Time for a Small Business Safety Network?

Small Business CrimeMaybe it is time to create a safety network for small business owners? I have met several entrepreneurs and sole proprietors that have been fooled by “scammers” and other types of fraud. A special group of these parasites are calling themselves “business developers.” These guys hide behind a valid title – but they only use it as a cover for their shady activities.

They’re fast talkers and promise all sorts of things – and then the hammer drops . . . they ask you for an advanced fee, a consultancy payment, so they can start to, ahem “work” if you will, on your project.

Then the circus is on the road including pranksters, clowns and magicians, all wearing different “hats.” They get very “busy” for a period of time and then they start to play hide-and-seek with you and eventually (yep, you guessed it) – they disappear!  Below is an excerpt from a piece I wrote titled, “Five Lessons Learned From My Startup and Why I’d Do It Again” which includes some lessons I’ve learned so far:

“There are many external barriers. For example, we faced bureaucracy, rules, the jante law and fraudsters who seek to cheat you. I have been a bit naive, but personally I think that in the long run it is still a good idea to give people the benefit of the doubt.”

I think it’s the buyer’s responsibility to check that everything is in order (i.e. act according to the “caveat emptor” rule). But it’s important to note that the “buyer beware” rule does not include fraudulent behavior. Take this, for example, from Answers.com:

“This rule is not designed to shield sellers who engage in fraud or bad faith dealing by making false or misleading representations about the quality or condition of a particular product. It merely summarizes the concept that a purchaser must examine, judge, and test a product considered for purchase himself or herself.”

We have seen several versions of these robberies, (e.g., ponzi schemes and advance-fee fraud) come and go. During the summer period, July through August, and vacation time in Europe, you often get fake invoices and order confirmation documents from scammers. I received an “order confirmation” from a fake yellow pages directory and a phone call from telemarketer who wanted to force me to say “yes” to his questions, so he could record it as evidence for a purchase of their online directory.  Here is one key finding from Ernst & Young’s European fraud survey 2009:

“Our survey respondents believe the likelihood of fraud and corruption is set to rise further still. 55% of the respondents expect corporate fraud to increase over the next few years.”

So, what can we do to prevent future frauds from happening? Any suggestions? Well, I have been discussing it with an entrepreneur to try to set up some kind of support network for small business owners who have been victims of fraud so we can warn fellow business owners and keep them from going through the same scenario. The goal is to create something positive out of all of this negative. It’s time to learn from old mistakes and share the new experiences with others. As Friedrich Nietzsche said so eloquently:

“What does not kill me, makes me stronger.”

One idea could be to create a member forum together with one of the associations of business owners. Personally, I am thinking of joining a BNI (Business Network International) chapter in Gothenburg, Sweden. My goal is for this post to be seen as an open letter to small business owners around the world, as an attempt to start an ongoing thread and conversation on this issue, and to create a proactive defense program for the producers in the long run.

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Martin LindeskogAbout the Author: Martin Lindeskog is a “trader in matter & spirit” and a small business entrepreneur in Gothenburg, Sweden. He is a board member of the Swedish National Association of Purchasing and Logistics (Silf, Western Region). Martin also writes a long-standing blog called Ego.


Martin Lindeskog Martin Lindeskog is helping businesses use new media to boost their supply and value chain. Martin is a tea enthusiast and you can find him on his blog, Ego.

12 Reactions
  1. Martin,

    Love the idea and though spammers are constantly changing their names and fronts, the basics behind the scams are basically the same. Scammed business owners could point out red flags to watch out for and if in doubt you could have fellow business owners weigh in with their thoughts on an offer that seems a bid shady or “too good to be true.”

  2. Hey Martin
    Good post. I’ve seen these protection measures in industries like Travel where consumers largely write up reviews of mailings they’ve received. I know we’ve seen Yelp reviews help consumers, but I could see where you flip the model slightly and allow biz owners to chime in about questionable letters/invoices/etc that they’ve received.

    But the challenge is the direct mail/spammers/schemers are usually one step ahead of us because we don’t have time to chase them down. We’re too busy running the biz. But there’s probably a place for listing known schemes in one place.

  3. Good post. I think there is a very good relationship between business and industry associations; and that relationship can be built to help put a stop to the issues of fraud, corruption, theft and more.

  4. Hi Martin, in your last business what kind of fraudster did you deal with? It would be interesting to share details.


  5. Martin Lindeskog


    I will write a list of type of fraudsters in a comment later on. I have material for a whole book… Although it happened some time ago, it is stirring up emotions when I think about it again, so I have to take a mental “breather” and come back to you soon again…

    In the meantime, please read my post, The Third Place, by clicking on “Martin Lindeskog” Says:. If you want to see me in “action,” feel free to watch my video message in the blog post.

    As they say in the Terminator movie: “Hasta la vista, baby” … “I will be back”… Or to say it in another, “see you later, alligator!” 😉

  6. Unfortunately I don’t think it’s possible to stay ahead of these scammers. They’ll just change and evolve when people start to catch on. When money is involved, these fraudsters will do anything to get their hands on it. I wish there was a simple answer. I’m leary to do business with anyone online that I know zero about. I tend to stick with using someone that others have recommended to me and that they can trust.

  7. Anita,

    I had to deal with several fraudsters. Here is a list of them:

    – “Business developer” as I described in the beginning of the post. This person got money and didn’t deliver and then started to “jump on” some of our business contacts. I had to spend plenty of time to deal with this issue and warn people about this person.

    – Supplier that got paid and didn’t deliver. The person got fooled by the “business developer” and couldn’t come up with products that we had ordered.

    – A person who turned up to be a confidence trickster. The person took money from our business and turned people against each other in a manipulative way.

    – Another Supplier that got paid but didn’t deliver. The company had a facade but the owner was a con man.

    – Several people who pretended to be experts on different business areas, but it turned out that they only wanted to get attention and suck energy out of our organization.

    I have material for a fiction book. I wonder if I could get a “ghost” writer to help me with this?

    I always want to end on a good note. Through all this mess, I have meet good people too. I am working with a couple of them right now on a new business venture. They have also been hurt but fraudsters. See the end of my post.

  8. Just got done reading your article in my RSS reader, yes I am a few days behind but just catching up on some reading on Friday afternoon. Good article and how true it is. Information is key.

    What I want to say is there are numerous fraud and security issues that most businesses must deal with on a regular basis, the problem is that a lot of times we really don’t think about it until it happens to us. I have dealt with a lot of small and medium sized businesses over the past 12 years in this area and most of the time they had a hard time just keeping up with the many things that are necessary to run a business let alone the many security issues related to a running a business. I found myself many times visiting businesses after the fact and repeating much of the same information related to a security issue. After the fact never really helped them prevent it, it basically just provided them info to deal with a future event.

    So I decided to do was to start a site that provided up to date information regarding physical security, computer security and fraud issues geared towards the small business owner. My thought is let me do the research for you. I have been up for a couple of months and would love everyone to check the site out and see how the information may help everyone deal with such issues in their business. I also have a contact form on my About page so feel free to leave me your thoughts and concerns and if a number of people have the same security or fraud concerns I will try and write a post on it so everyone has access to the information.

  9. Sean McCreary,

    Thanks for your comment. I will start to follow your Business Security Information site.