Entrepreneur Beware: The Reverse Scam That Could Ruin Your Business

In this episode of 'Hood Winked: Surviving the Scam,' I dive deep into a side of entrepreneurship that doesn’t get talked about enough—the reverse scam, where the entrepreneur gets scammed by their own clients. I'll share my personal experiences from running a credit repair business, how I dealt with manipulative clients, and the strategies I learned to protect myself. From airtight contracts to proper documentation and handling disputes, I'll guide you through the steps you need to safeguard your business. Trust me, you don’t want to miss this one—hit play and let’s get into it!

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Transcript

0:51

Hey, PhysBesties. Welcome back. I am so excited to be back. It's been an incredible year and definitely a roller coaster. When I started this podcast, I knew that it was something that I needed for my own self healing because I, as I've shared with you in previous episodes, have been a victim of scams. But what I didn't expect was to take a deeper dive and uncover the fact that this happens way too often. I get several submissions for people who have told me their stories of being scammed as entrepreneurs. And and really, that is what I focus on is uncovering the scams in the business world because I see so much. And today's episode is going to focus on what happens when the tables are turned? What happens when the business owner, the entrepreneur isn't getting scammed by another business or entrepreneur, but is in fact being scammed by their very own clients. I like to call this a reverse scam situation. This episode is a cautionary tale, but it's a guide to how to protect yourself and your business from those who would take advantage of your hard work and your integrity. We're talking about business owners who have been scammed by their own clients. I want to start with a little bit of my own story. As I mentioned to you guys before, I, unfortunately, have been in several situations where I have been the victim of a scam. And it's very unfortunate, but I've been in business for quite some time, and so it is bound to happen. One of the first companies that I had was a credit repair company. And for those of you who are familiar with the industry, you know that the credit repair industry has a bit of a tarnished reputation, and that's just putting it very, very lightly. Credit repair is a field where integrity can definitely be hard to come by. And that's why, when I decided to start my credit repair company, I knew that I wanted to set myself apart from all of the others and really lead with integrity because that, to me, was important. And especially because in the industry of credit repair, you are asking customers to trust you with their personal, private, sensitive information. So for me, I really focused on a level of trustworthiness and honesty in my business. I wanted to be the exception in an industry that was full of scammers and empty promises. But here's the thing. No matter how much integrity I felt like I was bringing to the table, I was often met with clients who would accuse me of the very thing I was fighting against, which was lack of integrity. Looking back, it makes sense and and almost in a twisted way because, after all, I was in an industry where I was helping people to fix their credit, which often meant that I was dealing with people who hadn't paid their bills. They hadn't made good on their debts. Some clients, of course, are in situations where it's a tough financial situation due to life just lifeing. Life can be very unpredictable. And I speak from experience because I've had troubles financially where I, at one point in time, had really bad credit. And I talk about this. I, at one point, had a 423 credit score. It wasn't that I was a bad person and I just didn't want to pay my bills. But during that time, the economy had suffered. I was in real estate and I took a huge hit. It just wasn't feasible for me to be able to make my payments. So I understand from experience that having bad credit isn't something that defines you as a person. Now, on the flip side of that, yeah, there are people who don't pay their bills. They don't feel like they have to. They make no effort to do so and they lead with not having integrity. And so I did have some clients that were like that. They, definitely didn't feel like they had to to pay their bills. And it was almost, looking back, naive of me to think that they would look at their obligations to pay my company differently. Why did I expect them to treat me differently? Dealing with clients who lacked integrity took a serious toll on me. You try to tell yourself as an entrepreneur, as a business owner, that it's just business, not to get involved emotionally at all. But the truth of the matter is sometimes it's hard to disconnect yourself emotionally from your work, from your company, from your baby that you're working so hard to little bit that I went above and beyond to help someone, a lot of times hearing their personal stories and feeling connected to them. And when I started my credit repair company, it was just me at the very beginning. So I did have a lot of hands on with my clients, and a lot of them, I still talk to to this day. I became emotionally invested in a lot of their lives. You know, some of them were single moms. Some of them were families looking to purchase their first homes. And I wanted to be a part of that story, that success story, that pivotal moment in their lives that would change the trajectory of their lives forever. And I do say on a positive side or a positive note that, to this day, that still feels good. That still feels good to know that I was a part of that. I went above and beyond to help people, and it was very disheartening emotionally to have them turn around and accuse me of wronging them. It's really frustrating, and it can make you question, why even bother to try to do the right thing? These clients that I had, they weren't just