The National Veteran Owned Business Association (NaVOBA) reports that there are over 3.6 veteran owned businesses in the United States. This means that roughly 1 in 7 businesses is owned by a man or woman who was served in the Army, Marine Corps, Navy, Air Force or Coast Guard.
If you're a veteran looking into your civilian career options, don't overlook entrepreneurship as a way to further your dreams. In addition to all the standard resources available for any aspiring entrepreneur, there are a number of military-specific tools and programs designed to help you start or grow a business in the industry of your choosing.
How Military Service Helps You Develop the Qualities of a Successful Entrepreneur
Although successful entrepreneurs come from many different backgrounds, the men and women who've served in the United States military often find that their service training has done an excellent job of helping them to develop the personal characteristics needed to succeed in owning their own business. For example:
- Perseverance: Once you've enlisted in the military, you can’t quit simply because you've had a bad day or two. Commanders expect you to push through the obstacles and emerge a stronger person. You’ll require the same perseverance to become a successful business owner. The initial months after starting a company will see you working long hours under trying conditions.
- Self-Discipline: In the military, you work on becoming mentally and physically stronger by overcoming weaknesses and the temptation to give up when things get difficult. This self-discipline will be a great asset in any civilian career, but it's particularly important if you want to be a business owner.
- Confidence: The military expects soldiers to perform their jobs under some of the most stressful situations imaginable. This gives you the confidence to know that you're up for any challenge.
- Competitiveness: If your military career lasted a decade or more, you know that achieving promotions and advancing in rank requires tapping into your competitive spirit. That same desire to be the best will make you a successful entrepreneur, no matter what type of business you want to start.
- Passion: Most veterans will tell you they were attracted to military service because they had a passion for helping others and serving their country. If you can find a business idea that inspires the same level enthusiasm, you're bound to be successful.
Developing Your Business Plan
The first step in becoming an entrepreneur is to create a business plan. A business plan is a formal statement of your business goals and the steps you plan to take to reach. The document will answer questions such as:
- What need does your business fill in your target market?
- How does your business satisfy the need you've unidentified?
- What sets your company apart from its competitors?
- Who is involved in your business, aside from yourself?
- Who are your target customers?
- How will you market and promote your business?
- How much money do you need to start your business?
- How will you generate revenue?
- How long will it take you to break even?
A business plan also includes a number of supporting documents. For example:
- Resumes for everyone involved in the business
- Tax returns and financial statements for the key people who will own and operate the business
- Copies of licenses and other legal documents that apply to the type of business you want to form
- A copy of the proposed lease for your office space
- Information about your suppliers, such as a letter of intent
Many books and websites offer guidance in writing a business plan. However, you can also receive personalized assistance from a SCORE mentor. SCORE is a non-profit association supported by the US Small Business Administration. They offer mentoring in person or via email and present workshops on different aspects of entrepreneurship. Some states also have Veterans Business Outreach Centers that provide training, mentoring and referrals for veterans who want to start or expand a business.
Aside from helping you clarify your own thoughts regarding the type of company you want to form and acting as a roadmap for the future of your company, a business plan serves as a tool for securing loans or investor funding. For this reason, you'll need to create as detailed of a business plan as possible before you attempt to secure financing. With an incomplete business plan, you’ll struggle to obtain the necessary funds even if your basic idea is simply outstanding.
Business Funding Programs for Veterans
Obviously, one of the biggest challenges associated with beginning your own business is obtaining the necessary financing. Your start up costs will vary depending upon factors such as whether you want to work from home or rent office space, what type of equipment you'll need and whether you plan to hire any employees during the early stages of your company. You can start a home-based service business like an accounting firm for less than $10,000, but a factory that manufactures wooden educational toys for children would likely need much more money to get off the ground.
Traditional approaches to financing a business include:
- DIY Funding: Some entrepreneurs will self-fund their ventures in the early stages with their personal savings or by leveraging assets such as their home. The main advantage of this approach is that it requires the smallest amount of paperwork and will show other investors that you believe in your vision. The main disadvantage is that you put yourself in a dangerous position if your business fails.
- Friends and Family: If you have friends and family looking for an investment opportunity, they may be willing to help you fund the initial startup costs for your business. However, it's recommended that you agree to pay these types of investments back in one year. Otherwise, you risk damaging personal relationships.
- SBA Loans: The Small Business Administration offers a number of loans to people who want to start a business. The government isn't lending the money directly, but they do guarantee to banks and other financial institutions that the loans will be repaid. This means they often have more favorable interest rates than a conventional loan. Examples of SBA loan programs include the 7(a) loan program, microloan program, CDC/504 real estate and equipment loan program and low-interest disaster recovery loans.
- Conventional Bank Loans: Conventional bank loans have a quicker and less stringent approval process, making them a popular choice for starting a business. Conventional bank loans can be used for working capital, equipment or merchant cash advances. You can also apply for a line of credit for day-to-day cash flow needs.
It's also quite common for investors to want to show their patriotism by helping veterans achieve their dream of entrepreneurship. In addition to the more traditional sources of business funding, here are three options worth looking into:
- Online Lending Platforms: Street Shares connects investors with veterans who want to start or expand a business. After completing a short registration process, you can pitch directly to lenders for loans of between $5,000 and $50,000.
