The experiences of serving one’s country have a way of delaying — and often interrupting — other life plans. And following the completion of military service, it’s difficult for former servicemembers to seamlessly transition back to civilian life. This is frequently the case for veterans seeking to become entrepreneurs before, during, or after military service.
While there are more than 2.5 million veteran-owned businesses in the United States, according to the Small Business Administration (SBA), these servicemembers-turned-entrepreneurs face a number of hurdles to getting their operations up and running.
Whether it’s a business idea that predates enlistment, or one that emerged post-discharge, veteran entrepreneurs can follow these steps when starting a business after the military.
1. Conduct Research and Find Resources
Business research is a necessary step in starting a business — both as it relates to the profitability of the idea, and how it will fare in its sector.
In the excitement of starting a business, many first-time veteran entrepreneurs often fail to consider whether their business has a market — that is, if it provides a service consumers will actually pay for.
Similarly, aspiring entrepreneurs, both veteran and otherwise, need to consider potential competitors. Sizing up a competitor will likely require an entrepreneur to assess where they’ll be doing business, and if there are any existing enterprises that offer similar goods or services.
If the field is saturated with similar businesses, it may be helpful to consider a different enterprise, especially given the stiff competition that exists for start-ups.
Roughly 40 percent of businesses fail within their first five years, according to Investopedia (who cites the Bureau of Labor Statistics), and while this statistic shouldn’t stop new enterprises, it does emphasize the importance of picking a business idea that can weather the storm.
“I started out thinking that I was going to provide project management and business development services to companies in the service industry,” says consultant Paul Dillon, a former U.S. Army Lieutenant. “But that didn’t work out — I had to pivot several times before I found a niche that worked.”
Aspiring veteran business owners thankfully have a plethora of resources available to help them understand the competition.
The Veterans Business Outreach Center (VBOC) offers free assistance in conducting market research and competitive analysis to this end.
Veterans should also consult the Small Business Trend’s list of 20 Resources for Veteran Business Owners to seek out mentoring and networking opportunities when getting their start-up running. They should take full advantage of the support offered to individuals starting a business after the military.
“I signed up for a coach that helps veterans, who I tap every so often, and I also have occasional conversations with other successful entrepreneurs,” says former Navy serviceman Edward Marchewka, who founded the information security advisory firm Chicago Metrics. “My point is, don’t go it alone.”
2. Craft a Business Plan
Once a business’ viability and competition has been determined, the next step for the veteran entrepreneur is to write a business plan to help ensure future success.
Getting into the fine print of exactly what a business does can seem tedious and difficult, but it’s a necessary challenge to ensure a business is viable — and a necessary step before sinking time and money into a fledgling enterprise.
A business plan should be detailed, and must include line items such as product development goals if relevant, marketing plans, sales plans, operational procedures, and most importantly financial projections — how much everything is going to cost, as well as slated revenue.
In short, a business plan serves as an overview of operations, and serves as a roadmap for how an entrepreneur can get to a point of sustainable success.
Former servicemembers starting a business can take advantage of the Entrepreneurship Bootcamp for Veterans, a free course that teaches entrepreneurs how to craft a successful business strategy.
The course is run by a consortium of universities, and while it requires nine days of in-person instruction and an application paired with a letter of recommendation, 72 percent of program graduates have gone on to use the course’s skills in starting their own business.
Consider the Business’ Structure
While writing a business plan, an entrepreneur should simultaneously think about their business’ structure in the process.
Choosing whether the business is founded as a sole proprietorship, limited liability company (LLC), a C corporation, or an S corporation is an important decision. An entrepreneur needs to consider factors such as cost to set up, liability, and how much they might pay in taxes when establishing their company.
For example, C corporations pay tax on income, and the owner also pays taxes on any income earned as an employee. Holders of S corporations pay pass through taxes, meaning the owners report company earnings as income on their personal taxes.
Similar to an S corporation, the owner of an LLC, or an individual operating as a sole proprietor, pays self-employment tax, though there are some technical differences that affect taxes, earnings, and personal liability between the two.
The subject of business structuring is tricky and often difficult for the layperson to understand — however, there are qualified professionals available at a reasonable price who can assist in this process. Interested entrepreneurs should also consult the SBA’s resources, which can serve as a solid primer for individuals weighing the costs and benefits of different structures.
“In my experience, entrepreneurs tend to not give enough thought toward business taxes, only to have a lack of decision-making come back to essentially bite them later,” says Shaun M., a business consultant and veteran based in Denver. “Though it’s an additional cost, it’s well worth paying now rather than later.”
Former military servicemembers should also explore whether they can qualify for veteran-owned business status. Though this status doesn’t confer any lucrative tax benefits, it can qualify an enterprise for certain government contracts and provide mentorship opportunities.
To qualify, the veteran applying must retain a majority stake in their company’s equity, and remain at the helm of day-to-day operations, according to the Department of Veteran Affairs (VA). Servicemembers seeking qualification can check out benefits and verify their business via the VA’s Office of Small and Disadvantaged Business Utilization.
