For the last several years, I’ve been at the forefront of a movement known as implementation science, or the science of scaling. In this work, we are trying to understand why some products, companies, and social programs thrive as they grow, while others peter out.
When a seemingly promising idea loses efficacy or profitability as it expands, we call it a “voltage drop.” These failures to scale never happen because of one single reason.
Over the last 25 years as a behavioral economist, consultant to companies large and small, and former White House economic adviser, I’ve identified five causes, what I call “vital signs,” of voltage drops.
1. False Positives
This occurs when you interpret a piece of evidence or data as proof that something is true, when in fact it isn’t — for example, as we’ve seen with inaccurate Covid test results. For scaling, a false positive is an erroneous sign that an idea has voltage when it really doesn’t.
Sometimes a false positive occurs because of a statistical error, as was the case with the famous drug abuse prevention program, D.A.R.E. After an independent study showed promising short-term results, the program received an influx of funding from the U.S. Department of Justice. However, there were several problems with the study: It excluded drugs like alcohol and marijuana, focusing on tobacco; it was based on a small sample size; and later studies and even metanalyses could not replicate the results.
In other cases, false positives result from intentional lying. Think of Elizabeth Holmes and the purportedly groundbreaking blood-testing technology of Theranos, which didn’t actually exist.
When possible, the solution for rooting out false positives is to have at least three independent replications of the idea that show early promise. In companies with confidential research, employees must be incentivized with financial rewards that encourage them to question results.
2. Biased Representativeness of Population
Once you’ve reliably demonstrated the efficacy of the endeavor you hope to scale, the next step is to answer the question “How broadly will the idea work?”
All ventures must understand their potential audience. The first way to do this is by making sure your test samples in the small scale reflect the larger population at scale. Otherwise, you’ll be like McDonald’s, which fell victim to selection bias when it launched the unsuccessful Arch Deluxe. Focus group participants loved the new product, but they weren’t representative of the majority of Americans, who simply wanted to keep eating their Big Macs.
To weed out such biases, make sure your early adopters are a random sample. You should also make sure that your survey respondents have appropriate incentives to tell you the truth. A focus group participant who says they would purchase a product if it was introduced could simply be saying, “I would love the option to consider that product in the future,” as opposed to “I will be purchasing the product in the future.”
3. Non-Negotiables That Can’t Grow or Be Replicated
For an idea or enterprise to hold strong at scale, you need to know whether your “non-negotiables” — the drivers of your success — can be replicated at scale. In other words, is your secret sauce the “chef” or the “ingredients”? Since people don’t scale well (i.e., they can’t be cloned), talent-centric ventures often don’t either. You can’t afford all the talent you need as you grow, so you hire fewer high-performers and quality suffers at scale — a cruel voltage drop.
But, this vital sign is about much more than just people. As you scale, regulatory constraints, resource constraints, fidelity concerns, and a host of other issues might arise. In the end, we must bring these scaling constraints back to the petri dish and make sure the idea works with them in place.
4. Negative Spillovers
A spillover effect is the unintended impact one event or outcome can have on another event or outcome. A classic example is when a city opens a new factory, and the air pollution it produces impacts the health of nearby residents.
As you scale, the likelihood of spillovers increases dramatically. General equilibrium effects, or natural readjustments of the market, are one chief cause. I saw this firsthand when I was the chief economist at Uber. A coupon that led to more riders in one area of Seattle failed when we scaled it to the whole city because surge prices kicked in, and users found cheaper ways to get around that night.
Positive spillovers exist too, like network effects that make a social-media platform more valuable as more people join it. When designing your idea early on, you must anticipate negative spillovers and look for opportunities to engineer and benefit from positive ones.
5. The Cost Trap
To scale successfully, you need to determine not only how many people like your idea, but also what they’re willing to pay for it and, crucially, how much it will cost to provide.
When designing your enterprise, you must account for two types of costs: upfront fixed costs, like the one-time investment for the research and development to create a new product or service, and your ongoing operating expenses. Upfront costs can be recouped, but operating ones can bleed you and lead to a voltage drop, as happened to the innovative scientific wellness startup Arivale, which was poised to change preventative health care, only to go bankrupt a few years later, because it couldn’t find a viable price point for its services.
One strategy to escape the cost trap of scaling is to make sure you benefit from economies of scale, a skill Elon Musk excels at in all his ventures. Ever since he helped transform the world of online banking at PayPal, each major innovation he has undertaken thrives on scale economies. Consider Tesla. Its massive success can be traced to economies of scale of its two most important components: batteries and solar power generation cells, both of which can be manufactured significantly cheaper in higher numbers. In addition, everything at Tesla is geared toward increasing the efficiency of “the machine that makes the machines,” or what Musk affectionately calls his “Alien Dreadnought” — that is, a highly advanced, fully automated production facility.