- Angel Investment Groups: Hivers and Strivers invests $250,000 to $1 million in start-up companies run by graduates of US military academies.
- Venture Capital Funds: The Veterans' Opportunity Fund is the country's first venture capital fund devoted exclusively to investing in businesses founded, managed and/or owned by those who've served in the armed forces. They'll provide up to $3 million and are especially interested in technology, healthcare, business services or specialty manufacturing companies.
Debt vs. Equity Financing
As you're investigating the different options for financing your business, keep in mind that sources of funding qualify as either debt or equity financing. It's vital that you understand the difference between the two approaches.
Debt financing means you're borrowing money that you'll need to pay back. Unless you borrow money from a friend or family member offering to help out of the goodness of their heart, your loan will have specific repayment terms and a set interest rate. Interest on your debt can be deducted on your company tax return, but the cost of repaying the debt will raise your company's break-even point.
Equity financing means you're raising capital by giving investors shares in your company. If you've always been very conservative with your personal finances, this might sound like a better approach than borrowing money to start your business. However, when you give investors shares in your business, you're diluting your own ownership interest in the company. If your business becomes successful beyond your wildest dreams, you'll be sharing those profits will all your investors instead of keeping the rewards for yourself.
Special Partnerships That Support Veteran Owned Businesses
If you're a veteran interested in starting your own business, it's important to keep in mind that the government has specific policies in place to make it easier for veteran-owned business to land contracts. For example, the Department of Veterans Affairs has a procurement hierarchy, which gives the highest priority to businesses owned by veterans with a service-connected disability.
Other veteran owned businesses are next in line, followed by 8(a), HUBZone and woman owned small businesses. However, business owners who want to participate in the VA Veterans First Contracting Program must complete a verification process that certifies their eligibility. VA certified verification counselors would provide any necessary application assistance at no cost to any veteran who is interested in participating.
The private sector also has select opportunities that give veteran owned businesses an edge in the competitive business marketplace. According to the US Department of Veterans Affairs, many commercial companies have programs in place to support veteran owned businesses. For example:
- AT&T provides maximum opportunities to minority, women and service disabled veteran owned businesses who wish to become suppliers of goods and services for the company.
- General Dynamics, a global aerospace and defense company, has policies in place that give veteran owned small businesses, service disabled veteran owned small businesses, SBA-certified HUBZone small businesses and minority or women owned companies a leg up in building supplier relationships.
- Northrop Grumman, a top global security company specializing in unmanned systems, cybersecurity and C4ISR, is the fifth-largest defense contractor in the world. Their Socio-Economic Business Program Office serves helps veterans, women and minority owned businesses navigate the company's procurement processes.
Franchising as a Path to Entrepreneurship
If you don't have a specific business idea in mind, a franchise might be a great solution to help you achieve your dreams of entrepreneurship. Franchisees let you use an existing business name and operating system to create your own business. Pizza Hut, Subway, KFC, Jiffy Lube and Great Clips are just a few examples of the popular businesses that offer franchise opportunities.
There are over 600 different franchise companies participating in the Veterans Transition Franchise Initiative (VetFran). Veterans can also take advantage of a VetFran mentor network, a free franchising 101 course and a fund to help those without the necessary equity for traditional loans to access franchise financing.
Often times, the specific incentives franchises offer incentives to those who have served in the military. For example, Valpak, a direct marketing franchise that offers advertising solutions for businesses across America, will waive startup costs and provide qualified veterans with help obtaining operating capital. Since they offer multiple revenue streams, exclusive territory and extensive marketing support, this makes them a great choice for a veteran who wants to experience the benefits of entrepreneurship without trying to begin a business from scratch.
A Special Note for Military Spouses
Military spouses face a number of unique challenges, including the need for frequent moves and the increased parenting responsibility that accompanies the deployment of a spouse. However, becoming an entrepreneur can be an excellent way for a military spouse to continue to develop their professional skills. Self-employment is generally much more flexible than a traditional office job. Home-based businesses are particularly suited to the needs of a military spouse, since they can relocate as needed.
Military spouses are eligible for many of the same free entrepreneurial training programs that are available for veterans. These training programs explain the process of creating a business plan and securing the necessary financing. For those who want to break into federal contracting, programs are in place to give women owned small businesses a leg up in the procurement process.
Getting the Education You Need to Be Successful
Entrepreneurs must be able to wear many different hats. Not only do they need to be an expert in their product or service, they need to understand basic accounting, human resources and management functions. For this reason, earning a degree in business should be a vital part of your plan for long-term success.
Vista Military offers a number of flexible business education programs in areas such as business management, business administration, human resources and project management. All of these programs can be completed in two years or less, which makes them ideal for veterans or military spouses who are eager to get to work. Students can use military benefits such as the Montgomery GI Bill, 9/11 GI Bill, Reserve Educational Assistance Program (REAP), Yellow Ribbon and Veterans Retraining Assistance Program (VRAP) to help with tuition costs. Call 1-877-316-0246 to speak with a Vista Military admissions representative today!