3. Name and Claim the Business
Deciding on a business name goes well beyond coming up with a title that’s attractive and marketable. For the entrepreneur, naming a business has important consequences that can affect success for years to come.
For starters, it’s important to see if the business title is already in use. Many great names have likely already been used by other companies; operating under a title that’s too similar can come with potential legal consequences down the line.
Entrepreneurs can search for similar business names using the U.S. Patent and Trademark Office as a start. After an unused name is chosen, former military servicemembers can again turn to the services of the VBOC on how to file a trademark for their own business.
And while the Patent and Trademark Office usually takes roughly six months to approve or deny new requests, entrepreneurs can continue start-up operations while awaiting deliberation — though in rare circumstances, it may be necessary to rename the business should the Office find a problem with the slated name.
Depending upon the type of business being run, a trademark might not be required. The SBA recommends entrepreneurs register their business’ name in at least one of the following manners: by trademark registration, by entity name registration, as a doing business as (DBA) name, and/or a website domain.
The requirements for a business’ registration will depend upon the location and structure of the business, though it’s unlikely small operations such a sole proprietorship will require too much legal paperwork.
Regardless of how you register, once the ink is dry and the business name is filed, veteran entrepreneurs should contact the Internal Revenue Service (IRS) to apply for a tax ID number. While a tax professional can do this for a fee, any enterprise owner can do it for no cost on their own via the IRS’ website.
4. Pitch the Company
At this point, much of the technical processes of forming a business has been completed. Now it’s time to develop strategies to secure necessary funding to get things off the ground.
It’s important for business owners at this stage to consider if they need funding — it’s likely that many sole proprietorships may have some start-up costs, but may not require additional outside capital investment. Conversely, larger operations may require significant funding, necessitating careful preparation.
If the enterprise is seeking additional outside funding, part of the process to obtain funding involves the creation of a pitch — highlighting the goal of an enterprise, and how its goods or services help to meet that goal.
Entrepreneurs tend to have a couple of forms of their business pitch.
This can include an elevator pitch, which summarizes the business in 30 seconds, as well as a visual pitch deck, which serves as a more in-depth slideshow or similar visual.
A visual pitch deck will highlight elements such as an overview of the business, its market opportunity, financial projections (as well as any sales successes to date), employees, and an ask — usually money for equity, and if so how much.
Crafting a compelling pitch is a difficult skill to master, especially for the uninitiated. Veteran entrepreneurs can take advantage of servicemember-specific education, such as the Veteran Fast Launch Initiative and the Veteran Entrepreneur Portal to hone these skills and put their best foot forward.
5. Strategize to Receive Business Funding
Even with a pitch deck memorized and a business codified, veteran entrepreneurs may face struggles with obtaining funding, as all businesses do.
When choosing targets for business funding, it’s important to remember the long-term effects of any partnership.
For example, entrepreneurs seeking investment from family members may be able to negotiate a favorable ownership stake, but should their business fail they might face awkward conversations and familial tension.
Likewise, an angel investor or potential cofounder who offers full funding for a majority stake in a company may deprive a founder of future earnings, and could lead to the original owner losing control of the company.
Plus such a situation could deprive a veteran of retaining their veteran-owned status, which requires that a veteran retain 51 percent ownership of their enterprise.
As such, it’s key for servicemembers seeking business funding to take a prudent approach. This might involve seeking funding via a crowdfunding platform like Kickstarter or taking out a 7(a) loan via the SBA.
It could also involve joining a veteran-specific incubator, like Bunker Labs or Patriot Bootcamp, which provide both operational office space and supplies in addition to access to lawyers, accountants, and experts in marketing and finance.
Incubators also serve as hotspots for collaboration and mentorship, which can assist servicemember entrepreneurs vying to reach the next step in their business.
Entrepreneurs might also want to consider joining pitch competitions, which enable aspiring business owners to showcase their business plans — many of which include monetary awards for placing participants.
Beyond careful planning, working with professionals when necessary, and taking advantage of network resources, military entrepreneurs should focus on ensuring their business continues to grow with the right team on hand — and that they seek out the right advice from the right people.
“Think about your business like you would your squad — you are the leader and people are looking to you for leadership in both good times and bad,” recommends veteran Zak Garcia, former chief marketing officer of Bulletproof Coffee. “It’s important to keep a level head and not be afraid to make tough decisions.
Possibly the most important maxim ex-military entrepreneurs should follow is to ensure their business fills a niche — and provides a service that addresses a problem efficiently.
“Your first idea for your business might not be the right one. Be flexible, and find an area or industry that is underserved where you can add value, then go for it,” Dillon recommends. “Don’t take no for an answer, and if you meet with rejection, get up, brush yourself off, and try again.”
With the right mindset, and by following these practical steps, veteran entrepreneurs can find professional success.