Service Members & Veteran’s Guide to Starting a Business
America’s veterans have a long tradition of entrepreneurship. After World War II, 45% of military veterans came home to start their own companies, as did 40% of Korean War veterans.
Since then, the percentage of self-employed veterans has fallen to 4.5%, but veterans remain more entrepreneurial than the average person. According to the Small Business Administration, veterans are 45% more likely than non-veterans to become business owners. Almost one in ten new businesses is veteran-owned.
Why Veterans Make Great Entrepreneurs
“The primary difference in veteran entrepreneurs is perseverance,” said Mark Cuban, the billionaire Shark Tank investor who has invested in dozens of startups, to an audience of veteran entrepreneurs. “You’re used to having your back against the wall, used to fighting through the muck. you’re used to dealing with an insane bureaucracy,” Cuban said. “Having that veteran mentality makes you more suited for being an entrepreneur.”
In addition to the qualities of mental toughness and resiliency that Cuban describes, veterans also bring a number of other advantages to the table.
Leadership Experience. Military officers, non-commissioned officers (NCOs) and warrant officers are expected to exercise leadership. Even where veterans leave the military before becoming NCOs or officers, they have invariably been exposed to many leaders — both great ones and mediocre ones — and have been able to learn from both types.
Technical Skills. Many veterans learn trade or technical skills in the service that are directly or indirectly applicable to operating their businesses. These skills may include electronics, plumbing, information technology, mechanical repair or truck driving. Some learn about more general or advanced concepts such as supply chain management, inventory management and logistics applicable to almost any business.
Teamwork. Veterans are accustomed to working in teams to accomplish a mission or task and tend to understand the value of things like delegation and distributing the workload. They can also see how professionals of different disciplines can work together as a combined arms team to enhance each others’ effectiveness.
Initiative. Veterans have generally been encouraged to show initiative since early in their careers. Most can see the value in acting in accordance with the commanders’ intent, even in the absence of orders. This is a necessary ingredient in successfully “becoming your own boss.”
Sacrifice. Nearly any veteran who’s been deployed to a combat zone, sea duty, or extended field exercises knows that long hours and hard work over long periods won’t kill them. As Cuban says, veterans are used to the grind and many even embrace it. “You guys are used to sacrificing. You’re used to making a lot out of a little. Those are great qualities for starting a business.”
Unique Opportunities for Veterans
Veterans have a few natural advantages that translate to unique business opportunities not readily available to non-veterans.
Many veterans leave the service with a top-secret or at least a secret clearance already in hand. A top-secret clearance can be difficult and expensive for businesses to obtain, with an average cost of $3,000 to $15,000 per investigation. Holding a high-level clearance means the government is much more willing to grant you access to a myriad of sensitive or classified technology, operational and intelligence information. This could open up opportunities in government contracting and consulting.
Veteran-Owned Business Contracting
You don’t have to contract directly with the federal government. It’s usually easier to break into business-to-government (B2G) entrepreneurship as a subcontractor than as the prime contract holder.
This is because federal procurement officers are required to work with contractors and to ensure that enough contract and subcontract work goes to minority and disadvantaged businesses.
They are evaluated on meeting specific quotas. Among them are quotas for veteran-owned and service-disabled veteran-owned businesses (SDVOBs).
Marketing to Military and Veterans
Many veteran entrepreneurs have found success marketing to other veterans directly. Examples include the Black Rifle Coffee Company, 9-Line clothing and Gruntworks. Each of these businesses carved out a niche with their respective much larger industries (coffee and clothing) by appealing specifically to military veterans and first responders.
But it’s not necessary to limit yourself to the military and veteran market. Veterans founded FedEx and Enterprise Rental Cars, both of which are household names well beyond the military and veteran market.
Sectors and Industries Where Veterans Are Making an Impact
Overall, veterans make up between 9% and 10% of all business owners. But they are overrepresented in a few industries. The top-10 sectors for veteran entrepreneurship are represented by the percentage of veteran-owned businesses in the industry, according to the Small Business Administration.
