Veterans contribute to society in many commendable ways, and the path of entrepreneurship is one particularly impactful example. There are close to 2 million veteran-owned businesses in the U.S., and they employ over 5 million Americans. Despite facing challenges in accessing capital and other areas, 80% of veteran entrepreneurs consider their businesses to be successful.
As we observe Military Appreciation Month and Small Business Month this May, it’s a great time to recognize the contributions of veteran entrepreneurs. They not only support the health of our economy but continue to enrich local communities as well. In this article, we’ll look at ways to support veteran-owned businesses and answer questions such as:
Overall, despite experiencing difficulties in securing financing, identifying mentors, and navigating regulations and bureaucracy, veteran-owned businesses are reporting success and positive sentiments.
How many veteran-owned businesses are there in the U.S.?
Veteran-owned businesses in the U.S. total nearly 2 million and employ over 5 million Americans. SCORE’s 2021 survey of over 3,000 entrepreneurs found that 9.1% of U.S. small businesses are veteran-owned, and they generate $1 trillion in annual receipts.
Former service members open businesses in numerous sectors, including real estate, construction, retail trade, and transportation. This variety of enterprises helps to meet the needs of their local communities and plays a role in sustaining our economy.
SCORE’s survey findings show that many veterans feel the military prepared them well for small business leadership by developing strengths, like taking on hard work (75.6%) and leadership skills (57.7%). The report also suggests veterans are 35.4% more likely to start their businesses as a supplement to their primary income.
To qualify as a veteran-owned small business, a company must meet the U.S. Small Business Administration’s (SBA) requirements of being at least 51% owned, operated, and controlled by a veteran.
The SBA has two main categories for veteran enterprises: Veteran-Owned Small Business (VOSB) and Service-Disabled Veteran-Owned Small Business (SDVOSB). Having one of these designations is helpful for entrepreneurs seeking to secure federal contracts, as they allow businesses to compete for sole-source and set-aside contracts at the Department of Veterans Affairs (VA). The VA earmarks at least 7% of its contracts each year for certified VOSBs and SDVOSBs. VOSBs can also compete for contracts with other qualifying programs.
The Success Rate of Veteran-owned Businesses
The Institute for Veterans and Military Families (IVMF) 2022 survey of military-affiliated entrepreneurs found that 80% of veteran-owned businesses consider themselves successful, and 54% reported that their businesses were profitable in 2021.
According to the SBA, veterans are 45% more likely to start their own business than the general population. In fact, the number of veteran-owned businesses doubled in 2021, making up 10.7% of new business owners — up from just 5.4% of new entrepreneurs in 2019.
Veterans are known to make not only great employees but also great business owners, and they are more likely to hire other veterans when they start their own companies. With their characteristic discipline, former service members have often been trained in a variety of skills, making them agile, hands-on leaders. They also bring unique experiences to the workplace that can be beneficial for everyone involved.
However, the links between military service and business ownership don’t always lead to smooth transitions for veteran startups. Many service members face challenges in transitioning to civilian life and may not have access to the right resources or networks on the way to becoming a business owner. For example, over 46% of veteran entrepreneurs surveyed by IVMF shared that navigating business resources in their local community was difficult. Hence, becoming a veteran entrepreneur can feel siloed, contributing to limitations in growing and marketing their business.
What challenges do veteran business owners face?
Common challenges for veteran-owned businesses include “developing and utilizing social capital, identifying successful mentors, accessing appropriate financial capital, and obtaining and utilizing business and management skills.”
Despite the ability to adapt to change (a trait that can be useful in keeping up with shifts in their industry or in consumer behavior), former service members may lack the financial resources and business tools to grow their company.
In particular, service members beginning the transition to civilian life may already be overwhelmed with the complexities of securing employment, housing, healthcare benefits, and other necessities that come with a high level of bureaucracy. And those opting for self-employment will need access to resources and networks that may not be readily available or easy to attain.
According to the 2022 National Survey of Military-Affiliated Entrepreneurs, veteran business owners expressed facing barriers in the following areas:
Financial barriers: Lack of access to capital (37%), lack of financing (34%), current economic situation (27%), and irregular income (22%).
Social and human capital barriers: Problems finding good employees (30%), lack of mentors (20%), lack of organizations that assist entrepreneurs in business training (12%), and lack of relationships with other entrepreneurs (11%).
Regulation and policy barriers: Difficulty navigating taxes and legal fees (20%), federal regulations and policies (20%), state regulations and policies (13%), and startup paperwork and bureaucracy (12%).
Cultural and knowledge barriers: Lack of experience in entrepreneurship or business ownership (18%), fear of failure (14%), personal health issues, such as disability or mental illness (13%), and lack of education about the business world (13%).
