As global business increases with technology, so does the reach and rate of business scams. As you consider selling your business you are particularly vulnerable to attempts of being scammed. If the sale of your business is your plan for funding your retirement, approach a sale with an abundance of caution
Preparing your business for sale while running the day to day business can lead to distraction, exhaustion and the potential for missing subtle signs that something is wrong. Hiring a competent professional to guide you through the exit process and coordinate your professional team is not a luxury, it is a smart, strategic business decision.
So how do you know what to look out for? And how do you protect yourself? While this is not everything you need to be weary of, here are ten of the most common scam’s used on business owners and simple tips to help avoid these situations.
1. Imposter Fraud
There are imposters who will claim they can help sell your business, that they have a buyer lined up who is very interested in your business. Hey will “require” a large deposit, typically $25,000 to $50,000 as an advance payment against their future success fee to ensure that you are serious about selling before connecting you with the buyer. Once the wire is received, they are never to be seen just like your hard earned money.
Take the free 10-minute Value Builder questionnaire to determine your business exit readiness.
Tip: Google the name of anyone offering to buy your business. Look for them on LinkedIn. Credible entities / individuals have an internet history beyond a brand new, barebones website.
2. Ransomware Attacks
Ransomware is when a hacker takes your data hostage, threatening to destroy or leak the information if they are not paid off. Unfortunately, if you cannot release the data yourself, you may be forced to pay off the hacker.
Businesses continue to fall victim to hackers at an increasing rate, up 105% in 2021 in ransomware attacks alone. Ransomware is on the rise as a money-making version of cybercrime.
Even large organizations are not safe from Ransomware, Acer for instance was hit with a $100 million dollar ransomware attack back in 2021. If large corporations are at risk, so is your small or midsize business.
Often times when business owners are looking to sell, they are more vulnerable to sharing private information if they think a buyer is interested in their business. Remember to maintain your diligence and always work with a trusted advisor when selling your business.
Reviewing you cyber compliance is now becoming a key component of due diligence and not being prepared can reduce the offer price and in some cases scuttle the deal.
Even if you have an internal IT team, having a qualified independent cyber professional team review your preparedness is not only a prudent business decision and give you piece of mind but will go a long way in moving the due diligence along.
Tip: Invest in quality data encryption and firewalls for your website and cloud-based software. Continue reviewing common scams that allow hackers to enter your system, like opening scam email links. Finally, make sure your security procedures and software systems are up to date as most ransomware attacks are caused by human error and vulnerabilities due to outdated software.
Check out our strategic cyber partner for the small and midsize business community.
3. Bank Account Possession
Hackers can steal your passwords and login information through certain scam emails known as phishing. All they need you to do is open the link, launching malicious spyware called keystroke loggers. This virus will track your keystrokes and web activity, sending the data back to the hacker. Then they can use that information to log into your bank account as you.
Once they’re in, they can siphon out money, change your passwords, and more. Some banks may offer fraud alert protection and coverage for scammer activity– make sure you know what protections your bank provides.
Tip: Always check the email address of the sender. Often times the email address will give away a scammer. It is also a best practice to never clink the link but go directly to your online banking portal via your web browser if the bank wants you to change your login information you will be prompted when you try to login. Never click on links in unsolicited, unknown email accounts.
4. Whaling and Spear Phishing
An increasingly common way to scam companies is whaling and spear phishing. This practice involves scammers stealing email signatures and creating fake email accounts similar to real corporate accounts. They often pose as upper management or IT to get employees to reveal passwords, send payments, or reveal protected information.
Whaling targets higher-level employees, while spear phishing usually aims for lower-level employees. No matter the victim, these scammers can cause serious reputational and monetary damage to your company.
If you’re a business owner and you get requests for information from an employee, vendor, or partner that is unusual be cautious. Always call to verify the request for information and why the person requesting this info needs it.
And even then, only give important information if it is absolutely necessary.
Tip: Hold regular training to help employees be aware of signs these scam emails that seem to be coming from a known person. Set clear boundaries over how money or trade secrets are shared and who to check with if anything seems “phishy.”
5. Zelle Scams
Zelle has emerged as a top competitor to Venmo. It’s an app that allows you to “text” money to friends, family, and businesses directly from your bank account to theirs. While this option is appealing to many, the fact that you don’t even need a name to complete the transaction can make it dangerous.