Another strategy is to create models that don’t rely on top-tier talent. As you scale, finding and paying high-performers will become prohibitive. The solution is to create products that can give their full value to customers even with average performers delivering it.
When I give talks on this topic, I like to invoke the famous opening line of Leo Tolstoy’s novel Anna Karenina: “Happy families are all alike; every unhappy family is unhappy in its own way.” Similarly, scalable ideas are all alike; every unscalable idea is unscalable in its own way. The difference with scaling is there are only five main obstacles you face. And once you anticipate and avoid them, you can scale your idea for the highest voltage possible.
How to Find the Right Business Coach — and Avoid the Wrong One
At its best, business coaching can connect you with a mentor and supporter who helps you generate ideas, make plans and execute on them.
But at its worst, a business coaching offer can cost you time, energy and money — without much to show for it.
Here’s what to expect from a business coach, how to find a coach that suits you and how to spot red flags.
What a business coach can do
Business coaches draw on their professional experience to help you set and achieve your own business goals.
“I’m here to help you, and I’m here to raise your level of knowledge in whatever way I can,” says Gary Robinson, who chairs the Memphis, Tennessee, chapter of SCORE. SCORE offers free business mentoring for entrepreneurs nationwide.
Some ways a business coach or mentor might do this include:
Offering feedback on your ideas and suggesting new ones.
Giving you templates and other tools that help you make plans.
Connecting you with resources in your region or your industry.
Giving you deadlines and holding you accountable to them.
Some business coaches may also offer coursework or group training sessions on particular topics, like sales.
Working with a coach should help you identify opportunities you hadn’t seen before or develop new strategies for pursuing those opportunities, says Sophia Sunwoo, who coaches women and nonbinary entrepreneurs through Ascent Strategy, her New York City-based firm.
“[Coaches] don’t necessarily have to have all the answers,” Sunwoo says. “But they are the people that know how to maneuver and create a bunch of different thinking paths for their clients.”
What a business coach can’t do
A business coach isn’t the same as a consultant, whom you would hire to perform a specific task. A coach or mentor could look over your business plan, for example, but they wouldn’t write it for you.
“If you were to hire me as a consultant, you would expect me to roll up my sleeves and pitch in and work with you to get things done, and you would pay me for that,” Robinson says. Coaches, on the other hand, “try to show you how to do things so that you can do them [yourself].”
Business coaches are also not therapists, Sunwoo says. Entrepreneurship can be emotionally and mentally taxing, but it’s important that coaches refer clients to mental health professionals when necessary.
Business coaching red flags
If a business coaching opportunity “promises guaranteed income, large returns, or a ‘proven system,’ it’s likely a scam,” the Federal Trade Commission warned in a December 2020 notice.
In 2018, the FTC took legal action against My Online Business Education and Digital Altitude, which purported to help entrepreneurs start online businesses. The FTC alleged these companies charged participants more and more money to work through their programs, with few customers earning the promised returns.
In both cases, these operations paid settlements, and the FTC issued refunds to tens of thousands of their customers in 2021 and 2022.
To avoid offers like these, the FTC recommends that you:
Be wary of anyone who tries to upsell you right away or pressures you to make a quick decision.
Search for reviews of the person or organization online.
Research your coach’s background to see if they’ve accomplished as much as they say.
Sunwoo says to also be skeptical of one-size-fits-all solutions. A coach should customize their advice to your personality and skill set, not ask you to conform to theirs.
“The moment that a business coach pushes you to do something that is really not compatible with your personality or your beliefs or values,” Sunwoo says, “that’s a huge problem.”
How to find the right coach — maybe for free
Here’s how to find a coach that will be as helpful as possible.
Determine whether you need advice or to hire someone. A coach isn’t the right fit for every business owner. If you need hands-on help organizing your business finances, for instance, you may need a bookkeeping service or accountant. And take legal questions to an attorney.
Seek out the right expertise. A good coach should be aware of what they don’t know. If they’re not a good fit for your needs — whether that’s expertise in a particular industry or a specialized skill set, like marketing — they might be able to refer you to someone who’s a better fit.
Consider free options. There may be some in your city or region:
SCORE offers free in-person and virtual mentoring in all 50 states, plus Guam, Puerto Rico and other U.S. territories.
See if your city has a Small Business Development Center, Veterans Business Outreach Center or a Women’s Business Center. All are funded by the U.S. Small Business Administration and offer free training and advising for entrepreneurs.
Do an online search for city- or state-specific programs. Philadelphia, for example, offers a business coaching program designed for entrepreneurs who want to qualify for particular business loan programs. Business incubators often offer courses or coaching.
Make sure your coach is invested in you. They should take the time to learn about you, your business and its unique needs, then leverage their own experiences and creativity to help you.