Veterans select a widely diverse set of sectors for their entrepreneurial activities, according to the Small Business Association and U.S. Census Bureau data.
The most popular industries among veterans are:
- Professional, scientific and technical services. The amount of veteran entrepreneurs who go into this sector is 17%, which is not surprising. It’s where veterans can readily take advantage of their edge in technological training and experience working and repairing sophisticated electronics and machinery. Veterans frequently put their security clearances to work in these sectors, as well.
- Construction. The construction industry attracts 16% of veteran entrepreneurs after their service and runs a very close second to the professional, scientific and technical services when it comes to popularity among veterans. Veterans tend to be experienced in the project management and logistics of running a construction business and do well managing multi-disciplinary teams of specialists and leading them to a common goal, which is the essence of the construction industry.
- Real estate. When they go into business for themselves, 9% of veteran entrepreneurs choose to get into the real estate industry. Success in real estate requires hard work, a head for numbers, tolerance for calculated risk and extraordinary self-discipline when it comes to sales and time management. Veterans frequently excel in each of these dimensions.
Best Business Ideas for Veterans
The best sectors and industries for veteran entrepreneurship are the ones where veterans can leverage their advantages of mental toughness, resiliency, favored status in government contracting and the ability to take advantage of the public’s general goodwill towards veterans as a group.
At the same time, veterans may want to consider industries where their disadvantages — limited access to monetary and social capital — are minimized.
Business-to-Government (B2G) Contracting
Veterans, especially service-disabled veterans, have a natural advantage in pursuing government contracting and subcontracting opportunities. Veterans in any industry can seek out companies who are federal contractors and offer their goods and services as subcontractors.
All federal contractors are expected to assign a certain percentage of subcontractor awards to small and disadvantaged businesses, including minority-, women-, veteran- and service-disabled veteran-owned small businesses.
These prime federal contractors are under constant pressure to show federal procurement officers and OSDBU representatives that they are meeting their quotas. By going through the verification process and becoming certified as a veteran-owned or service-disabled veteran-owned small business, you can set yourself apart from the competition right away.
To get started in B2G contracting, start your business as a corporation or limited liability company (LLC), get ramped up with inventory and staff so you can deliver the goods and services you are selling and get certified as a veteran-owned or service-disabled veteran-owned business.
As the SBA notes, veterans are attracted to insurance and financial services. While veterans comprise about 5% of the adult population in the U.S., they make up more than 13% of all the insurance and financial services business owners in the country.
Many major financial services companies offer excellent sales training and support, and you can establish your own agency or financial advisory firm under their umbrella. You’ll have to work very hard and master the art of prospecting and selling in your early years, which can prepare you for any endeavor you choose.
The capital requirements to get started are usually minimal. There’s no inventory to buy and no equipment to lease. You don’t even need an office to get started. You can launch your business with a couple of nice suits, a car, a phone and a laptop.
To get started in the financial services business, take good care of your credit rating for several years before you launch. Most reputable financial services firms will do a credit and background check before they bring you on board. Interview with several different insurance and financial advisory companies and local offices to find the best match for you.
Technology and Engineering
If you have training and experience working with and repairing high-tech equipment in the military, you have a leg up on the competition already. It can be challenging and expensive for civilians to get the same training you got for free in the military, and this is a significant advantage when you launch your business.
Many veterans who go into technology and engineering also go into government contracting, leveraging their other advantages as a veteran-owned business, often with pre-existing security clearances.
A Checklist for Creating Your Veteran-Owned Business Plan
All veterans understand the importance of planning before mission execution. Starting a business is no different. You need to plan carefully and line up resources and expertise. As a veteran, here are some things that need to be on your shortlist of things to accomplish.
- Create a business strategy.
Having a dream is one thing. Having a plan and strategy is quite another. Your business plan turns your entrepreneurial dream into a set of concrete actions and steps you can take to make your dream a reality. It’s a road map of how you will get from where you are now to where you would like your business to be — ultimately out to your exit or retirement plan.
