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How to Start Your Own Business
Thinking of launching a business? Because of your military service, you’re already ahead of other entrepreneurs, says Paul Gregory, co-founder of Veterans Incubator of Colorado, a nonprofit that provides entrepreneur boot camps to Soldiers.
“The success rate in Veteran-owned businesses is twice what it is in the general population,” he says. “There are attributes the general public doesn’t have.” One is that Soldiers never quit. They have a huge work ethic. Also, he says, they’re able to adapt to unbelievable situations. “All of these are essential to an entrepreneur. These are hard, transferable skills.”
Think of your startup in terms of a military mission, says Lieutenant Colonel (Ret.) Edmund Lizotte, director of military programs and Veterans affairs at Post University in Waterbury, CT, who served with the Massachusetts Army National Guard for 25 years.
With that approach in mind, here are their suggestions on making your business dream a reality.
Test your idea and determine the size of your market first. The Colorado Veterans Incubator teaches an intelligence-gathering method called “Lean Startup.” That strategy calls for the entrepreneur, once the idea is defined, to “get out of the building.”
“What I mean is that typically a Veteran gets a great idea, and the first thing they do is see their mother, aunts and uncles, who tell them, ‘You are the smartest person!’ That’s not the way to test the idea,” Gregory says. “Get out from behind the desk and set up coffee meetings with people who are your potential customers. Ask them, ‘Would you buy this? How much would you pay? What are the pitfalls?’ Get honest feedback outside your sphere of influence to give you the reality check.”
Hit the VA’s entrepreneurial website, which offers information and tools for your launch, Lizotte says. Then go to LinkedIn and search “veteran entrepreneur.” Connect with those people for advice. Similarly, don’t hesitate to ask advice from entrepreneurs who are members at your local chamber of commerce.
Next, determine your market size to project your company’s potential growth. Is your idea tailored to your neighborhood or to an international audience? “Without looking at how big the idea or market is, you’ll never know whether to proceed,” Gregory says.
PAIR UP WITH A CIVILIAN
Have a second-in-command who is not military-related and whom you trust and have known a long time, says Lizotte. “Say you have a landscaping/snowplowing business, and you’re called up [by the Guard] for a blizzard. Your customers will have to wait, because you’re on a deployment. Some units might say, ‘Come in when you can,’ but that’s between you and the commander and the unit, and that flexibility isn’t always there.”
There are exceptions, of course. But that structure works only if your company can adjust to unexpected Guard duty. Also, be cautious about partnering with spouses. “Do not give your wife general power of attorney over the company,” Lizotte says. “If she files for divorce while you’re deployed, you’ll come back and no longer have a company. This has happened on more than one occasion.”
A noncompeting business that offers parallel services to your company could be a strategic partner. For example, Gregory is mentoring a Veteran whose idea is to manage the process of recording burned-out streetlights for municipalities and utilities. They located a San Francisco software development company with a wide swath of potential customers, and the Veteran is now partnering with it to create the software.
DECIDE: STARTUP OR FRANCHISE?
If you don’t want to deal with the hassle of getting a business off the ground and would prefer an established clientele, a set business structure and a definite market, then franchising may be for you.
“Franchises are proven businesses and offer tested ideas and have procedures in place. You pay for that in terms of paying for their blue sky. But you lose flexibility to adapt,” Gregory explains. “And franchise by definition involves investment up front.”
The VetFran program, offered by the International Franchise Association (IFA), helps service members access franchise opportunities through training, financial assistance and industry support. Since the IFA launched Operation Enduring Opportunity in 2011 to help Veterans transition from the military, there have been more than 4,300 new Veteran franchise owners.
Check VetFran.com about mentoring and qualifying for financial assistance.
PREPARE FOR THE UNEXPECTED
Don’t overlook essentials like health insurance and contingency planning. A friend of Lizotte’s, a former cavalry squadron operations officer, nearly broke his back during a landscaping job and was out for six months. “He had someone to do things for him, and his wife was able to oversee things, but that’s the reality of life. You have to plan,” Lizotte says.
Make sure you have health insurance for situations when TRICARE doesn’t cover you. “For a traditional Guard Soldier, you’re covered during your time at drill or Annual Training, if something happens then. But once you’re well or fixed, you’re no longer eligible,” Lizotte says.
Insure your company, too, by listing it as a limited liability company (LLC). This provides you with corporate-like protection against personal liability. It is usually treated as a noncorporate business organization for tax purposes. State law governs the creation of an LLC. Usually, your secretary of state’s office has the information you need on filing requirements.
The biggest mistake Gregory sees among Veterans is “they think that finding funding will be easy, and it absolutely is not.” They also treat the business like a fun hobby. “But it’s a lot of work, and you probably will not have enough money at first,” Gregory says.
If personal savings and favors from friends and family still leave you short of startup costs, seek out grants.
• The Amber Grant Foundation (WomensNet.net) is geared toward women entrepreneurs and offers grants that are usually $500 to $1,000.
• Small-business grants are available from the National Association for the Self-Employed (NASE.org). NASE members can apply for a grant of up to $5,000.
• Small Business Innovation Research grants (SBIR.gov) are for research and development and are offered through various federal agencies. They are competitive, though, and the application process can take a while.
CONSIDER OTHER FUNDING METHODS
Check out microlenders. For example, Gregory’s incubator has a partnership with Accion in Denver. “They are nonprofit, funded through government grants and private donations, and their rules for lending are appreciably set,” Gregory says.
Get an instant loan from a credit union. Service unions are especially open to lending, Gregory says.
Look into the Small Business Administration. Gregory recommends this step after microlenders and credit unions because SBA loans require a lot of collateral and the paperwork is complex.
Lizotte also recommends aid from venture and angel capitalists. The “angels” give seed money and receive an equity share in the business. “Google the words ‘angel capitalists’ to find firms and see who and what they’ve donated to and what their concepts are,” he says. “The first step is having a good business plan and concept, and then looking for the angels that have invested in those types of startups,” Lizotte says. Venture capitalists typically don’t use their own money, unlike angels, instead relying on institutional funds. Also, venture capitalists usually invest much larger sums than angels.
Expect a profit in three to five years after startup. “A profit is where the owner draws a salary from the company,” Lizotte says.
WIN HEARTS AND MINDS
The key to successful marketing today is networking, and the importance of social media can’t be overemphasized. It’s free and simple. “My son, who is a firefighter, and his friend have started a woodworking business as a side thing. They created a Facebook page and now have ten orders and paid zero marketing dollars. You don’t have to have a lot of skills to get the word out,” Lizotte says. “There are free resources to create websites. Social media is a tremendous way to do it.”
Gregory says it’s a perfect time for a Veteran to start a business, and cites the public’s support for service members. “It’s an advantage to tell people you are a Veteran,” he says. “Don’t underestimate the value in this market of telling people, ‘I served my country proudly.’ People will respond positively.”