Urban Miyares- Part Two It is a pleasure to be back again. Welcome to everybody. Hopefully, you were here last time that I did the first presentation. It really was a boot camp type thing about the process of whether someone should go into business. Basically, self-employment is not for everybody. For disabled veterans, there are some definite advantages and disadvantages in getting into business, especially from a military lifestyle, whether it is recent or it has been a while, most especially since a disability is also accompanying the business. The business world, as I’ve said before, is an able-bodied world. We have to compete on that level. Although disabled veterans, mainly service connected disabled veterans, do have some advantages. In most instances, it is not a priority in business today. Those that are previously designated or certified as 8A, or as a disadvantaged business, will have priority in most government contracts, if the disabled veteran is going after a government contract. What we’re going to cover mainly in this session, which I like to call the mission. The business mission is that if a veteran is thinking about starting a business, the veteran just wants to go to business. Often, it is a business that they have a pretty good idea of what they want to go into. Unfortunately, this is often one of the biggest mistakes. They are going into a business that they generally know something about, have some experience in, or have a passion in. But, they have the prior experience or information from before their disability and often before military service. There are some veterans who try to take their MOS, or what they were trained in the military to do, and then turn it into the business. I’ve had quite a few vets in the last few years, especially the first years of Iraq, coming back with disabilities. Right away, they wanted to go into the business of making stronger bumpers for cars, putting armor on vehicles, and going to metal forging. That was due to an emotional thing. There was no sound judgment on their part. The biggest difficulty, weakness, or mistake that I see of disabled veterans getting into the business world, is that they really don’t understand how to run a business with a disability. Now, you have to really separate the traditional, the norm in business, versus the nontraditional, which almost every disabled veteran would qualify under. The norm or the traditional way of doing business, or the stereotype of business is basically a white male in their late 40s or early 50s. He has good credit ratings, work experience, and money in the bank. He often has experience in the business he is going into and a strong set of resources. The traditional person is healthy—the nontraditional business owner or entrepreneur generally isn’t that. It might be a female. It might be someone with poor credit, no work experience, and above all has a disability. The more serious the disability, the more nontraditional they are. The difficulty we have in business today is when a disabled veteran enters the world of business, they try to jump right into the traditional way or they are coached that way. There is a whole process before and during business, which we covered a little bit in the last session. You get people like the Small Business Administration and the Small Business Development Centers. They are wonderful in what they do regarding business. But, they don’t know the stages before them with dealing with a disability, especially that of a disabled veteran, both the psychological and physical aspect and the transition from getting from the military lifestyle or the military attitude into the traditional world. They push them right into the business world through the business plan. You’ve got to have so much credit. You need money to start a business. That’s not true at all. The traditional world, and for those of us with disabilities and how we do business, is entirely different. How we conduct business is entirely different. I believe I mentioned this last time, you could have two individuals all having the same attributes, except one is disabled and one is not disabled, opening the same type of business on the same street in the same city dealing with the same client base. Each one would run their business or manage their business in a completely different way. Each would have different financial needs, primarily due to the disability factor. These are all considerations that have to be put into the business concept. It is not easy running a business when you have to compete on the level of others, and you have a disability. It’s more than possible. If you know how to use your disability properly, it can actually be an advantage in business in many cases. One of the understandings is, why people get into business? I have always said there are three reasons people get into business. It’s either due to money, control, or thirdly-pleasure. It’s one of the three reasons that make up almost everything we do, whether we buy a car, whether we date or marry someone. Generally, it is one of those three factors. We hope it is all three. In most cases when you are starting out your first date, car, home, or business, there has to be identified which one of those three would it be. Most people say it has to be money. Well, most people get in business not because of money. They get into the control or pleasure. It’s either something they want to do and hopefully the money will come out later. Or they want to control their own future, their destiny, and in my case, when I first got into business more than 40 years ago coming back from Vietnam, it was due to control. I had no control. No one would hire me. I wanted to control my own future. That’s where I got into the business world. As time came along, the other two factors came into play, the money and the pleasure. One of the tremendous benefits of self-employment is that when pleasures come, they are more firm and stronger, because you controlled your own destiny. There is also something about