- File articles of incorporation in your state.
Speak with an attorney or accountant about whether creating an S corporation, C corporation or limited liability company would work best for your business.
- Get a DUNS number.
Your Dun & Bradstreet number identifies you within the federal contracting system. It’s a nine-digit number. If you have multiple locations, you need a different DUNS number for each location.
- Enroll in the Veteran Federal Procurement Entrepreneurship Training Program (VFPETP).
The Veteran Institute for Procurement administers this program. As a new business owner, start with the VIP START program, a three-day, 27-hour certification program, available at no cost to you. The VFPETP provides a crash course on business basics such as contracting, accounting and business development and offers valuable networking and educational experience.
- Take classes.
“If you have a chance to take an accounting class, finance class or a marketing class, do it,” said Mark Cuban. “It will be the best money you ever spent. Because if you don’t understand the language of business, you will always depend on others. And it will always cost you more to start.”
- Assemble an advisory board.
Every small business owner should put together a formal or informal advisory board composed of experts in various disciplines who can give you sound and timely advice and guidance. Large publicly-traded businesses have paid board members. But you’ll probably rely on a team of volunteers to start.
Think of the areas you are weakest in or have limited knowledge of, and try to recruit people for your board who are strong in these areas. Examples may include IT, accounting, finance, HR or logistics.
As your business grows, these advisors can help you fill critical vacancies and may even be investors in your business themselves. You can find potential board members within your local Chamber of Commerce, from alumni board listings and from startup incubators that may be operating near you.
Get Funding for Your Startup
Financing has long been a difficulty for veteran and service-disabled veteran-owned businesses. A 2018 Federal Reserve study found that veteran-owned companies were more likely than other companies to experience serious cash crunches due to lack of access to credit and financing. Veteran-owned businesses get turned down for credit more often and get approved for less than the amount sought more frequently. Since 2010, SBA-guaranteed loans have increased by 48% for veteran borrowers compared to an 82% increase for other borrowers, according to the Federal Reserve.
Lack of access to capital is among the most commonly cited problems veterans run into when starting a business. It's often advisable to estimate spending and savings to gain a better financial picture. But Mark Cuban cautioned veteran business owners not to get distracted by the prospect of raising money. “Don’t start with raising money,” he advised. “Raising money isn’t an accomplishment. It’s an obligation.”
But there are times when there’s little choice. If you need to borrow money to buy equipment and inventory, to make payroll or for any other purpose, the following vital resources for funding your startup may help.
Small Business Association
The SBA primarily provides loan guarantees to banks and other lenders so they'll be more willing to lend to veteran business owners. The SBA usually doesn’t lend money directly. To get funded, apply directly to an SBA-approved lender.
The popular "Patriot Express" loan program has been discontinued, but the SBA still backs small business loans up to $350,000 under the 7(a) Small Loan program, and up to $5 million under the 7(a) Standard Loan program.
The Department of Veterans Affairs makes every attempt to prioritize veteran and service-disabled veteran-owned small businesses when it comes to contracting opportunities. If you want to do business with the VA, register your business with the VetsFirst Verification Program.
Even if you don't plan to conduct business directly with the VA, the VetsFirst program provides education and training for veteran small business owners. It maintains an extensive library of educational materials.
If you don’t have collateral, excellent personal credit or a proven track record as a borrower, you might also want to approach internet lenders, who may have easier credit criteria. But you’ll probably pay a higher interest rate.
StreetShares is a private lender founded and operated by veterans, focusing on lending to veteran-owned small businesses. They can provide loans directly, open a line of credit, or lend against accounts receivable.
Franchise companies frequently have arrangements with lenders to finance franchise purchases and inventory. If you're buying a franchise, it may be easier to qualify with your franchisors' financing company. But that doesn't mean they have the best terms. It almost always pays to shop around.
