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An Exploration of Veteran Business Creation and Management Using the Census Bureau’s Survey of Income and Program Participation

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Research Summary

No. 420                                    February 2014

An Exploration of Veteran Business Creation and Management
using the Census Bureau’s Survey of Income
and Program Participation


By Compendium Federal Technology, LLC; Lexington Park, MD 20653. 95 pages.
Under contract number SBAHQ-12-M-0181.

Purpose

Veterans of our armed services form a vital part of
the nation’s population, labor force, and business
sector. Their economic success on re-entering the
civilian economy is a national priority. While many
veterans have gained important skills and leadership
abilities from their active duty and reserve service
that are directly relevant to business ownership,
some veterans may have difficulty in starting and
growing a business, especially during an economic
downturn and slow recovery. Previous studies have
found veterans very active in firm creation and
management, but these studies have not provided a
complete picture of their activities or compared the
entrepreneurial experience of veterans and non-veterans.
The researchers in this study explore 20 years of
U.S. Census Bureau data (1984 to 2004) to describe
in greater detail the level and nature of veteran
involvement in business creation and ownership.
A key purpose of this study is to provide important
information about any differences in the experience
of veterans and non-veterans in business creation and
management and to assess whether such differences
have changed over time.

Background

Business populations in dynamic, growing economies
are constantly changing. No business lasts
forever, and firm creation and termination are common
events. Veterans and non-veterans may exhibit
different patterns of business creation and management,
and comparing these patterns could identify
unique challenges veterans may confront in starting
a business and over the lifespan of their business.
The authors of this report identify such differences
over the 20 years from 1984 to 2004—a period that
included two national recessions.

Overall Findings

The most striking finding of this study is the high
level of firm creation and business management
among veterans, which is comparable to their non-
veteran age peers. Also of note is the stability of
the major patterns relating to these firms over the
20-year period examined. In addition, the researchers
find that veterans involved in business creation
and management are in better financial condition
compared to wage- and salary-earning veterans.
However, younger veterans who manage firms have
reduced levels of employment, personal business
income, and profits than their non-veteran peers.
Other findings include:

• Male veterans of all ages, when taken together,
appear to have a slightly higher rate of firm ownership
and management than their non-veteran peers,
but this difference was not statistically significant.
Male veterans between 25 and 54 years old appear to
be significantly less involved in firm ownership and
management than their age peers, but this difference
is offset by the large number of veterans aged 55 or
older when all age groups are aggregated.

• Women veterans appear less likely to be
involved as firm owner-managers than their non-veteran
peers, and these differences are statistically significant
for the all-age comparison, for those 18-24
years old, and for those 35-44 years old. There is no
statistically significant difference in firm ownership
between veterans and non-veterans among women
age 25-34 or over age 45.

• The rate of new business creation by male
veterans is slightly lower than that of non-veterans
when all age groups were combined. This difference
is statistically significant. The rate of such new business
creation appears to be slightly lower for each of
the four veteran age cohorts between 25 and 64 years
of age, although none of these individual differences
was statistically significant.

• In all but one age category (65-74 years of
age), female veterans appear to have lower rates of
business creation than non-veteran peers. However,
because of the small number of female veterans, the
difference is statistically significant in only one category,
55-64 years of age.

• There is very little difference in the age distribution
of the owners of the firms in terms of industry
and occupation, whether veteran or non-veteran.

• Veteran-managed firms are slightly less likely
to be organized as corporations; they are slightly
more likely to be sole proprietorships.

• Performance (in terms of employment, monthly
business income, monthly profits, or expected
sales) is very similar for firms managed by both
older veterans and non-veterans (age 55-74).

• Compared to their non-veteran age peers,
monthly business income and firm profits are slightly
lower for firms managed by veterans aged 18-34
and 35-54. Employment is also somewhat lower for
the 18-34 group.

• In the 28-month period during which the businesses
were monitored, firms managed by veterans
over 34 years old have survival patterns comparable
to firms managed by non-veterans. Those managed
by younger veterans aged 18-34 have a slightly
shorter duration than those managed by their age
peers (about one month).

• Veterans involved in firm creation and management
are associated with higher household
incomes and higher personal incomes, and veterans
who own businesses are much more likely to report
the highest levels of income.

Policy Implications

Because the economic welfare of veterans is an
ongoing concern of policymakers, various programs
have been designed to help support aspiring
veteran entrepreneurs and business owners. These
efforts include financial assistance from SBA and
its resource partners, as well as business development
programs managed by SBA in cooperation
with other federal agencies, such as Operation Boots
to Business. SBA has also supported other efforts
initiated by private-sector sponsors, nongovernment
organizations or universities. Among these
is a nationwide network of 16 Veteran Business
Outreach Centers, the Entrepreneurship Boot Camp
for Veterans with Disabilities (EBV) sponsored
by Syracuse University and seven other business
schools, and Women Veterans Igniting the Spirit
of Entrepreneurship (V-WISE). Congress has also
enacted legislation establishing government-wide
goals for federal procurement dollars going to service-
disabled veterans, as well as special contracting
tools to help agencies meet these goals.

The findings of this study suggest:

• Younger veterans may be at some relative
disadvantage compared to their age peers in launching
and managing a business after leaving military
service.

• As more women become veterans, there will
be a need to provide special technical assistance and
training to help them create, sustain, and manage
their businesses.

Scope and Methodology

The researchers explore the U.S. Census
Bureau’s ongoing Survey of Income and Program
Participation (SIPP) to address major veteran business
research issues. These data, collected over 20
years (1984 to 2004), were analyzed to determine
whether they could portray the level and nature of
veteran involvement in business creation and ownership.
The researchers developed 11 panels (each a
representative sample of U.S. adults) from 1984 to
2004 that track individual workforce activity for at
least 28 months. As less than 2 percent of veterans in
the sample were women, the assessment focused on
men, with controls for age. Cross-sectional analyses
of veterans and non-veterans were used to analyze
business creation and management, types of firms
managed, differences in employment/sales, and
financial well-being. In addition, longitudinal data
was extracted from SIPP which provided data across
time for each specific business venture. This data
included details about each venture, including the
first mention of a business activity by a respondent.
Information on interview wave completion dates
made it possible to identify ventures described in the
initial interview as well as those ventures described
for the first time a year following the first interview.
The former were designated “established” firms and
the latter “new” firms. Differences between veterans
and non-veterans were considered statistically significant
at the 0.05 level.

This report was peer reviewed consistent with
Advocacy’s data quality guidelines. More information
on this process can be obtained by contacting the
director of economic research at advocacy@sba.gov
or (202) 205-6533.

Additional Information

This report is available on the Office of Advocacy’s
website at www.sba.gov/advocacy/7540. To receive
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releases, regulatory communications, publications,
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Research Listservs.


This document is a summary of the report identified above, developed under contract for the Small Business Administration, Office
of Advocacy. As stated in the report, the final conclusions of the full report do not necessarily reflect the views of the Office of
Advocacy. This summary may contain additional information, analysis, and policy recommendations from the Office of Advocacy.