How 200,000 veterans could rescue America’s small businesses

Key Concepts

Asset Building for Transfer: The core idea that businesses should be built as assets intended for eventual sale or transfer, not just for immediate income.
Veteran Entrepreneurship: The focus on empowering veterans to transition into business ownership.
Acquisition vs. Startup: The emphasis on acquiring existing businesses as a potentially less volatile and more structured path to entrepreneurship for veterans.
Purpose-Driven Transition: The importance of finding fulfillment and meaning in post-military careers, aligning personal values with professional endeavors.
Community Impact: The concept of veterans leveraging their skills and resources to invest in and uplift their home communities.
Succession Planning: The critical need for businesses, especially those owned by retiring individuals, to have a plan for their transfer.
Owners in Honor: A nonprofit organization dedicated to educating and supporting veterans in business ownership, particularly through acquisition.
EMBA (Executive Master of Business Administration): A program that can provide veterans with business acumen applicable to leadership roles and entrepreneurship.
Veteran Network: The value of leveraging connections and shared experiences within the military community for professional development and support.

Summary

This episode of Warrior Money features Patrick Flood, an Army Green Beret combat-decorated veteran and founder of Owners in Honor, a nonprofit focused on helping veterans transition into business ownership. The discussion highlights the significant disconnect between the desire of veterans to return to their home communities after service (80%) and the actual percentage who do (less than 30%). The central argument is that veterans should leverage their taxpayer-funded leadership training and experience to build businesses in their home communities, creating exponential impact rather than simply pursuing high-paying W2 jobs and relocating.

The Asset-Building Perspective on Business Ownership

Patrick Flood's primary piece of advice for aspiring veteran entrepreneurs is to view business ownership as building an asset for eventual transfer. This perspective, he argues, is often overlooked. Understanding the long-term vision for the asset allows for effective backwards planning and informed risk calculations, aligning with the strategic thinking ingrained in military service. This approach is contrasted with the common tendency for veterans to focus solely on immediate financial well-being.

The Decline of Veteran-Owned Businesses and the Opportunity for Acquisition

The conversation touches upon a historical trend: post-World War II, over 40-50% of businesses were veteran-owned. Today, this figure has dropped to 5%. Flood attributes this decline, in part, to a lack of education on business ownership pathways and a shift away from generational businesses. He emphasizes that many veteran-owned businesses were not just startups but family enterprises passed down through generations.

Flood's personal motivation stems from his father's experience. His father, a Corman and PA who served 26 years in the Navy and Army reserves, built and ran a clinic for over 20 years. When he decided to sell the business due to his younger son's suicide (a common reason for business exits), he lacked a strong network for the sale. His family attorney, unfamiliar with M&A, negotiated against private equity-backed attorneys, resulting in his father selling the business for its property value rather than its true business worth. This experience underscored the critical importance of understanding the exit strategy and having expert representation.

The Challenge of Exit Planning for Technicians

A significant challenge identified is that many business owners, particularly those with technical expertise, tend to run their businesses as their identity rather than planning for an exit. The national average shows that less than 85% of businesses have an exit plan. This leads to a "one-time in their life event" when they need to transition, often facing a "sharky environment" where experienced buyers can exploit their lack of preparation. Flood illustrates this with his father's situation, where a deal that seemed good (three times annual salary) was actually a fifth of the business's true value.

Owners in Honor: A Framework for Veteran Entrepreneurship

Owners in Honor aims to address these challenges by providing three core components:

Education: Asynchronous modules designed to prepare veterans for business acquisition. These modules cover understanding oneself, one's vision, and financial horizons, as well as mitigating acquisition risk through exercises like the "buy box" exercise. This process is likened to a mini-EMBA.
Advisory Services: Providing ongoing support, including a small business advisor and executive coach for up to five years post-acquisition. This mirrors the mentorship and team-building found in the military.
Community: Connecting veterans with established networks like the CEO Circle and IBMR, and fostering a culture where graduates commit to mentoring future participants, replicating the military's cyclical mentorship model.

The program targets veterans with a general discharge or better, military spouses, and Gold Star family members. The goal is to prepare them to acquire businesses, ideally from retiring Baby Boomers who own approximately 40% of small businesses and are nearing retirement.

The Power of Purpose and Community Re-engagement

The discussion emphasizes that for many veterans, the transition to civilian life is about finding purpose. While high-paying jobs can provide financial stability, they may lack fulfillment. Business ownership, especially in one's home community, offers autonomy and the opportunity to solve problems, manage expectations, mitigate risk, and communicate with people – skills honed in the military.