ungrateful, but they were really manipulative, spinning stories that made them out to be the victims when, in reality, they were the ones trying to scam me. And what do I mean by that? So, for example, I had a few clients who I worked really hard to improve their credit situations. I mean, I'm talking about taking them from a 500 credit score, not being able to be approved for anything, not even a store card, to having a 750 and above and having doors open for them that they had not been able to get through in years. For those of you who understand the power of credit, you understand that once you have great credit, sky's the limit. You can pretty much do whatever it is that you want to do. And for me, I felt like I was charging a reasonable rate. I mean, my clientele, again, were people who were families or single parents, and I wasn't charging a crazy fee of 1,000 and 1,000 of dollars. But with that being said, these clients, some of them set out with the intentions to scam me. And that is something that a lot of business owners face. If you're a business owner, maybe you've been in a situation where someone has purchased your product or your service and turned around and charged it back. And you're sitting there thinking like, no, I really provided this service or I sold them this product and they used it and they received it, yet they're charging me back and they want me to take the loss. These are the types of clients that I classify as the scammers because it's their intent to not pay for the services or products that they have indeed received. So with this podcast, you guys, it's not just about sharing our stories of what happened to us, but it's also about being able to identify red flags and being able to identify ways to protect ourselves. So how do you protect yourself from these kinds of client scammers? This is the heart of today's episode. I really wanna share with you some strategies that I learned the hard way, but I wanna share these strategies with you so that it allows you to be able to avoid some of these pitfalls and save you a ton of headaches. Now, the first thing is contracts. As an entrepreneur, it's super important to make sure that your contracts are airtight. A lot of times as an entrepreneur, we're starting out, we don't have the money, we're bootstrapping, and we just don't have the money to hire lawyers or someone to look over our contracts. But trust me, it is super important for you to make sure that your contracts are airtight. And there's several resources that you can utilize in order to make that happen. For example, when I started out, I used a a company called Rocket Lawyer, which I often use today. There's also LegalZoom. Do the research and find out some alternatives for yourself that are affordable for you to be able to not skip this step. In your contracts, you wanna make sure that you are clearly outlining what services you're providing, what the payment terms are, and also, very important, what the consequences are for nonpayment or breach of contract. I also want you to include in your contracts a defamation clause to protect your business from any false negative reviews. When I first started out, I didn't have this, but after watching several people in my industry get a bad reputation for clients going online and slandering them in their business, I had a coach that explained to me the importance of the defamation clause. The other thing is documentation. I'm really good at documentation. You guys, I document everything. I save every email. I take detailed notes of every single conversation, and I ensure that all of my agreements are in writing. Documentation is your best defense in case of a dispute. Also with my clients and with my staff, we record our calls. We record our calls for not only quality assurance, but we also record our calls so that, again, there's documentation of what's being said. Whether I am on a phone conversation or I'm conducting a Zoom call, I have documentation of exactly what agreements were exchanged between myself and that client as well as my team. Just a little side note, when it comes to recording calls, you wanna make sure that you know and understand your state laws. So make sure to do your due diligence and make sure that you are in compliance with your state law. For example, in the state of California, it's a 2 party consent state, meaning I have to let my clients know that I'm recording the call and they have to consent to that. And the way that we tackle that is just with a call whisper. When someone calls me, they'll get a call whisper to let them know that if they continue on with the call, that it is being recorded. Them continuing on with the call is their consent. The other thing is you wanna set the proper expectations. You wanna set the tone from the very beginning and that starts with your onboarding process. You want to make sure that your onboarding process is thorough, professional, and leaves no room for misunderstanding. This is going to be where you lay the groundwork for your relationship with the client. When I was working in the credit repair industry, I made sure that my clients understood exactly what the expectations were. Number 1, because I was in an industry where there was tons of false promises being made, Clients would come to me after being burned by a credit repair company that they had utilized in the past, promising them to fix their credit overnight, when in fact fixing credit is not an overnight process. During my onboarding process, I let clients know to at least prepare for 3 to 4 months of working through their credit reports in order for them to see lasting results. During that onboarding process, I had them repeat back to me what I said so that there was no miscommunication whatsoever. During that onboarding process, we also set the rules. We also set the expectations for communication. How are they to communicate with you? How often are you going to be communicating with them? Sure. These things are in the contracts. But what I have learned