Reader Inquiry: Is it a Scam?

I received the following e-mail this week:


A business advertised on Craigslist for $495.00 for materials to start a home inventory business. They are based in FLorida and said they have more work than they can take on.
In addition to the initial fee, they are requiring $150.00 for every referral after the affiliate has been paid. their name is HTCA and when I looked the website up on whois.com
 the website was registered in July of 2010. It seemed to good to be true. What do you think?


My response:
Most of these are a scam. Legitimate firms looking for subcontractors approach people directly ("competitors" in their area) or hire additional contractors or employees. If they legitimately have too much work, they're not going to be selling you a kit and then charging you $150 for referrals.

I addressed a similar issue in a previous blog post:

http://homeinventoryservice.blogspot.com/2008/03/home-inventory-service-business-scam.html

Jumpstart Your Home Inventory Service Business

One of the problems I've had with the current marketing of home inventory service businesses is that the emphasis of the sellers of "business start-up systems" on getting people to purchase a "Cadillac" of inventories right off the bat.

I understand their reasoning -- it's hard to get people to invest in a $300-$500 "startup kit" with the prospect of making $500 a month. But that's also the REALITY of the situation that most home inventory service business owners face.

The home inventory service business is in its infancy at this point. Few people have heard of the service ... even fewer nationally have actually used a home inventory service business to document their possessions. Of course, once they do decide to use the service -- and particularly if they ever need to file a claim -- they're sold. But understandably, few people want to be pioneers.

So when you come around and offer to document all their possessions for $300-$500, you face some hurdles:

• They've never heard of someone offering this service before, so you need to educate them.
• They don't know you, and they're trusting you to come into their home. (How do they know you're not going to use that information for nefarious purposes?)
• A minimum investment of $300 is quite a bit of "insurance" to purchase when they don't know if they'll have a claim or not.
• They think that their existing insurance will cover their losses (it often isn't until they have a claim that they realize the burden of proof that is required from them).
  

Instead of looking to hit a home run -- especially with a NEW home inventory service business -- try to just get on base. You're not going to make a million dollars in your first year of operating this business ... but you might make a $1000. And you might make $2,000 in your second month. (And who couldn't use an extra $15,000-$20,000 a year from working part-time?)

Jumpstart your business sales by offering an "Express" Inventory for $99 (or $149 with a DVD video). Offer 60-90 minutes of services focusing on overall documentation (photos by the room) as well as documentation (1-2 photos plus serial number and purchase price recording) of up to 20 items (big ticket items -- TVs, computers, iPods, stereo equipment, etc.). Offer to document additional items as an additional cost (say, 1o more items for $25 or 25 more items for $50).

This will help you start generating revenue while building your client list. You can do up to 2 of these express inventories in one evening (one from 5:30 to 7 and the other from 7:30 to 9 p.m.). Do 5-6 express inventories in a week, and you'll earn an extra $2,000 a month. Plus, you'll build a portfolio of inventories, an opportunity to convert them into full inventory package orders later (offer a $25 gift certificate towards an upgrade to a "full" inventory package), and you'll have a list of clients you can contact in 6 months or a year to do an "update" inventory. Plus, you can generate referrals from these customers.

See if you can get the initial customer to refer someone right off the bat. You might offer the service for $79 if they refer someone who books an appointment with you for an Express Inventory and becomes a customer. Offer a $20 discount off for each referral -- if they refer five customers, they get their inventory for free!

In your first couple of months of business, you might end up doing a dozen or more of these "loss leader" inventories -- but you'll be building your business. And I've always felt that the home inventory service business should be one where you don't just serve the client ONCE -- you work with them once or twice a year. Do the initial express inventory and then contact them for a six-month update with an additional 10-20 items for a $59 fee.

If you do 20 inventories in a month, you'll have done more than 200 by year's end ... and the likelihood of one of those individuals needing to file a claim during the year is quite high (11% of homes file an insurance claim each year, on average). That will allow you to get testimonials from satisfied customers who were able to use their inventory, and will help connect you to insurance agents who are in the position to refer more clients.

You'll earn more revenue from a series of "base hits" ($100/express inventory) than trying to hit a home run ($300/full inventory).

Guerrilla Marketing: Your First 90 Days

While bigger companies (like Coke, Pepsi, Nike, etc.) can afford to "buy" brand name awareness, a home inventory service can get started with high impact, low cost marketing ideas. Slow and steady wins the race ... a couple of paid gigs will get you going and start to produce referrals. You don't need to spend hundreds -- or thousands -- of dollars to generate that new business, however.

Your best investment to start (best place to spend your startup marketing money):

• Car magnets
• Business cards (most use Vistaprint [Click here for 50% OFF Premium Business Cards & FREE Return Address Labels], at least to start)
• A Chamber of Commerce membership
• A phone book listing (not necessarily a Yellow Pages ad, because most directories don't have a specific "Home Inventory Services" category, but having a business line that will get you in the white pages is important).
• A web site (professionally designed if you can afford it, but clean, simple, well-thought out, and error-free, at a minimum). Invest in a service like Constant Contact to start building your mailing list. Click here to try their Do-It-Yourself Email Marketing for free!
• Door hangers (200-500 of them to start -- can print your own or order online from NEBS.com or one of the other door hanger-specific web sites out there). Simple is still effective.

Your 90-day game plan:

1. Attend all the Chamber of Commerce events you can (especially the networking ones). Don't just focus on getting YOUR name out there -- instead, collect the business cards of the people you meet and send them a "nice to meet you" letter. Then add them to your database. Keep in mind that small business owners are also a good prospect for non-revenue inventory services (that is, inventories of their office excluding any inventory of product that is for sale).
2. Join a local tips group if there's one in your network (BNI is a nationally known one). Find one that has lots of business-to-consumer members
3. Make a list and contact at least 2-3 insurance agents in your area per week. Draft up an introductory letter and then followup with a call and ask if you can take them to breakfast or lunch to introduce yourself and find out more about their specialties. You are a prospective referral source for them too! (Start with your own insurance agent, and then ask for referrals out from there).
4. Research and see if there is a local branch of the Independent Insurance Agents of America in your area, and find out if they have a newsletter or meetings. Sponsor one of *those* instead of doing consumer marketing.
5. Follow the lead of real estate agents and "farm" an area -- preferably your neighborhood. Is there a neigborhood association? Do they have a newsletter? Contribute an article on conducting a home inventory (I'll try to put together some samples of this type of stuff and post it later). Do they have meetings? Offer to come and speak to them. Take door hangers door-to-door in the area. Put a time-limited offer on the door hanger (i.e., 15% off your inventory if you book your appointment in the next 30 days.)
6. Plan and execute your public relations campaign. (Here's another whole separate article with examples from me...) You're a new business. That's a news release. There's a disaster in your area (flooding, tornado, hurricane, earthquake, major housefire) -- that's another news release (with tips on conducting your own inventory). Send an announcement to your alma mater for their magazine or newsletter (especially if it's in the same town you live in now).

That's your first 90 days.

If you are buying a TV or radio or newspaper ad over $50 in your first 90 days of business, you're wasting your valuable start-up money. The real problem you have is not a lack of name awareness of YOUR business, it's a lack of awareness of the WHOLE INDUSTRY at this point. Do some guerrilla marketing first to seed the market before buying awareness. (I recommend any of Jay Conrad Levinson's "Guerrilla Marketing" books -- available online (used or new), at your local bookstore, or your local library).