk and grow from there.
▶ Watch: Watch: Robert Nikic on avoiding business scams and starting small
That advice sounds obvious until you're on a call with a confident salesperson, a slide full of numbers and a countdown timer. I've been on both sides of a lot of business conversations since I started my first company at 13. The people who got hurt usually weren't careless. They were hopeful, and nobody had given them a checklist.
So here's mine. Answer each question honestly and score it. At the end, the total tells you whether to walk away, slow down or keep going.
How to use the scam scorecard
For each question, give the opportunity:
- 2 points if the answer is clear, written and checkable
- 1 point if it's partly answered or only verbal
- 0 points if the seller can't or won't answer
The maximum is 14. The scoring guide is at the end.
1. Who exactly am I buying from?
Get the legal company name, the registered business address, a main phone number and the full name of the person selling to you. Then check them yourself.
In the United States, the FTC's Business Opportunity Rule requires many sellers of business opportunities to give buyers a one-page disclosure document with exactly this information, at least seven days before the buyer signs or pays (FTC). Not every offer falls under that rule, but every legitimate seller should be able to meet that standard.
Score 2 if you have the legal name, address and phone in writing and they match the state business registry. Score 0 if you only have a first name and a cell number.
2. Is there an income claim, and is it in writing?
This is where most business scams live. A salesperson says "our people make $10,000 a month," and nothing is written down.
The FTC's view is clear. If a seller says or implies how much you can earn, the claim has to be in writing, and they need written proof on hand to back it up. Under the Business Opportunity Rule, that means a separate document titled "Earnings Claim Statement Required by Law" (FTC). In 2021, the FTC also warned more than 1,100 companies that misrepresenting typical earnings in money-making opportunities can lead to civil penalties (FTC).
A legit seller can show you the claim, the dates it covers and how it was calculated.
Score 2 for a written, dated claim with documentation. Score 0 for verbal numbers or screenshots only.
3. What percentage of people actually got that result?
One success story tells you almost nothing. Ask how many buyers reached the result being advertised, and what percentage of all buyers that represents.
The FTC's Notice of Penalty Offenses on money-making opportunities says it's deceptive to present earnings as typical when they aren't, or to leave out the time, effort and percentage of participants behind them (FTC). That gives you the right question: "What does the typical buyer earn, and over what period?"
Score 2 if they give you a number and a percentage. Score 0 if they change the subject to the best story.
4. What are the cancellation and refund terms, word for word?
Don't rely on the sales page. Ask for the contract and read the section on cancellation. Who decides whether you qualify? What do you have to do first? How long does it take?
This isn't about assuming bad faith. Plenty of good companies have clear terms. The point is to know them before you pay, not after.
Score 2 if the terms are written, specific and match what the salesperson told you. Score 0 if there's no written policy.
5. Has the seller been involved in legal actions?
The FTC's standard disclosure form asks business opportunity sellers whether they, or their key people, have been involved in certain legal actions in recent years (FTC disclosure form). You can also do your own check:
- Search the company and owner names with "complaints" and "lawsuit"
- Check your state attorney general's consumer protection office (find yours at NAAG)
- Look up the company on your state's business registry
A lawsuit isn't automatically a red flag. Businesses get sued, and they sue others. What matters is the pattern, and whether the seller tells you about it before you find it.
Score 2 if the seller discloses openly and the history is limited. Score 0 if they deny something you can find in five minutes.
6. Can I talk to buyers the seller didn't choose?
References picked by the seller are marketing. Look for people who found the opportunity on their own, in forums, on social media or through mutual contacts. Ask them three things:
- What did your first year actually look like?
- How much did you spend beyond the purchase price?
- Would you do it again?
Score 2 if you can find independent buyers and their stories broadly match the pitch. Score 0 if every reference comes from the seller.
7. Could I lose all of it and be okay?
This is the question that matters most, and it's the one only you can answer.
I've watched people put their life savings into a single bet. Some came out fine. Some came out, as I put it on Brad's show, dry cleaned. I once lost $28,000 that I depended on, money my family depended on. I learned from it, but I wouldn't wish that kind of learning on anyone.
Start with an amount you can afford to lose. Prove the idea works. Then add more.
Score 2 if losing the whole amount would hurt but not break you. Score 0 if it's money you need for rent, debt or family.
Scoring: what your total means
| Score | What it means | What to do |
|---|---|---|
| 12–14 | Strong transparency | Proceed carefully, starting small |
| 8–11 | Gaps worth closing | Get the missing answers in writing before you pay |
| 4–7 | Serious warning signs | Pause. Talk to an accountant or lawyer |
| 0–3 | High risk of a business scam | Walk away |
Red flags that should end the call
Even with a decent score, stop if you hear any of these:
- "This price is only good today."
- "You don't need any experience. The system does it all."
- "It's basically guaranteed."
- "Don't worry about the contract. I'll take care of you."
- Requests to pay by wire transfer, gift card or crypto to a personal account
The FTC's penalty-offense notice lists telling people they don't need experience to earn, or that they must act immediately, among the practices it considers deceptive (FTC).
What should you do if something already feels wrong?
- Stop paying. Don't send more money to "unlock" results.
- Save everything: contracts, emails, texts, receipts and call notes.
- Ask for answers in writing.
- Report it at ReportFraud.ftc.gov and to your state attorney general.
- Talk to your bank or card issuer about your dispute options.
▸ Why this matters to my work
These days my work is policy, not sales. As Advisory Council Chair at Reseated Councils (United Nations SDG 8 & 9), I focus on making it simpler and safer to start a business. Disclosure rules like the FTC's are one of the few protections a first-time buyer has. I'd like more people to know they exist, and use them, before they pay. A founder who starts with a clear head and money they can afford to risk is the founder who's still in business in year three.
FAQ: business scams and business opportunities
How can you tell if a business opportunity is a scam?
Look for missing seller information, verbal income promises without written proof, pressure to pay immediately, and no independent buyers you can talk to.
Is it illegal to make income claims about a business opportunity?
Not on its own. But in the US, claims generally must be truthful and substantiated, and many business opportunity sellers must put earnings claims in a specific written statement (FTC).
Where do you report a business scam?
At ReportFraud.ftc.gov, with your state attorney general and with your bank if you paid by card.
The best deals survive your questions. The bad ones need you to hurry.
What is Robert Nikic's view on business scams?
Robert Nikic's view is that the safest way into business is small and verified. Get every claim in writing, check who you're dealing with, talk to independent buyers, and never risk money you can't afford to lose.
Related reading: Robert Nikic on Income Fraud: Why Order Count Isn't Revenue · Legit or Scam? The Office Test · Should You Become an Entrepreneur?