“I’m on your team now,” Robinson says of his clients. “Let’s do this together and make this a success.”
Are There SBA Loans for the Self-Employed?
Many of the same SBA loans are available to both self-employed people and more formally structured businesses, such as limited liability companies and corporations. However, self-employed individuals, like sole proprietors and independent contractors, might face a higher barrier to entry for having limited credit history, inconsistent revenue or no collateral. If they can’t qualify for an SBA loan, other business financing options are available.
Who qualifies as self-employed?
Sole proprietors, independent contractors and partnerships all fall under the self-employed category. In these cases, there is no legal distinction between the business owner and the business itself. Sole proprietors, for example, are solely responsible for their business’s gains and losses, while LLCs and corporations are legally distinct from their owners. This distinction helps protect the owners’ personal assets if their business runs into legal or financial issues.
Are self-employed SBA loans hard to get?
While a sole proprietorship is much easier to set up than an LLC or corporation, lenders may be more hesitant to finance them for a few reasons:
Self-employed business owners are legally responsible, as individuals, for any debt and liabilities that their businesses take on. If someone sues their business, for instance, their personal assets — not just their business — could be at stake. This makes it riskier for lenders to finance them.
Sole proprietorships and independent contracting businesses may have lower revenue or less collateral to offer since they’re often a business of one. This could make it more difficult for them to prove that they can pay back the loan, plus interest. And it may require more paperwork.
Some banks set lending minimums that surpass what a self-employed business owner is looking for, either because the business owner doesn’t need that much funding or doesn’t qualify for it.
Since there is no legal distinction between the self-employed business owner and their business, they may lack business credit history. To establish business credit, you’ll want to register the business, obtain an employer identification number and open a separate business bank account and credit card to keep your business and personal finances separate.
SBA loans for the self-employed
SBA microloan: Best for small loans and more lenient requirements
Applying for an SBA microloan is a great option for self-employed business owners, especially if they’ve been turned down by traditional banks and don’t need more than $50,000 in funding. In fact, the average SBA microloan is around $13,000, according to the SBA. SBA microloans are administered by nonprofit, community-based organizations that can also help train applicants in business practices and management. And because the loans are small, the application process may be easier — applicants may have limited credit history and typically don’t need as high of a credit score as they do for an SBA 7(a) loan.
SBA 7(a) small loan: May not require collateral
Funds from the SBA’s most popular 7(a) lending program can be used for a variety of business-related purposes, such as working capital or purchasing equipment. While the maximum SBA 7(a) loan amount is $5 million, SBA 7(a) small loan amounts don’t exceed $350,000. And if the 7(a) small loan is for $25,000 or less, the SBA doesn’t require lenders to take collateral.
SBA Express loan: Best for quicker application process
SBA Express loans are a type of 7(a) loan for businesses that need quick financing and no more than $500,000. The SBA responds to these loan applications within 36 hours as opposed to the standard five to 10 days, which may speed up the process for borrowers working with non-SBA-delegated lenders. Additionally, borrowers might not have to fill out as much paperwork — the SBA only requires Form 1919. Beyond that, lenders use their own forms and procedures.
SBA loan alternatives
Self-employed business owners turned down for SBA or traditional bank loans may be able to qualify for financing with an online lender. These lenders offer options such as term loans and lines of credit, and they often process applications faster and have more lenient requirements. However, applicants should expect to pay significantly more in interest than they would with an SBA loan.
Business credit cards
Not only can business credit cards help build your business credit history and pay for everyday business purchases, but they can also help finance larger purchases (within your approved credit limit). And if you qualify for a credit card with a 0% introductory APR offer, you’ll have multiple months to pay off the balance interest-free. Just make sure you’re able to pay off your purchase before the intro offer ends and a variable APR sets in.
9 Best Factoring Companies for Trucking
Factoring companies for trucking, also called freight factoring companies, give trucking companies cash in exchange for outstanding invoices. They can be helpful to trucking companies that need working capital quickly or don’t have the staff to manage invoicing and collections, but be cautious about potentially unclear costs and contracts.
Here are our picks for freight factoring companies, as well as additional information to help you decide whether this kind of small-business loan is right for your business.
Best trucking factoring companies for funding speed
These factoring companies for trucking offer some of the fastest funding times.
Time to funding: Minutes via its proprietary Blynk payment service; otherwise, same-day and next-day funding.
Good to know: Company factors freight invoices on nights, weekends and holidays. Its proprietary Blynk payment service, launched in 2020, allows customers to get paid via debit, Zelle or bank transfer. Apex specializes in small and midsize trucking companies.
Headquarters: Fort Worth, Texas.
Time to funding: One hour during the week.
