Scams a First Time Startup Founder Should Be Aware of
And Why They are Dangerous for Your Business
The birth of a new company can be one of the most rewarding experiences in a person’s life. Unfortunately, many first — time entrepreneurs might also experience overwhelming emotions of fear and trepidation as they approach their company’s launch.
This is completely normal and should not deter a new entrepreneur from launching and developing their business further, but it is important to be aware of some common scams that exist and how to avoid them.
What is a Scam?
Scams are commonly defined as dishonest or deceptive acts that may result in financial loss or harm to an individual. Scams often occur as a result of the following:
Impostor or Fake Entrepreneurs
Impostor entrepreneurs are often unknown to the victims, who may not be aware that they are being scammed until it is too late. Often, impostors are simply unqualified individuals who use deceptive methods to appear more experienced than they actually are.
An impostor might attempt to convince a victim that he is someone else in order to secure their financial resources or create a false sense of authority. The scammer might also be trying to take advantage of an existing company by stealing assets, misrepresenting their credentials, or claiming to be an existing employee.
A Ponzi scheme is when someone who does not have any assets or funds invests in an asset with the expectation that they will get paid back with money from new investors. The scheme can also be called a pyramid scheme, which involves multiple people joining together and paying fees to the person at the top of the pyramid.
It is similar to gambling in that you do not know who will win or lose money in this type of scheme, so you may want to invest only a small amount of money to avoid losing all of your funds.
In a confidence scam, a scammer attempts to convince a victim that they have a particular skill or talent that the victim can use to their advantage. This might involve a victim being convinced that they can assist in a business venture or be given false information in order to attract others into the scheme. This type of scam is often an attempt to steal money or personal information from someone else.
Bait and Switch
A bait and switch scam is when someone attempts to sell something at an extremely low price but then tries to charge more for it later on. A typical example of this type of scam involves selling items for $1, but then selling them for $10 or more after the buyer has made the purchase.
It is also common for individuals who are selling items on websites like Craigslist or eBay to start out with extremely low prices and then raise their prices after you make your purchase. This is one of the most common scams, so you should always make sure that you read the entire item description before making your purchase.
As an entrepreneur, you might find yourself in a situation where you are offered a free service or product that sounds too good to be true. If you do not feel comfortable with the terms of the offer, do not accept it. Even if it seems like a legitimate deal, there is no guarantee that you will receive the service or product that you are promised.
Affiliate Marketing Scams
Affiliate marketing scams occur when an individual promises a person money for promoting a product or service, but never delivers on their promise. In many cases, affiliate marketers might simply charge for referrals and then leave the victim with no way to make money from their referral after they have been charged for this service.
In other cases, affiliates might charge a fee for people to advertise their products without actually giving them any way to earn money from those sales. Some people also have even been tricked into buying things they never intended to buy just so they could earn commissions from other individuals who were trying to sell the same products as them.
Being aware of these common scams can help you avoid becoming a victim of one. If you do find yourself the victim of a scam, there are many organizations and websites that can help you find information about what to do next. Stay safe and keep working hard on your business!
About the Author
I hope that my post has helped you know more about Startups. Feel free to leave a comment and tag me and I will answer them. Follow my profile to get the latest content I post to stay ahead of the curve.
I am the Founder of Cudy Technologies, a full-stack EdTech startup helping teachers and students learn better. I am also a mentor and angel investor in other Startups of my other interests (Proptech, Fintech, HRtech, Ride-hailing, C2C marketplaces, and SaaS). You can also find me on Cudy for early-stage Startup Founder mentorship and advice.
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