Late-stage entrepreneurs prone to scams; gouging

Local entrepreneur shares her story to help educate others of the dangers

In the age of high-speed technology and automated marketing, Florida SBDC at University of South Florida business consultants sometimes see entrepreneurs who are taken advantage of, due mostly to a lack of knowledge. Clients, often retired from their first career, sometimes come to the FSBDC at USF because they have been taken advantage of by organizations who charge excessive amounts for jobs that an entrepreneur can do themselves, with a little bit of knowledge and coaching.

Recently, Bill McKown, business consultant, sat down with one such client who wants to help educate others of the dangers of not knowing that there are no-cost or low-cost services in their own hometowns, with face-to-face experts who can help.

Connie Burke was born and raised in Illinois. She has a background in sales and public relations and was a chamber executive director in Colorado. She now lives in Avon Park. After retiring, Burke, eager to get her own business started, reached out to two out of state companies that promised big results, even telling her what business to go into. After being taken for more than $30,000, she now finds herself starting over, but this time with the right resources. Read on for her story:

Note: Editor reserved the right to remove the name of the two companies mentioned in this Q & A.

Bill:  You were looking for entrepreneurship opportunities right?  Can you tell us what you were looking for and maybe where you went to start looking?

Connie: My jobs had been eliminated last year, so I wanted something that I could work from home so I would have a little more use of my time, where I could actually choose when I work and when I didn’t and I could take it with me wherever I went because I travel quite a bit. And as a result of losing one of my jobs, I was actually on unemployment for the first time in my life and so what happened is I decided I wanted to do maybe like an ecommerce business of some sort.

Bill: And you needed income?

Connie: I definitely needed it, I had none. I just had social security.  I was used to more than that obviously. There were two things I did actually. I had talked with some people who had a friend who lives out in Montana and he had done an ecommerce business and was selling on ebay so I thought okay I could do that. To tell you the truth right now, I can’t remember if it was an email I answered or a text message, but it sounded interesting.

Bill: You went online and were searching for opportunities?

Connie: Yes. And this happened to come up so I made the call and I talked to several people and they were so excited and so forth.

Bill: At that point did you know what type of business you wanted to get into or looking at or did they suggest things?

Connie: No, they suggested this particular company and this particular business. The reason, I’d been in sales so they thought oh okay you could do this and it’s a matter of working with wholesalers and they said you’re still young and you can do all these things. We all like to hear that. We all like to hear that we’re still viable and I wanted to be productive.  It devastated me when I had to go on unemployment. I’d never been on unemployment in my life.

Bill: So what type of enterprise were they wanting to set you up in, or did they suggest that you set up this type of business?

Connie: Well, the first company didn’t. They’re the ones who took the largest sum of money. They were saying we need money for e-mentorship, we need money for e-learning, we need money for this, and it just kept on going.  And I thought okay I need to have all of that stuff.

Bill: Did you already know at that point what you wanted to sell?

Connie: No. I really didn’t, I had been selling food, health food and I kind of thought well I can sell health food but I can also sell a lot of different things because what they were trying to get me to do was be involved with the wholesalers and work with wholesalers. No matter what it was they said you can sell anything, you can sell absolutely anything and you have to go through certain steps as to how much you charge.

Bill: So what they were doing, without having an exact business line that you were looking at or any sort of business plan, they were suggesting you go ahead and form an entity?

Connie: Right. I needed to form a LLC and I needed to get my EIN and they were working with another company and [they] were the ones that actually set up the LLC and worked with me in that area and they were tax people and that sort of thing. I thought initially that they were together, that they were the same company but they weren’t.

Bill: Your interaction with them, was this primarily over the telephone?

Connie: All of it. All of it was on the telephone.

Bill: When you were talking with them, did it seem like it was high-pressure sales? Did you feel that?

Connie: They were very, very smooth. And they knew that I was a senior. They knew I was vulnerable. They knew I was desparate because I needed to make some money.

Bill: Did they seem to have the answer?

Connie: Oh yes, and I can do it. You know they kept saying you can do this and we can help you. We will be there for you. We will always be there for you. And the one thing that they wanted to be sure that at the end of my successful story that I had a testimonial to give to them, that they could sell everyone else on that testimonial. So that they could get other people hooked on it.

Bill: So the first part of the service they helped you set up entity and get an EIN?

Connie: Yep, that was all part of it.

Bill: And what did they charge you for that?

Connie: The total was about $32,000 dollars. And the interesting part of that was I had a little bit of my own money and I gave it to them, but the other part I had to have credit cards. They were on the phone with me, because I told them I don’t have any kind of a credit line like that, you know I had a really good credit rating, so they went to Chase, and they were on the phone with me.

Bill: So they helped you get new credit cards?

Connie: No, increase the credit line with existing so I could afford to have the $32,000 debt line. And they kept telling me you could do this because after two or three months you’re going to know exactly what you’re doing. You’re going to be able to start selling. Things will start moving for you, we know it will.

Since starting her work with the Florida SBDC at USF, Burke has learned, through consultants McKown and David Noel, that creating an LLC and obtaining an EIN is relatively easy and inexpensive to do on your own.

Bill: Did you feel like you were taken advantage of?

