Pump and dump, multi-level marketing (MLM), Ponzi, pyramiding, advance fee, and coaching schemes are examples of financial scams that have stolen billions of dollars from innocents around the globe. They promise you that you’ll earn five to six or more figures in such a short time in exchange for a fee. Yet, they never deliver.
The thought of getting swindled by one is already a horror. But that doesn’t mean there’s nothing you can learn from these scams as a business owner. Here are wise lessons to bear in mind to make your time, money, and effort as an entrepreneur worth it.
1. There is no way to get rich quick
Only a few have been able to go from rags to riches in such a short time. They are either scammers or business owners who got lucky. For ordinary entrepreneurs, getting rich means putting in blood, sweat, and tears to your business to start it up, manage it, and make it grow.
2. Humans are bad lie detectors
It doesn’t matter if you’ve taken multiple hours of a psychology course or lie detection lessons at the CIA. One way or another, you will get fooled. It may come from a scammer but it can be from one of your employees or a family member.
My point is, you have to be extremely vigilant especially when you let others handle your finances or other critical work. However, trusting others is important as a business owner. By giving it to the right person, you can achieve a lot of success. This is the part where you must get to know who you deal with at a deeper level.
3. Money isn’t a weed
Your money won’t multiply if you leave it alone in a vault or in the hands of another person. Although saving is good, you still have to take risks and do active work for your cash to breed. Even in copy trading, which is an automated form of stock trading, studying the trader you’re about to copy is a must to increase the chances of your investment paying off.
4. Some networks can help you while others won’t
Image source: World History Encyclopedia
Pyramiding and MLM schemes require you to pay for products, recruit, and network with other people to earn. This alone is already a red flag in the world of investing. Schemes like this can be present in the form of “entrepreneur groups”.
The only thing that would make an entrepreneur group legit is that it requires zero membership fee where everyone is genuinely helping each other without asking anything in return. There are only a few business networks that can truly give you advantages. Examples are partnerships, collaborations, and advertising agencies.
5. If things sound too good to be true, it probably isn’t
One of the tactics financial scammers use is when they bombard you with a lot of data, outrageous product claims, and promises. This is to lower your guard, earn your trust, and prevent you from doing extensive research about the “company”.
So what does this mean to you as a business owner? It means that despite your extensive research or analysis telling you a major business decision will be successful, it’s still prone to screwing up. A smart entrepreneur always does testing first and creates contingency plans before going all out.
6. Change isn’t always a good thing
Scams are so successful because they mostly happen in moments of change. A recent example is the toilet paper shortage of 2020. It all took one disinformation campaign to cause a massive public panic of hoarding. And it’s a solid example of the pump and dump scheme.
Who knows? Maybe the scammers were hoarders who stocked a lot of toilet paper in advance. The lesson here is that following trends aren’t always good for your business. It wouldn’t hurt to be patient and let those eccentrics test the water first.
It will be a win-win for the cautious you. If a trend does indeed bring a lot of advantages to your venture, then by all means ride the waves. If it doesn’t, then good for you because you never incurred any financial losses out of making blind decisions.
Skepticism can be a good thing. In a world where everyone is experiencing a crisis, it’s best to always step back, breathe, and let your rational side take over to protect your hard-earned money.
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