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5 Signs a Business is Legit

Financial IQ

How do you know a company is on the up-and-up? You don’t want to throw away your hard-earned money on a bogus business, let alone a scam. But how can you tell?

It’s not as if we’re issued a “scam-o-meter” that starts beeping when you pass by a bad business. But maybe there ought to be.

No one collects information on scammed Americans (I tried to come up with a number in my latest book, but it’s more of a guesstimate).

Perhaps the most authoritative number is the FBI’s Financial Crimes Report, which is a troubling document to read. It makes us look like we all have a bull’s-eye painted on our backs, which, in a way, we kind of do.

Here are five signs a business is legit:

A friend you trust loves the company.

A word-of-mouth endorsement from someone you trust remains the best (but by no means the only) way to vet a company.

If your best buddy in the world swears by a business, then that’s a good sign.

Your research turns up no skeletons.

A cursory Internet search of the name of the business alongside key words like “scam” or “rip-off” should reveal no meaningful complaints.

If they do — if for example, you find a site called “companyname” — then you’d be well advised to avoid it.

The crowds love it (but not too much).

Love ‘em or hate ‘em, crowdsourced reviews by the likes of Angie’s List and Yelp are very much a part of the modern-day vetting process for customers like you.

And while it’s important to factor in these ratings, you have to be careful — reviews can be manufactured and manipulated.

If a rating looks too good to be true, it probably is. Never, ever make a decision based solely on one of these write-ups.

It has an impressive trophy case.

Awards are important because they suggest the business means — well, business.

But there are awards and then there are awards. Many industry trophies are hopelessly rigged, using contrived categories to ensure every company is a winner, or requiring you to pay for the award in order to show off your prize.


Look for something impartial like the American Customer Satisfaction Index, which doesn’t play any of those games.

Its products speak for themselves.

If a company’s products are so good that the business doesn’t have to do a lot of advertising — or doesn’t do any advertising at all — then you’ve probably struck gold.

This often happens when restaurants serve food that is so outstanding there’s always a line around the block. You’ll never see an ad — the long lines say everything.

Bear in mind that these are only signs that the business may be legit. There is no guarantee that you won’t get ripped off.

Actually, companies change owners and managers with some regularity, so unless it’s a family-owned business with several generations involved in the day-to-day operation, change is practically a given.

Next week I’ll have report on how to tell if a business is bogus. Safe shopping, everyone.

Christopher Elliott is a consumer advocate who blogs about getting better customer service at On Your Side. Connect with him on Twitter and Facebook or send him your questions by email.


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