Credit cardsThese can be useful tools for a 30-day float. You don't have to pay interest if you pay all your new charges by the due date when you use it. You may even rack up points or [cash-back rewards](https://www.moneygeek.com/credit-cards/business/best-cash-back/). After that, they're pure poison.
Friends and family
Many people have started businesses with capital raised from friends and family. It can even help to show other lenders that your family has ‘skin in the game.’ However, if the business fails, things could get a little uncomfortable at the Thanksgiving dinner table.
Venture capital organizations invest in early-stage companies, typically looking to exit in three to five years. Often, along with their investment, they can provide managerial, executive and technical support. They may also be able to introduce you to markets, customers and financing you wouldn’t have been able to access on your own.
This is equity investing, not debt. Venture capital and private equity firms buy partial ownership in your business. Venture capital tends to focus on very early-stage companies. Investors typically look at companies where there is a strong prospect that they will be able to exit their investment after one to three years with at least 10 times their original investment on any single company.
Several venture capital firms put extra emphasis on investing in veteran-owned businesses:
Moonshots focuses on seed-stage opportunities in veteran-founded companies or companies where a veteran is on the founding team. They are looking for companies with $500,000 in recurring revenue, preferably who have already raised $500,000 or more. They are also looking for experienced management that has already run one or more businesses.
Veteran Ventures looks for veteran-owned or affiliated businesses with promising technology or an innovative business concept. They also consider existing companies with prospects for rapid growth.
TFX Capital is a Veteran-led venture capital firm that looks for opportunities to invest with proven and commercially-tested veterans. Their focus is on early-stage B2B technology and technology-enabled businesses.
Startup Resources for Vets
If you’re a veteran starting a new business, you’ve got a lot of support. The government and the private sector provide a wide variety of resources for veteran entrepreneurs. These organizations and initiatives help veteran business owners by providing education, mentorship, support networks and access to investment capital and low-interest loans.
American Corporate Partners
This private-sector organization connects post-9/11 veterans, active duty spouses and eligible military spouses with corporate professionals for customized mentorships.
This nonprofit, national network of veteran and military spouse entrepreneurs is dedicated to helping people in the military-connected community start a business.
This five-month in-residence fellowship program enables service-disabled veterans and military family members to gain first-hand experience in operating an actual bakery in Washington, D.C. In the process, those completing the program will have earned a certificate in business administration from Georgetown University.
Entrepreneurship Bootcamp for Veterans with Disabilities (EBV)
This recurring program is an initiative of the Syracuse University’s Institute for Veterans and Military Families. It’s primarily designed for post-9/11 veterans with disabilities.
Grow With Google
Google offers a number of options for veteran business owners to promote their businesses as “veteran-led” on their search engine. It also features several courses for veteran-owned and military spouse-owned businesses within their Grow With Us app. Google for Startups is partnering with Patriot Boot Camp, Bunker Labs and Veteran Capital to help veterans and their families grow their businesses.
This Texas-based non-profit SBA lender specializes in providing loans to women- and minority-owned businesses. Loans for qualifying veteran-owned businesses are available, and LiftFund also conducts workshops and provides counseling throughout the loan process.
National Veterans Entrepreneurship Program.
An initiative of Oklahoma State University, the VEP consists of a five-week online course of study, followed by an intense eight-day in-person course of instruction held on-site at the OSU campus in Stillwater, Oklahoma. There's also an ongoing mentorship and assistance program for graduates.
National Veteran Owned Business Association
NaVOBA strives to create corporate contracting opportunities for veterans through certification, advocacy, outreach, recognition and education.
This nonprofit advocacy group provides training and support for entrepreneurship in military families, particularly among military spouses who typically have high unemployment rates because of frequent relocations. Among their programs is Service 2 CEO, an eight-module program of instruction in entrepreneurship, which includes financial counseling and meetings with veteran business owners.
National Veteran Small Business Coalition
This trade association represents veteran-owned and disabled veteran-owned businesses and works to ensure that these groups are given first consideration for federal contracting and subcontracting opportunities.