Good to know: Company’s mobile app allows customers to submit invoices to be paid right from a smartphone. TAFS is a recourse-only factoring company, meaning that if the customer ultimately doesn’t pay your invoice, you pay the factoring company. In other words, you bear the risk of nonpayment. TAFS does factoring in several other industries too.
Headquarters: Olathe, Kansas.
Time to funding: Within 24 hours.
Good to know: Offers discounts to veterans. Also does factoring in distribution, staffing, oilfield, textiles and manufacturing industries. The company’s RTS Pro Factoring app lets customers upload invoices, submit invoices in bundles, use the camera to scan invoices and access reports. It also helps find fuel, tire and maintenance discounts.
Headquarters: Overland Park, Kansas.
Time to funding: The same day you deliver your load.
Good to know: TBS offers a program in which you can finance 50% of your truck insurance down payment through eight weekly payments from your factored invoices. The company also offers bookkeeping services.
Headquarters: Oklahoma City.
Best for trying freight factoring for free
These factoring companies for trucking offer customers a chance to use the service before fully committing.
Time to funding: First funding takes up to 48 hours but subsequent invoices process faster.
Good to know: Customers get an automatic, preapproved line of credit of up to $2,500 per truck. Transferring money from eCapital to your bank account is $10. The company also offers a 90-day free trial. Fees start at 2%.
Headquarters: Aventura, Florida.
Time to funding: Typically within 24 hours.
Good to know: Company says a $1,000 invoice will likely cost $25 to $40 (2.5% to 4%) in factoring fees. It also waives the factoring fees for your first invoice as sort of a free trial.
Headquarters: Carlsbad, California.
Best for upfront factoring pricing
Few factoring companies for trucking disclose their prices. These companies offer at least a peek.
Time to funding: Within 24 hours.
Good to know: Company does recourse and nonrecourse factoring. OTR Capital says it funds 96% of the invoice value, implying a 4% fee.
Headquarters: Roswell, Georgia.
Porter Freight Funding
Time to funding: Within 24 hours and sometimes sooner.
Good to know: Discounts available if you sign a six-month or one-year contract. Recourse factoring fees start at 3%.
Headquarters: Birmingham, Alabama.
Time to funding: Same day.
Good to know: Fees start at 2%. Works with startups and trucking companies with one to 100 trucks. No mobile app available.
Headquarters: Weatherford, Texas.
What is freight factoring?
Freight factoring is a process in which a factoring company buys your invoices at a discount and collects payment from the customers on those invoices. The arrangement creates a source of fast cash for the trucking company.
There are two types of factoring companies for trucking:
Recourse factors. If the customer ultimately doesn’t pay the invoice, the trucking company pays the factoring company. The trucking company bears the risk of nonpayment.
Nonrecourse factors. If the customer ultimately doesn’t pay the invoice, the trucking company doesn’t have to pay the invoice. The factoring company bears the risk of nonpayment, which is why nonrecourse factoring typically costs more than recourse factoring.
Do I need a factoring company for trucking?
A factoring company for trucking can be a source of quick cash, which could come in handy if a trucking company is having trouble making payroll or paying other bills, or if it doesn’t want to take out a loan or other financing. In addition, companies that don’t have the time or staff to deal with collecting money from customers might find factoring attractive.
Flexible — factor only what you need when you need it.
Credit score doesn’t matter.
May cost more than bank financing.
Company may come after trucking company if customers don’t pay.
How much do factoring companies charge?
Trucking factoring companies buy accounts receivable at a discount, meaning that trucking companies selling invoices won’t receive the full value of those invoices. The size of that discount is one of the key factors to consider when choosing a factoring company for trucking.
However, it’s rare to get an upfront price from factoring companies because they typically base their discount rates on a variety of factors:
Whether you want recourse or nonrecourse factoring.
Who your customers are.
The volume of the invoices.
Whether you want to pay a flat factoring fee (the same percentage fee for every invoice) or a tiered factoring rate (a lower fee on invoices that pay quickly and a higher fee on invoices that pay more slowly).
Whether the company also charges invoice submission fees or invoice processing fees.
For these reasons, it’s important to review the contract terms of any factoring agreement and make sure you understand the costs before you sign up.
Alternatives to freight factoring
Freight factoring is just one way to borrow money quickly. These other options might be viable alternatives for your trucking business.
Business credit cards
Borrowing money using a credit card gives you the opportunity to keep 100% of what your customers pay you. Credit cards can carry various rewards, such as travel miles or cash back, and a business gas credit card may make sense for a trucking company. But be sure you can pay your credit card balances off in full, because the interest charges may be higher than what you’d pay in factoring fees.
Business line of credit
If you need access to ongoing working capital, drawing from a business line of credit might be cheaper than factoring to cover short-term costs. You’ll likely have a higher spending limit with a line of credit than with a business credit card, but there may also be higher qualification hurdles to jump in terms of credit score and financial performance.