Academic journal article Academy of Entrepreneurship Journal

A Study of Veteran-Owned Small Businesses and the Impact of Military Reserve Call-Ups since 9/11

Academic journal article Academy of Entrepreneurship Journal

A Study of Veteran-Owned Small Businesses and the Impact of Military Reserve Call-Ups since 9/11

Article excerpt

INTRODUCTION

According to the U.S. Small Business Administration (SBA), small businesses employ 59.7 million workers, or slightly less than half of the U.S. workforce and that small businesses with less than 500 employees account for 99.9 percent of an estimated 27.5 million businesses in 2009 (SBA, Office of Advocacy). Of these businesses, 52 percent represent home-based businesses and 2 percent franchises. In addition, small businesses account for 97.5 % of exporting companies and 31 percent of total export value (SBA, Office of Advocacy). Finally, small businesses produce 16.5 times more patents per employee than larger companies (SBA, Office of Advocacy, 2012).

Just as our economy depends on small business to be the driver of our economy, as a nation, we depend upon members of our military to secure our freedom. Upon leaving the military, some veterans choose to start their own business rather than work for someone else. In some cases, veterans with service-connected disabilities might choose self-employment due to physical limitations. In fact, service disabled veterans account for 196,760 or 8.3 percent of all veteran owned businesses (http://www.census.gov/econ/sbo).

Many veteran-owned businesses provide employment for others. The Census, through the Survey of Business Owners, collects data from both employer and nonemployer businesses and further breaks down that data by demographic characteristics and ownership status. In 2007, 491,344 veterans reported owning companies. Those firms employed 5.8 million persons and a payroll of $210 billion. In addition, those businesses generated $1.1 trillion in revenues. In 2007, employer firms accounted for 20.1 percent of the total number of veteran-owned firms and 92.3 percent of such firms' gross receipts. Average receipts for these veteran-owned employer firms in 2007 exceeded $2.3 million.

Many other veterans choose to become self-employed. In 2007, the Survey of Business Owners reported an additional 2.0 million veteran-owned firms without employees. These nonemployer firms generated $93.8 billion in receipts. In 2007, nonemployers accounted for 79.9 percent of the total number of veteran-owned firms and 7.7 percent of the gross receipts of such firms. Receipts for these veteran-owned nonemployer firms in 2007 averaged $47,931. With regard to the type of business activity veteran-owned firms engage in, 32.5 percent operate in professional, scientific, and technical services (Survey of Business Owners, 2007).

Hope, Christman, and Mackin (2009) offered good insight into characteristics of veterans as entrepreneurs. The authors indicated that military veterans with 20 or more years of military service report higher levels of self-employment. The authors suggested that this could be due to longer-service retirees generally possessing more wealth. Veterans who are small business owners also tend to be older married males, and possess at least a high school diploma. Interestingly, their study also found that for each additional year of age, the probability of self-employment increases by approximately 7.5 percent.

The Hope, Christman, and Mackin study (2009) also reports commissioned officers to be 55.6 more likely to start their own business than enlisted personnel. The authors attribute this to the fact that commissioned officers possess higher education levels than enlisted personnel.

Promoting veteran business ownership

The U.S. Small Business Administration provides special assistance to military veterans through the Office of Veterans Business Development. Programs and resources for veterans include business counseling for those veterans seeking to start or expand a business and special financing programs including the Patriot Express Pilot Loan program. This program, launched in 2007, provides for loans of up to $500,000 with loan guarantees up to 85% (http://community.sba.gov) and loan money can be used for business start-up, expansion, inventory, working capital, equipment purchases, or also real estate purchases when business-related. …

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