Unfortunately, scams targeting young entrepreneurs have become rampant on the internet. Young people are viewed as tech-savvy and internet-literate. But apparently, being ultra-tech-savvy isn't enough to protect you from entrepreneurial scams.
You should be extremely cautious, especially if your business is a startup. Scam artists view young entrepreneurs as easy pickings. They trust easily and don't do their due diligence to verify a person's credentials before doing business with them.
Scam artists view young entrepreneurs as easy pickings.
Luckily, there are online tools to find public records that may reveal more about a person. You can verify their identity and stay protected.
Reasons Why Young Entrepreneurs Are Easy to Scam
Some of the reasons include:
1. Heavy Dependence on Online Resources
Young people tend to spend more time online. Most of them are on their phones just before they go to sleep and immediately after waking up. They end up feeling comfortable on the internet, so it's not hard for them to get caught up in scams.
They are also heavily reliant on online resources such as social media, and online stores. This over-reliance and constant online presence makes them easy prey for scammers.
2. Lack of Legal/Business Experience
Young entrepreneurs usually don’t have the same level of experience as older and more mature entrepreneurs. This puts them at a disadvantage. It's easier for an older entrepreneur to identify and avoid scams because the chances are that they have dealt with them in the past.
On the other hand, a young entrepreneur knows very little or nothing when it comes to avoiding scams. This is because they lack adequate business experience, and it makes them complacent. This makes it easier for cyber criminals to scam them.
3. Overconfidence and Excitement
Starting and running a business is a huge achievement, especially if you are young. It evokes a feeling of excitement and confidence in oneself. Young entrepreneurs may believe they are invincible to scams because they are confident in their abilities. The excitement of running a business may make them complacent in identifying potential scams. Therefore, they end up making bad decisions and taking more risks, which makes them easy targets.
4. Wrong Partnerships and/or Trusting The Wrong People/Investors
Young entrepreneurs are quick to trust. Of course, there are plenty of genuine partners, investors, or business associates out there. Then there are those with nefarious intentions who can smell gullibility a mile away!
These scammers will show you impressive but fake portfolios and credentials just to reel you in. Once you give them trust, they easily reel you in. The sad thing is, you won't be any the wiser until it's too late.
Again, to avoid the wrong partnerships, you should verify the credentials of all people you have business dealings with. The easiest way to do this is to find public records that can give you the intel you need. Then you can decide whether to work with them or not.
5. Fear of Missing out on a Trendy Opportunity
Fear of missing out (FOMO) is anxiety that an exciting opportunity or event is happening without you being there or participating in it. It's natural for all entrepreneurs to experience this. Such anxiety and unease can lead you to make bad investment decisions.
Anxiety and unease can lead you to make bad investment decisions.
Young entrepreneurs are often quick to jump on trendy new networks because they believe that is where their customers are. They forget that there are also cybercriminals looking to profit from the trend by using dubious means. FOMO makes it easy for scammers to lure unwitting young entrepreneurs.
Types of Scams That Might Target Them
Some of the scams that may target young entrepreneurs include:
1. Marketing Scams
Marketing scams involve making false or misleading promotional claims for financial gain. This type of scam can take several forms:
- Advance fee scams - Here, the scammer will promise substantial financial benefit if you can purchase their product or service upfront. In the end, you may only realize that the offer is bogus when you have already paid and it's too late.
- Bank and financial account scams - Some marketing fraud schemes will trick you into providing your bank details or the financial account data of your business. This way the scammer gains unauthorized access to your accounts and empties them.
A common trait of a marketing scam is the promise of financial gain, investment return, or other rewards. These are all lies, and young entrepreneurs are quite susceptible to them.
2.Financial Scams
Financial scams happen when someone deprives you of your money, capital or harms your financial health using deceptive, misleading, or other illegal means. You can report these scams, but it’s also good to be able to identify them:
- Identity theft - The scammer steals your personal financial information linked to your business. This can include your credit card number, social security number, or bank account number. They then make fraudulent charges or withdrawals from your accounts.
- Government grant - The scammer will tell you they’re from a government agency. They’ll ask for your personal information and your business information if you want to qualify for a government grant for your business. They’ll then use this information to defraud you.
- Business coaches - Business coaches usually offer heaven and earth (for a fee), to show you the secrets of succeeding and transforming your business. But not all of them are genuine. Many are out to defraud unsuspecting and inexperienced entrepreneurs. Avoid this by using online tools to find public records that’ll help verify their identity.
- Vanity scams - Scams exploiting the human ego have become popular, and young businesspeople tend to be a key target. A scammer may approach you about receiving a business or leadership award or the opportunity to be included in a biographical directory of "Who's Who."
These usually come from bogus and worthless organizations. Often the total or partial amount of the cost of receiving the award is requested. Being a young entrepreneur, this is an exciting prospect. Many victims waste no time paying the fee.
Conclusion
Despite the many threats that scammers impose on young entrepreneurs and their businesses, the good news is that young entrepreneurs are savvy enough to implement safety guidelines better than any other age group. There are services online that can help. With extreme caution, it’s possible to steer clear of these scammers and safeguard your business.
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How to Deal with Bad PR
Why Brand Credibility and Package Design Are So Important