Flood advocates for veterans to return to their home towns and invest their acquired business acumen and capital. This creates a powerful narrative for recruitment and community development, allowing veterans to contribute to civic assets like parks and community events. This contrasts with the traditional post-service path of relocating for a W2 job.

Patrick Flood's Personal Journey and the Role of Network

Flood's personal journey is rooted in a family tradition of service and a desire to contribute. As a third-generation American with Irish heritage, he was inspired by his grandfathers' military service and his father's entrepreneurial spirit. His path to service included an ROTC scholarship to George Washington University, a brief consideration of enlisting in the Navy, and ultimately commissioning as an armor officer in the Army.

His military career included 22 years in Special Forces and Green Berets. A significant turning point was his decision to attend Duke Business School while serving as a battalion commander. This was influenced by his friend Dave Kluki, who advised him to pursue an EMBA program that offered a full degree. Flood found that the business school curriculum directly applied to his role as a recruiting battalion commander, which he likened to running a business with marketing teams and strategic planning. This enabled his battalion to achieve top rankings. He highlights the importance of loyalty from the top down, exemplified by his transparent leave schedule, which allowed for better battalion management.

Key Arguments and Perspectives

Veterans possess invaluable leadership skills that are transferable and highly beneficial in business ownership.
Acquiring existing businesses offers a structured and potentially less risky path to entrepreneurship for veterans compared to startups.
Building businesses as assets for transfer is crucial for long-term financial security and legacy creation.
Returning to home communities allows veterans to create significant local impact and foster community growth.
Succession planning is a critical, yet often neglected, aspect of business ownership.
Veteran networks are powerful resources for mentorship, support, and professional development.

Notable Quotes

"80% of veterans would like to return to their home record after they enlist and less than 30% do. So wouldn't it be great? So instead of telling someone, hey, take the highest dollar value possible for a W2 company, move anywhere in the United States and start your family over with another permanent change of station, instead saying move back home and take those millions of dollars of taxpayer leadership that you've been given and pour it into a community where you have exponential impact." - Patrick Flood
"Whenever you're becoming an entrepreneur I think sometimes that's maybe lost on some people is that you're building an asset and so understanding that you're building an asset and that you eventually are going to leave that asset to somebody else." - Patrick Flood
"The biggest the most expensive part of running a business is selling it." - Patrick Flood
"The things that you're going to learn in business school are directly applicable to you as a battalion commander and recruiting battalion because it's very much like running a business." - Patrick Flood

Technical Terms and Concepts

W2 Company: A company that issues W-2 forms to employees, indicating traditional employment.
Permanent Change of Station (PCS): A military term for a relocation.
M&A (Mergers and Acquisitions): The process of combining or purchasing companies.
Private Equity Fund: An investment fund that pools capital from investors to acquire and manage companies.
DD214: A military form that documents a service member's record of military service.
EMBA (Executive Master of Business Administration): A graduate-level business degree program designed for experienced professionals.
CSM (Command Sergeant Major): A senior enlisted leader in the Army.
Exo (Executive Officer): A junior officer who assists a commander.
Corman: A Navy medical rating.
PA (Physician Assistant): A medical professional who practices medicine on teams with physicians.

Logical Connections

The discussion flows logically from the problem of veteran transition and community reintegration to the proposed solution of veteran entrepreneurship through business acquisition. Flood's personal story serves as a compelling case study, illustrating the challenges of business transitions and the benefits of strategic planning and education. The introduction of Owners in Honor provides a concrete framework for how veterans can achieve this goal, emphasizing education, mentorship, and community. The conversation then broadens to discuss the broader implications of veteran-led businesses for community development and the economy.

Data and Research Findings

80% of veterans want to return to their home communities after enlistment.
Less than 30% of veterans actually do return to their home communities.
Post-World War II, over 40-50% of businesses were veteran-owned.
Currently, only 5% of businesses are veteran-owned.
Less than 85% of businesses have an exit plan.
Approximately 40% of small businesses are currently owned by Baby Boomers nearing retirement.
Each year, 200,000+ active troops become veterans.
Each year, 600,000 small businesses fail.

Conclusion

The core takeaway is that veterans possess a unique blend of leadership, discipline, and problem-solving skills that are highly transferable to business ownership. By shifting the focus from immediate employment to building businesses as long-term assets, and by leveraging organizations like Owners in Honor, veterans can achieve not only financial success but also profound personal fulfillment and significant positive impact within their home communities. The emphasis on acquiring existing businesses offers a practical and strategic pathway for veterans to lead again, this time as business owners and community builders.