Many service members dream of opening their own businesses after leaving the military.
On a recent morning at the Pentagon, about two dozen of those troops with separation dates on the horizon sat in a classroom-like setting to receive a healthy dose of reality about the challenges facing startup entrepreneurs.
“Banks want to see the five ‘Cs’ — credit, collateral, commitment, character and cash flow,” Charles McCaffrey told the service members. “Banks are going to want to see 20 percent to 30 percent collateral. And they are going to check your personal credit scores.”
McCaffrey is an instructor with the Defense Department’s Transition Assistance Program, an expanding array of mandatory seminars and optional classes designed to prepare the roughly 250,000 troops who separate each year to return to civilian life and use their military training to find gainful employment.
The so-called Boots to Business bloc of instruction is an optional two-day class for troops interested in entrepreneurship. It is now offered at virtually every domestic installation and by the end of this year will expand to overseas bases.
Hitting the pros and cons
The class covers how to select a potential business venture, compile a professional business plan, and find business loans, investors and startup capital. The aim is twofold: to prepare participating troops for self-employment while fully outlining the potential pitfalls of small-business ownership.
“Some service members will say, ‘Whoa, there is a lot more here than I expected. I’m not going to go any further with this,’ ” Susan Kelly, director of the Pentagon’s Transition to Veterans Program, said in an interview. “We don’t want them going into this venture not understanding what the challenges are and what they have to do to meet those challenges.”
The possible businesses floated in the class ranged from bars and restaurants to real estate development and cybersecurity consulting. Troops asked about when and how to obtain patents and trademarks, and reviewed the tax implications of owning a business.
McCaffrey explained the pros and cons of getting a bank loan — you own the company, but you have to pay the money back — compared to seeking investors, who will provide money outright but expect ownership and some future control in the business.
The military’s revamped TAP program is required for all service members preparing to separate, and commanders are encouraged to place a high priority on preparing troops for civilian life. That’s a significant shift from just a few years ago when military culture downplayed transition programs for fear they would encourage more troops to leave and hurt retention.
Spurring a cultural shift
That shift stems in part from concerns several years ago about exceptionally high unemployment rates among younger veterans; rates have since improved along with the overall economy. In 2011, DoD spent more than $1 billion on unemployment claims for separated troops, a figure that fell to less than $500 million in the most recent budget submission in March.
The White House and first lady Michelle Obama are placing a strong emphasis on veterans’ job initiatives and have encouraged other government agencies to participate in overhauling the military’s program.
The Labor Department helped update the job-hunting seminar that now offers troops tips on using social media, searching for jobs online and researching local job markets. For those who do not plan to seek a job immediately, TAP offers three options: the Boots to Business introduction to entrepreneurship, and classes for those who want to go to college or seek technical training.
The entrepreneurship bloc was designed by the Small Business Administration. Beyond the two-day class, troops who want further preparation can take an eight-week online class run by the SBA that will connect them with mentors in the business community.
They also can learn how to apply for SBA small-business loans, which offer up to $150,000 in startup capital and are easier to obtain than traditional bank loans.
“Some of us have a wealthy uncle we can turn to,” McCaffrey told his class of troops. “But some of us have to look to Uncle Sam.”