This organization focuses on helping veterans connect with franchising opportunities. Over 600 franchise companies participate, and VetFran screens them for quality.
Describing itself as a "modern military transition company," Veteran Capital connects transitioning service members with tech companies to work full-time in a three-to-four-month fellowship program while they are still in the service. The military, not the tech company, pays their salaries. The veteran is exposed to operations in the tech industry and learns the ins and outs of entrepreneurship. At the end of the process, the tech company can hire the veteran directly, or the veteran is better prepared to start and lead his or her own business.
Veteran Institute for Procurement
The Veteran Institute for Procurement focuses on helping veterans interested in selling to the federal procurement. The program is free and consists of an intense three-day seminar. Topics include contracting, teaming agreements, business development, human resources, accounting and finance.
Veteran Women Igniting the Spirit of Entrepreneurship (V-WISE)
This program for women veteran entrepreneurs is run by the Institute for Veterans and Military Families at Syracuse University. The program includes an online course, an entrepreneurship training event and ongoing mentorship, training and support opportunities for graduates launching or growing their business.
Government Offices and Programs
Office of Small and Disadvantaged Business Utilization (OSDBU)
This is the federal procurement office in charge of ensuring that the federal government achieves its objectives in awarding contracts to women and minority-owned and disadvantaged businesses, to include veteran and service-disabled veteran-owned business enterprises.
Small Business Administration
This federal agency helps business owners by facilitating access to startup capital, low-interest loans, education and coaching.
This resource is the SBA's introductory resource page for small business owners interested in contracting with the federal government. It includes links to further information on certifications, size standards, policies and procedures and other topics.
This program from the Small Business Association helps business owners find lenders whose lending criteria match their circumstances. The free online tool allows small business owners to fill out a quick online form and connects them with lenders within 48 hours.
Office of Veterans Business Development
This subagency within the Small Business Administration focuses on developing entrepreneurship and small business survival and success within the veteran and military community. The agency strives to expand the availability and usability of small business programs for veterans and their dependents or survivors.
Veterans Business Outreach Centers
This initiative of the Office of Veterans Business Development assists with business training, counseling and resource partner referrals. They conduct pre-business planning workshops, concept assessments, assistance with developing business plans, feasibility analysis and mentorship in centers established across the country.
Boots to Business
This program, run by the Small Business Administration, is part of the military's Transition Assistance Program. It is offered to all military service members as they transition out of the service and back into the private sector. It provides an overview of entrepreneurship and applicable business ownership fundamentals. It's not limited to transitioning active-duty service members; Veterans of all eras and spouses are also eligible.
Service-Disabled Veteran-Owned Business Program
This SBA initiative seeks to assist service-disabled veteran-owned businesses in achieving success in federal contracting and subcontracting. The federal government’s goal is to see that 3% of federal contract awards go to service-disabled veteran-owned businesses.
State and Territory Business Resources
Just as you can create a business to sell goods and services to the federal government, you can do the same for your state or any other state or territory. Click the link to search for contracting resources specific to your state.
About the Author
Jason Van Steenwyk is an experienced financial industry reporter and a writer for MoneyGeek. He is a former staff reporter for Mutual Funds and has been published in SeekingAlpha, Nasdaq.com, RealEstate.com, WealthManagement.com, Senior Market Advisor and more. He lives in Orlando, Florida.
- Bunker Labs. "The Veteran Entrepreneur Ecosystem.” Accessed June 3, 2020.
- Bureau of Labor Statistics. “Employment Situation of Veterans 2019.” Accessed June 3, 2020.
- Congressional Research Service. “SBA Veterans Assistance Programs: An Analysis of Contemporary Issues.” Accessed June 18, 2020.
- Institute for Veterans and Military Families at Syracuse University. "Vetrepreneurs — Strengthening the Backbone of the U.S.” Accessed June 17, 2020.
- Small Business Administration. “SBA Veterans Assistance Programs: An Analysis of Contemporary Issues.” Accessed June 3, 2020.