Starting a business isn't easy. Keeping one running is also very challenging. Roughly 40 percent of businesses in the United States fail within their first five years.1 There are many reasons for this. Some are straightforward. Others defy logic. Even great business ideas can falter. The following ideas may be helpful if you contemplate starting a business after your military service.
Conduct Market Research
Many first-time entrepreneurs fail to consider whether their business idea actually has a market. Will consumers actually buy it? To answer that question, you simply need to ask it. That's where market research comes in.
And there are many resources available to veteran business owners. The Veterans Business Outreach Center (VBOC) can help you perform competitive analyses and conduct market research. Both are available free to veterans. Both are enormously valuable.
For example, if your research finds that the market is saturated with similar businesses, you may want to consider going in a different direction. Competing with established businesses can be difficult, especially for unknown and unproven start-ups.
If your research suggests that your business idea is viable and that the market opportunity is large, then the next step is to write a business plan.
Business Plan Essentials
Your plan doesn't have to be elaborate. But it should include a discussion of what you offer, to whom, why they'll pay for it, and how you'll market it. Your business plan should include the following topics:
- Management experience
- Operational procedures
- Product development goals
- Marketing and sales plans
- Financial projections
Your business plan serves as a roadmap for how the enterprise will become a profitable, self-sustaining success.
Consider the Business Structure
Part of your business planning should consider the legal structure of the underlying entity. You'll want to consult with an attorney and tax advisor during this part of the process.
Some of the available options for structuring your business include setting it up as:
- A sole proprietorship
- A partnership
- A limited liability company (LLC)
- A C corporation
- An S corporation
The business structure you choose, and your location also determine whether you need to register your business. Most small businesses simply need to register a business name with state and local governments. You may not be required to register your business at all, but keep in mind that not registering may mean you miss out on some legal and tax benefits, and personal liability protection. This is an important decision, which is why you should seek both legal and tax advice.
Name and Claim the Business
As mentioned above, your business name is an important part of forming your small business. Deciding on a unique business name goes well beyond coming up with a catchy title. Naming your business actually has important consequences.
So, you should make sure that the business title isn't already in use. Operating under the name of another business, or using one that is very similar, can be embarrassing, confusing, or may present a potential legal problem.
At about this same time, veteran entrepreneurs should apply for a federal tax ID number. This can be accomplished for free on the Internal Revenue Service website.
In addition to seeking professional advice, which you will pay for, there are also free resources available through the Small Business Administration (SBA).
Resources for Veterans
Former servicemembers may also want to explore whether they can qualify for veteran-owned business status. Being designated a veteran-owned business doesn't offer any legal or tax benefits. But it can help your business qualify for certain government contracts.
Your business will likely qualify if you own a majority of the company and run its day-to-day operations. Both the Department of Veteran Affairs (VA) and its Office of Small and Disadvantaged Business Utilization are great resources to consult in this regard.
Pitch Your Company
Once you have a legal entity set up to do business, it's time to secure the funding necessary to get things off the ground. If you can't finance the business on your own, you will have to raise that money from outside sources. To do this you will have to create a pitch.
Your pitch highlights your goals for the enterprise and how you intend to achieve them. Many entrepreneurs have two business pitches: one is a quick synopsis that can be delivered in about 30 seconds. This is commonly referred to as your elevator pitch. The other is a more formal presentation, or visual pitch deck.
This visual pitch deck is typically an in-depth slideshow. It includes an overview of the business, its market opportunity, financial projections (including current and forecasted sales), a marketing plan, management background and experience, other important employees, and an ask. The ask is what you'd like the audience to do.
The ask is typically a request for money. It will discuss the expected return on investment for taking the risk and when an investor should expect to get his or her money back.
Business Funding Strategy
There are a number of ways to raise business capital. Your strategy will depend on your specific circumstances.
Many businesses get their initial financing from family members. Some borrow money from a bank. Others may be funded by angel investors. And in some cases, a cofounder may be brought in to provide funding in return for a stake in the business.
Other financing resources include digital crowdfunding platforms and various loan programs offered by the SBA. And there are a number of veteran-specific business incubators that offer collaboration, mentorship, and access to lawyers, accountants, and experts in marketing and finance.
Operational Art at Work
A successful business can be achieved by following some of the same techniques you learned during your time in uniform. Connecting the details of tactics with the goals of a broader strategy is key to operational success.
Create a plan, stick to it, and make sure that you have the resources to execute effectively.
1 Source: U.S. Bureau of Labor Statistics, Business Employment Dynamics