Veteran Entrepreneurship: Where Things Stand

This week, America remembers the 75^th anniversary of the attack on Pearl Harbor and its entrance into World War II. Veterans of World War II have had a considerable impact on the current economy: The Bureau of Labor Statistics finds that World War II veterans had the highest rates of self-employment of any period of service. The topic of veteran entrepreneurship, however, has received relatively little scholarly attention compared to other aspects of the military experience, according to a recently released report by the Institute for Veterans and Military Families (IVMF) at Syracuse University. This research, which examines qualitative and quantitative research on the topic, coupled with new datasets emphasizing the demographics of self-employment, sheds light on the current state of veteran entrepreneurship.

With the September 2016 release of the Census Bureau’s new Annual Survey of Entrepreneurs, researchers have more data than ever on veteran entrepreneurship. An SSTI analysis of the data finds that veterans were most likely to own firms in the finance and insurance (11.0 percent of identifiable firms), mining, quarrying, and oil and gas extraction (10.3 percent), and manufacturing (9.9 percent) industries in 2014. Overall, veterans owned 405,235 employer firms (7.5 percent of total firms) in 2014, with receipts of $924.1 billion (2.8 percent of total receipts), a Commerce Department analysis of the survey data notes. Approximately 6.8 percent of veteran-owned firms had been in business for less than two years, while 3.6 percent had been in business for 16 or more years, according to the Department.

Additional details on the demographics of self-employed veterans can be seen in Self-Employment in the United States, a March 2016 analysis by the Bureau of Labor. In this report, authors Steven Hipple and Lauren Hammond find that the unincorporated self-employment rate was 7.1 percent for veterans in 2015, nearly 10 percent higher than the rate for nonveterans.   The high rates of veteran self-employment reflect the demographic profile of veterans, according to the authors, which skews toward older and more male. Hipple and Hammond find that older veterans – those who served during the World War II, Korean War, and Vietnam War eras – were far more likely than recent veterans to be self-employed. Older veterans had unincorporated and incorporated self-employment rates of 15.3 percent and 8.7 percent respectively, compared to rates of 2.4 percent and 2.1 percent for veterans of the Second Gulf War era.

The State of Veteran Entrepreneurship Research: What We Know and Next Steps, a November 2016 report by the Institute for Veterans and Military Families (IVMF) at Syracuse University further adds to the research on veteran entrepreneurship. By analyzing U.S. Census data, the authors find that veterans were more likely than nonveterans to be entrepreneurs in each year from 2005 to 2014. In 2005, roughly 15.0 percent of veterans were self-employed, compared to 11.0 percent of nonveterans. By 2014, approximately 12.1 percent of veterans were self-employed, compared to 10.1 percent of nonveterans.

This gap in self-employment rates between veterans and non-veterans can be seen in the figure below. Self-employment among veterans declined from 2005 to 2014, with steep decreases during the Great Recession. Rates of self-employment declined for the nonveteran population as well, though at a slower rate.

Qualitatively, a strong case can be made for veteran entrepreneurship. Military veterans are able to learn many soft skills that are important to entrepreneurship through their military service, according to authors Elizabeth Osborn and Louis Hicks at St. Mary’s College of Maryland in the chapter Veterans as Entrepreneurs from the forthcoming book The Civilian Lives of U.S. Veterans: Issues and Identities. These skills include: organization and record keeping; strategic and tactical planning; complex scheduling; information gathering; process controls; inventory management; transportation planning; facilities usage; exposure to diverse cultures from both within American societies, and oftentimes overseas; and other relevant abilities. Through the G.I. Bill, Osborn and Hicks note, veterans also are given the opportunity to learn skills that are not typically part of the military experience such as marketing, business finance, cash management, real estate leasing, commercial law, and others. SSTI will explore further examples of programs to support veteran entrepreneurship in a future Digest article.