barriers that is a benefit. We face barriers in business. When we overcome them, the rewards are so much greater than if we didn’t experience those barriers. One of the issues that we also have is that people go into business for all different reasons. Most people’s impression is that you go into business strictly to make money. That is not necessarily true. Some people go into it to create a legacy. Some people go into it to stay active. Many veterans go into business for the sole purpose of being productive in some way in the workplace. Profit is an accounting method. Profit has no real status as far as how well a business is going to the benefit of the owners. There are many business owners who are living a very comfortable and apparently successful lifestyle, yet their business is barely breaking even. It’s an accounting method. There are a number of veterans that are in business, whose business will never be profitable. In business, when you make a profit you have a new partner. That’s called the IRS. Unless your business is looking for shareholders, investors, the plan is to eventually sell the business and make your money through the sale of the business. For some businesses that’s their primary service or revenue. This happens mainly in manufacturing of businesses like bed and breakfasts, lodging, and so forth where the sale of the business, with all the real estate appreciation attached is the major income source. Everything until you sell your business is a living wage. There is a number of businesses like that. You’ve got to understand that and people that work with you will understand that. For the nontraditional business owner, many are in business. Their family is employed in the business. A lot of expenses that would be normal living expenses are now business expenses that the business is paying, such as possibly the home or a percentage of the home, the vehicle. You know when you are in business, you don’t take vacations, you do business trips. You don’t go out to lunch or dinner, you have business meetings. These are things that are converted into business expenses that don’t reflect on the books of how well the business is doing. A lot of businesses overpay their employees because their employees happen to be family members or dependents. We have a number of businesses, one bakery I’m thinking of right now in the Los Angeles area, that has ten employees. All of them are relatives and in-laws working for the business. The business owner is a disabled veteran with quadriplegia. He just handles the books. The business is doing very well. All of his relatives, including his children and grandchildren, work at the business and receiving more salary and wages than they would get if they worked elsewhere doing the same job. That business, as far as I am concerned, is very successful in that area. Understanding that business is not always to going to make a profit is critical for those that are working with disabled vets in business. I realize you need to show that the veteran is self-sufficient and that they are being productive, especially the veterans. With Social Security, you have that 90 day closure and you want to get the veteran, might be a non-service connected veteran not receiving VA benefits but a Social Security disability. You are going to have a challenge with this if a veteran fully understands business. The other factor that has to look at going into business you have to decide if you are going into a business to buy a job or you are going into business to make money. Most people go into business because they have a skill or a talent. They want to sell that talent. It’s a one person show where maybe they do internet web design, they open up a coffee shop, or they are an auto mechanic repair shop. They are actually doing the work and selling the services of their time or product at the counter all the time. That’s one form of business structure. If for some, it can give you a very good income or living wage. If you get sick or you can’t continue working, your business really shuts down. You might as well close shop, because it is a one person show. The other type of business is one where you manage others. This is something that I learned a long time ago in business. It is so much easier to run a business with others, whether they are employees, partners, or people that you are associated with that you pay on contract or just help you out. You just tell them how to do it. Then they run the business. For those with disabilities, especially those who have severe physical or psychological disabilities, it is really all about you the business owner and your ability to manage other people who want to work with and for you. Once you are able to switch that separation between you physically doing the work and providing the service directly, and those with you doing the work. You just manage their production and business activities. You’ve crossed the boundaries of business and really now looking at yourself in the future as a very successful business owner. There are only so many hours in a day. For a disabled veteran, and depending on your disability, it often takes us more time to do something. With my disabilities, I often have to work three or four hours a day more to keep up with the able-bodied world in business because of the challenges I have. By having others do a lot of the work, I’m able to do that much better and just focus on those items that I need personality for. That is a critical point. It will determine what type of business a person should go into initially. Someone who wants to go into the accounting business, might be better off hiring others to do the accounting. Then, supervise their work or direct them. Whereas themselves opening up a one person shop, let’s say a person with quadriplegia that wants to be an accountant or someone who is blind and wants to be an accountant. Quite a few people are totally blind and do tax preparation, as an example, especially with today’s technology. That would give them a certain base