Marketing barriers: Difficulty marketing their business (47%) and conducting market analysis (28%).
The COVID-19 pandemic also presented notable economic challenges to veteran business owners.
A 2021 report from SCORE found that veteran entrepreneurs experienced a lack of support from federal (59.4%), state (76.9%), and local governments (78.5%) and their local communities (52.3%) during the COVID-19 pandemic. Though they applied for COVID-19 relief funds at the same rate as non-veteran entrepreneurs, these requests were denied “20%-100% more frequently than for non-veteran business owners.”
Some of the barriers veteran business owners face can be overcome with more community support, such as mentorship, networking events, and consistent patronage. It's also important for the VA and lawmakers to look toward increasing funding opportunities, business resources, and other initiatives that can open doors for veteran entrepreneurs and aid in the growth of their businesses.
What are some promising trends among veteran-owned businesses?
There are several promising trends among veteran entrepreneurs. Veteran-owned businesses are increasing and showing strong signs of succeeding. According to recent survey data by payroll management firm Gusto, 10.7% of new business owners in 2021 were veterans — up from 5.4% in 2019.
The 2022 National Survey of Military-Affiliated Entrepreneurs found that 80% of veteran business owners consider themselves to be successful, and 72% said they are able to financially support themselves and their families with their business income, compared to 26% that are not able.
Former service members are opening businesses across industries, and many express optimistic outlooks for the growth of their companies. A few of the top sectors for veteran businesses are professional services, construction, retail trade, healthcare, and accommodations/food service.
More doors are opening for funding as well. For example, U.S. Bank recently introduced a new Business Diversity Lending Program that will expand the ability of diverse entrepreneurs to obtain capital, such as women- and veteran-owned business owners.
Women Veteran Business Owners are on the Rise
Women veterans are demonstrating a notable aptitude and interest in entrepreneurship. Currently, 8% of veteran business owners are women, with “an estimated $16.3 billion in [total sales or] revenue, just under 100,000 employees, and about $402 million in annual payroll.”
Based on preliminary data from the U.S. Census Bureau's Survey of Business Owners, the number of businesses owned by women veterans increased by an incredible 296% between 2007 and 2012, up from about 130,000 to a total of 384,548 businesses. And 70% of female veteran entrepreneurs consider themselves to be successful.
Moreover, the signing of Executive Order (EO) 13985 in 2021 marked a historic commitment by the federal government to further support underserved communities, including women veteran entrepreneurs. The VA’s Women Veteran-Owned Small Businesses Initiative (WVOSBI) — providing opportunities and access to economic opportunities for WVOSBs — reports that this order will have a significant impact on the growth potential for female veteran startups.
Allocating $31 billion in new spending on small business programs, WVOSBI explains that this legislation will help:
leverage intellectual capital and resources to expand services to WVOSBs;
spark greater collaboration and partnership among WVOSBs;
increase the participation of federal agencies, nonprofits, and educational institutions in supporting the growth of WVOSBs;
create more training opportunities geared toward the development of WVOSBs; and
expand access to economic and educational opportunities for WVOSBs.
How can we support veteran-owned businesses?
Veteran-owned businesses are an important part of our economy and our communities. We can all seek to support veteran-owned businesses by sharing helpful information and resources with veteran entrepreneurs, making an effort to frequent their businesses, leaving positive online reviews, and spreading the word about their products or services. The Department of Veterans Affairs (VA) has a Veteran Entrepreneur Portal for veterans who aspire to be business owners. It includes step-by-step guidance on starting a business, securing financing, government contracting guidelines and other useful information.
The U.S. Small Business Administration (SBA) also offers support for veterans seeking to enter the world of business ownership, as well as SCORE's Hub for Veteran Entrepreneurs and the Coalition for Veteran Owned Business (CVOB), which both offer business mentoring, workshops, webinars and educational resources. Additionally, the PenFed Foundation's Veteran Entrepreneur Investment Program supports military-affiliated start-up owners in securing capital and offers leadership training.
When looking to find local veteran-owned businesses, you can browse extensive directories such as the National Veteran-Owned Business Association, American Veteran Owned Business Association (AVOBA), Women Veterans Alliance (WVA), Veteran Owned Businesses (VOB), BuyVeteran and the VA’s Vendor Information Pages. Lastly, be sure to encourage veteran business owners you know to share their stories with Mission Roll Call. Our movement continues to amplify the voices of underserved veteran communities, including service-disabled veterans, women, tribal and rural veterans looking for resources to start or grow a business.
Former service members have shown immeasurable dedication to our nation, and veteran-owned businesses are vital to our economy. These diverse entrepreneurs enrich our communities by providing an array of quality services and products. This Military Appreciation Month and going forward, let’s make it a point to seek out veteran-owned businesses to support, as so many are worthy of our patronage.