over years of being in business is that clients don't often read the contracts. And is that your problem? No. Not necessarily. They're obligated to read the contract. However, it can still come back to bite you because a disgruntled customer will leave you a bad review, whether it's your fault or not. Now, piggybacking off of the onboarding process, you also want to make sure that you have a great offboarding process. This is just as important as the onboarding process, and this is how you're ending the relationship. You wanna make sure that you have a clear off boarding process that ties up all the loose ends and ensures that the client understands what has been delivered. So many business owners miss this step. The client completes the program or the client gets the product, and that's it. That's the end of the relationship. Trust me, having a tight offboarding process can also help you to not only make sure that that client is satisfied, but provide an amazing experience for the client where they may return or send other clients your way. Setting expectations is going to be really important. I'm gonna talk about that a little bit more. You wanna make sure to be clear about what you can and what you cannot do for your clients. My model has always been to under promise and over deliver rather than the other way around. If I know in my business with credit repair that I have a 90% success rate of getting late payments removed in the course of 30 days, I'm not going to lead with that because there's still that 10% chance that that may not happen for that client. But maybe I tell them, let's give it 90 days. And if I get it done in 30 days, that's a bonus, that's a win, that client is even more excited. So apply that to your business in ways that you can set the proper expectations for your clients. Also, you wanna make sure that you have conflict resolution in place. Have a plan in place for how to handle any types of disputes. That should be outlined in your contract in terms of disputes and where they can reach out to you or to members of your staff if they have any disputes. You also wanna make sure that you have a process in place for handling disputes, and you wanna make sure that you address all of those issues as soon as they arise. Don't let them become an even bigger problem. Always make sure that you're resolving your conflicts or your disputes professionally as well. Now I'm going to talk about this because it's something that I see a lot in my industry and in other industries as well. When conflicts arise and there's a dispute between the client and the entrepreneur, the business owner, in regards to the expectations of services of what was supposed to have been delivered, whatever the case may be, sometimes those clients or those professionals take that dispute online, causing other people who are not even involved to get involved, causing the business owner to perhaps get a reputation of being a scammer when, in fact, the client was the one that was scamming the entrepreneur. Avoid those things. If you are a business, the conflict resolution should take place between you and your client. No matter what, keep it professional. You wouldn't expect that if you had a dispute with something you purchased from Amazon, that Jeff Bezos would get on the internet and blast you. That's something that you also wanna keep in mind for your own business, whether you're a staff of 1 or a staff of 100. And moving into my next point, which is overcoming being scammed. If you do find yourself scammed by a client, it's really important for you to know what your options are. You can take the legal route. You can take legal actions such as going to small claims court or you can send them to collections and that's something that I did and that's something that I had outlined in my contract. If I fixed your credit and you now have the opportunity to go out and create an amazing life for yourself because you have great credit, If you choose to charge me back or you choose to not pay your invoice, I will send you to collections. If you refuse to pay, I will send you to collections and that will, in turn, hurt your credit. It's crucial to stay professional and avoid airing out your grievances and things like that online, as I mentioned, because you are a business owner and you do, as a business owner, have options. The way that you handle these situations are going to reflect on your business as a whole. So, biz bestie, let's recap. Being scammed by a client is a painful experience. Trust me, I've shared with you. I know. I've been there, done that. But it doesn't have to define you or your business. You wanna protect yourself with solid contracts, thorough documentation and a professional approach to conflict resolution And if you do by yourself entangled in a scam, remember that there are ways for you to overcome it, whether that means legal action or simply moving on to better clients. And sometimes you do have to cut your losses. Sometimes everything's not worth going to small claims court. Sometimes everything's not worth your time or your energy. Trust me. I've had clients that I've had to let go just to save my own peace. And, yeah, maybe I did take a few 100 or a few $1,000 hit, but it allowed me to also identify the type of clients that I wanted to work with and what type of clients I didn't wanna work with, allowing me to be able to recoup that money and recoup my peace of mind, which is priceless. But I wanna leave you with this motivational quote that I hold dear to me, and I remind myself of this on a daily basis. Integrity is doing the right thing, even when no one is watching. Stay true to your principles and your reputation will speak for itself. Thank you for tuning in to this episode of Hoodwinked. If you've been scammed or have a story to share, I'd love to hear from you. And don't forget to share this episode with a friend who might need it and leave a review if you found it helpful. Until next time, stay diligent, stay informed and stay true to yourself.