of income, but if they really want to make substantial money and meet other goals that have financial base, they have to learn to manage others. This is a critical factor that goes into the personality of the individual. Once of the things once a person understands that they are in the business of managing others, not necessarily producing the product themselves or providing the service themselves, then once they understand business, it comes a point that it doesn’t matter what the product or service is and the type of business you are in. [As a] matter of fact, you don’t even need to know that much about your product or service to be successful in business. I always have fun meeting with successful business owners who maybe have 500 to 1000 employees, and believe it or not, they know very little about their business. In San Diego we have one car dealer, Stephen Cushman, Cush Motors. He has five or six dealerships: Honda, Jaguar, and a few others here in San Diego. A couple months ago we were out to dinner, Steve and I, with a group of other business owners. Steve came in late. Everyone was teasing him why he was late for the dinner meeting. He said, I had to change the tire on my car. He said it was the first time he had ever changed the tire on his car. He went on to say that he knows nothing about cars. He is one of the largest car dealers in Southern California, and he knows nothing about cars. That’s just an example of you really don’t need to know anything about your product or service. You don’t need to know anything as long as you understand business, and you are able to manage others when they want to work for you. In my example, I’m totally blind, as I think most of you know. I’ve owned steel fabrication companies and a chain of restaurants. I owned a publishing company at one time that did a national magazine called Innovation Magazine. You wouldn’t imagine someone who is totally blind could even start and run a company like that. Yet, they did quite well. The whole thing is understanding the business world. The more you are in business, the more you get to understand it. There is only so much you can learn in school. The education part prepares you for the other part. It gives you a head start to those who don’t have the educational background. Once you get into business, it will all hit you really quick. It is a constant learning experience in business. This is a factor that many in voc rehab have difficulty understanding. Some voc rehab agencies around the country are now requiring, before their consumers go into business through self-employment project, that they have prior business experience and knowledge in that business. That really is not a critical factor for everybody, for some people it is. That is just one of the aspects of it. The next thing is the individual themselves, their personality and without going into a seminar about personality profiles, the individual has to understand what their personality is. Are they laid back? Are they aggressive? Are they short-term? Are they long-term? I’m sure you have all worked with people who have, it seems, all the potential in the world but do nothing. Then you will have those who when you first meet them, this person doesn’t have a chance. Then low and behold, a year or two years later, you find them doing extraordinary things that just shock you. This is all part of the personality profile. How the veteran views himself? How he is going to handle himself in society? Self-improvement is constant in the business world. We primarily sell ourselves. Even if you have an Internet business, you really sell yourself. If you have a personality flaw, or something of that nature, you should have others be in the front. You have to identify your strengths or weakness. Focus in on your strengths, and let others do your weaknesses in business. In employment, the table is completely turned. In employment, you need to have a job skill to get a job. In self-employment you don’t. You don’t need a job skill. You just have to be able to manage others. You don’t even need to know anything about your product. Whereas with employment, you better know something about the product or service or you are not going to get paid a salary. These are some of the critical things—the separation that those in voc rehab have to understand—that someone with no job skills or anything, probably would be a wonderful business owner. I’m an example of that case. Believe me, there are many other disabled vets, who are in the same ballgame who are doing quite well in business today. There are disabled vets who do have job skills and have converted that into successful businesses, doing quite well in the marketplace. One veteran, a blinded veteran, Bill England in Utah is an example. Bill, I believe is a Korean War Veteran with low vision. He owns England Trucking, one of the largest trucking companies in the United States. He has management skill. I don’t think you would expect him to be a truck driver in that area. It’s an understanding that rehab has to have. There’s the personality trait of the individual. That has to be keyed on so they understand where it is. Of course, we do workshops and seminars on business personalities and business. When I came back from Vietnam, I stuttered tremendously. I knew that was a weakness. I went to Toastmasters so that I could do public speaking and not freeze when the media was in front of me and not know what say at the right time. That’s constant. Everything from dress appearance and communication skills are critical. Often a third party needs to evaluate the disabled vet on what are his strengths and weakness. Don’t use a family member, because they tend to be a little biases and not give you the entire story. The veteran also has to evaluate their medical issues, such as PTSD, brain injury, or something that gets them down. If they are chronically depressed, they need to not only fight that, but make sure they are medically stable. Keeping on their medications is critical. If they have a