Connie: Oh absolutely. And the other thing I remember is that after I said I would do this and I had signed on the dotted line they said, “we’re just glad you didn’t have to pray about it.” you know that really hurt my feelings, it really made me feel, in fact, I don’t know, right then I should have said no because that has weighed on me heavily.

Bill: I can tell.  So your encounter with them, your relationship with them, what was the amount, the very first amount that you agreed to? Do you remember?

Connie: $16,835. And then they asked for another $8,000. This happened on December 9, 2015, and the very first week of January is when I started telling them via phone, via email that I wanted nothing to do with this, please give me my money back. I was just desperate, I told them please have compassion, you know. They have no compassion. [One company] did give me back some money but not close to what I invested.

Bill: So Q: Connie, the initial amount was around $16,000 as you pointed out. What were you getting for that $16,000. Do you remember?

Connie: Yes, it was e-mentor, e-learning, and a part of that was also called my supplier find where I would tell them what I wanted to sell and then they had people who would do some research to find the various wholesalers who sell those products. That was a lot of it and the other part was every week I had an hour session with one of the counselors who’d be there to help me and encourage me and that sort of thing.

After initially hearing her story, Noel immediately recognized it. Other clients have had similar experiences, with organizations gouging seniors for items that can be found elsewhere for free, such as e-learning videos and setting up social media profiles. Most of what Burke paid for in e-learning could also be found on YouTube or via Facebook or eBay learning centers, at no cost.

Bill: What was your tipoff, where you began to go I question this, this is not panning out for me?

Connie: When I started working with the wholesalers and started putting all the cost factors into these items, and I thought to myself how in the world, why would anyone want to buy these things after I have added 45 percent onto an item from a wholesaler. They could go to Wal-Mart, they could go anywhere and buy these same items. Why would they want to buy it from me? The more I thought about it the more I thought this isn’t right; there is something wrong with this picture.

Bill: Is this something you questioned your mentor about?

Connie: Yes I did!

Bill: What was their response?

Connie: Well basically he just said you know Connie once you sell one item you’ll see how it can make money for you, but I said the problem is I feel like I’m having to add too much onto the wholesale price in order to make it pay me some money. How am I supposed to make $6,000 a month – they said anywhere from $4,000 to 6,000 a month – and I said how am I going to do that? Right now I can’t even make $142. I mean basically, I sold one item and I lost money on it. So the more I thought about it the more I thought this isn’t right. They do what they say their going to do in terms of giving you what they say they’re going to give you, but it doesn’t convert.

Bill: So how many weeks or months, all together were you involved?

Connie: I’d have to say from November; right before Thanksgiving is when I talked to them the first time, and then they called me back and then December the 9th is when I signed the contracts and stuff and through February 2016 basically.

Bill: Do you suppose this has happened to other people like you?

Connie: Oh I don’t think there’s any doubt about it. I feel really bad that I fell for it because I really thought I was kind of smarter than that. And I did. I thought I was smarter than that, to fall for a scam, but I wasn’t.

Bill: What would you say to other people like yourself, seniors or people who are looking for a home-based income? What would you say to them now as they’re searching for ways to make money?

Connie: I would suggest in coming and seeing people like you, talking to friends, talking to people who have been on eBay or who have sold on eBay or just talking to people who are not associated with the company.

Bill: So for the record, tell me where is your business is at now?

Connie: Well the one I’m working at now or the one I’m forming?

Bill: The one you were trying to form to begin with.

Connie: That one is done. I am not doing that at all. It stressed me so bad that I don’t want to get back into it again and I’m leaving it. I’m going to do another business that will be helping people. That’s what I want to do.

After putting all of her money into a business that was not going to work, Burke decided to attempt to work with the two companies to try to recoup her investment. She has reported the companies to the Sheriff’s Department, contacted the Better Business Bureau, and her credit card companies have attempted to collect on her behalf. In the end, she did not recoup the majority of her investment because she had signed contracts with the organizations. Now, she’s reaching out locally as she attempts to start a new business. She went to CareerSource Heartland and eventually, was introduced to the Florida SBDC at USF, and Noel, a business consultant for the FSBDC at USF, in Avon Park. In the meantime, Burke has picked up a part-time job to supplement her income.

Bill: So you went to the SBDC office at South Florida State College and you met with David and you met with me, as well. What was your take away after meeting with us? What was your feeling about things?

Connie: Actually I reached out to David because I wanted to find a business I could start on my own that right now I can supplement. The job I have is not giving me enough hours and I wanted to do more and I don’t want to go on welfare. I don’t want to do that. I really want to work, I want to be productive, I want to stay as young as I can possibly stay for as long as I can. That means using that head.

Bill: Thank you Connie. Thank you for coming.

If you are interested in entrepreneurship, please reach out to credible organizations in your local area. Avoid the possibility of becoming a victim of online scams, high-pressure sales or over-priced basic services by visiting local chambers of commerce, economic development organizations or the Florida SBDC at USF certified business consultant in your community. Your local FSBDC at USF representative will meet with you confidentially and at no cost. Go to SBDCTampaBay.com/resources and SBDCTampaBay.com/blog to learn more.