Your business may receive Zelle requests for unpaid invoices, phony refund requests, or other made-up situations to try to pull money from your account quickly.
Tip: Never send money over Zelle to someone you don’t know personally or who doesn’t have a verifiable business account.
6. Fake Invoices
A surprisingly simple but effective scam is when someone sends you a fake, overdue invoice requesting immediate payment. They may claim that they have attempted to contact you several times, that they provided a service that has been unpaid, and that they will be sending the money to collections or even sue.
When selling your business, you often put in extra effort to clean up your accounts before transferring ownership. And while you are juggling the additional stress and filing through old accounts no one remembers, it’s a prime time to fall victim to this scam.
Tip: Always close out your books monthly to confidently rely on your records for money due. If you can’t find a match in your system, you can ask the issuer to send proof of the transaction.
7. Fake Charities
As the consumer population continues to increase their expectation that businesses are involved in the greater good, more and more companies have increased their charitable partnerships. This primes the market for a rise in scams involving fake charities.
These non-existent charities may invest in a simple website, email you, or call you on the phone. While charity involvement is an excellent choice, thoroughly research any charity initiating contact with you. If a “charity worker” refuses to provide details about the organization and pressures you to donate immediately, those are red flags that the charity is at least suspicious.
Tip: Always check a charity’s status on the IRS’s website before making a donation– this will help you validate the charity and report accurate tax write-offs for the donation.
8. Fake Directory Scams
The fake directory scam typically targets both older business owners as well as newer entrepreneurs. It involves getting a phone call or email asking to put you on a directory to help you sell your business or get more customers.
Normally, directories allow you to list yourself free of charge. The directory scam however will ask for an upfront payment to get listed on their “exclusive” website. While there are legitimate directory sites that take payments for things such as ad space, to get listed for a simple directory is a red flag.
Tip: Use free tools to see if the website is legitimate. You can use Ahrefs free backlink tool to see if other sites are recommending the directory. You can also use URLVoid to see if a website is associated with any malware.
Either way do NOT go to the actual site until you check if it is safe, as websites can put viruses on your computer from visiting them. Either way, if a website seems sketchy trust your gut and pass on the opportunity.
9. Quick Closer Scam
The quick closer scam exclusively targets business owners looking to sell their business. It involves the scammer approaching the business owner offering to buy at full price on the grounds that they close quickly and to structure the sale as a stock sale.
When it came to the day of the sale however, the scammer will say they have a problem with their wire transfer. The scammer would then promise to have the money the next day all while they proceed to sell everything they can and clean out all the accounts.
By the time a business owner realizes what happens the scammer is already gone and the damage has been done. A scammer in Philadelphia was caught in 2009 after targeting 4 businesses, he faces up to 80 years in prison.
Tip: If something sounds too good to be true it often is. Always be weary of buyers that are looking to close fast. Do your research and partner with a trusted advisor to make sure your protected.
Finally, never sell your business until you’re fully ready. This is why we recommend taking our free PREScore Questionnaire to determine if you’re truly ready to sell your business.
10. Fake Phone Number Scam
You are contacted about your business for sale. The buyer reaches out and claims they want to make sure you are legitimate, so they ask for your phone number where they will text you a code to “verify” your information.
What they are most likely really doing is setting you up with a Google voice account to pose as you. This will make it so they can disguise who they are and potentially set up accounts in your name if you give them personal information.
Tip: If someone wants you to verify who you are they can do so many other ways than texting you a code. You can have a Zoom meeting, they can look up your business registration with your state, etc. Either way, do not verify a code or give out your personal number to someone you don’t trust.
Are you looking to sell your business within the next 6 to 12 months?
Buying a business is a long, in-depth, detailed process. This is why it’s important to work with a trusted exit planner.
We are NOT business brokers or investment bankers. We are former entrepreneurs who have successfully built and sold our own businesses. We recognize that one size does not fit all. Each of our business were unique, were in different industries, and sold in different economic conditions. Each had its own success and imperfections as well as reasons for selling.
That is why we start with a free, no-obligation consultation. We work with you to determine your exit planning goals and make them achievable. We also believe you should pay for what you need and what you will use. This is why we have aligned our service offering and fee structures to match that philosophy.
- Over 25 years of experience.
- Business selling success rate of over 75%.
- Entire evaluation and exit planning process is handled for you.