physical disability, I can’t say enough about how important it is to be healthy. I deal with a lot of veterans who are in chronic pain. Many of them cannot work pass 1:00 or 2:00 in the afternoon, because of a spinal cord injury or something related to chronic pain. We try to get as much work as we can concentrated in a shorter period of time. They quickly learn that they have to rely on others to continue the business, if they are not working the business, so that the business continues without any falter whether they are there or not. We get a lot of veterans that come to us that were not disabled when they started businesses. Then due to something that happened, a car accident, a disease, a diagnosis, they have become disabled. They are very difficult to work with because they are already in business. They have to learn a whole new management style, especially for those that are micromanagers. They have the attitude, “If I don’t do this, it is not going to be done right.” They’ve got so much pride in their product. It’s quite a difficult thing for us to get them to change their attitude, get them a little more mature about their business. In some instances, they find that their business actually grows even more than before their disability. There are some tremendous advantages of being disabled in business that others don’t have, in that we know what our weaknesses are, hopefully beforehand, and we can accommodate that. Others without disabilities, in their minds, they don’t have any weaknesses. They could do everything. They often drive themselves to business failure. The number one reason businesses fail in the United States today is due to the death or disability of the owner. It has nothing to do with money or management. This can be validated very quickly by insurance records, but most businesses that are offered for sale or close their door, do so because of the death or a disability of the owner or key individual in that company. If we’re going into a business already with a disability, we’ve got one up on everybody else. Very few people in their business plan, that don’t have a disability, will ever put in a disability factor. What happens if I become disabled as the business owner? We’ve got that factor already accommodated for in our business operations and how we conduct business. That’s the business profile, understanding why you’re going into business. What are your expectations for going into business and for what reason? Everybody will say money, as I said earlier. You want money because of what? To have a nicer car? To have a nicer home? To travel more? Whatever it may be. The business could do that, if you design the business around what your expectations are or your desires are. The biggest mistake disabled vets make going into business is because they want to do this. I want to own that coffee shop. I want to open that restaurant. I want to open this clothing store, or open this manufacturing company. That might not be the best business for them to get into. Sometimes even a new business can be exciting and a new challenge. We will start to go into the business evaluation. How do you do a business evaluation? I’m sure many of you will say, you’ve got to write a business plan. Writing a business plan is the most intimidating document. Most business plans don’t work, period. I’ll start by giving an example of what a business plan is and the way you should write it. First, there are nine different types of business plans. Not all of them are for financial needs. We have business plans to evaluate management. We have business plans to do product entry, expansion of an existing business, and a business plan to acquire a business. Is it feasible for you and things like that? Then, of course the business plans will have a financial goal to raise money and all of that. How a business plan is read by anybody who is a sophisticated investor or experienced in business lending, is the document opens up with what is called an executive summary which is one to three pages, which is an overview or the abstract of the entire business plan. It basically says what business you are in, identifies what the NAICS, or the SIC numbers. An NAICS or SIC is a number that’s designated by the IRS. Every business has this number. That’s how the IRS categorizes the business to put them into different industries. The new system is NAICS, which stands for the North American Industrial Classification. The old number has a four digit number. The NAICS now is a five digit number. That’s due to the number of new types of businesses today, mainly technology. It will list that. This number is a key number. I’ll explain the reason why. Executive summaries talk about the organizational structures: the sole proprietor, a corporation, a limited liability company, or some other organizational structure and nonprofit. You are going to need money. How much money will you need? And what do you need it for? Who is the management? What is the product or service? Generally, the closing is how you plan on repaying back the investment or the loan, or what terms you are offering in investment? That’s in one to three pages. Then you go into the business, the management, the management philosophy, objectives, marketing, and all of the business plan. Before the very last section, you have your financial with financial assumptions. The last chapter is secondary information. How a business plan is read, however, is the executive summary, the three pages read first, mainly to find out your NAICS number and then a dollar amount you are looking for if you are requesting funding. Then they go right to the financial section. There are a couple of books out there. They are often called annual statement studies. Dunn and Bradstreet has one. But, the real bible in the industry is RMS, which stands for Risk Management Associates. Every October, a book is published that lists all the tax returns of businesses by the NAICS number for the previous year. Just imagine if someone had the financials at hand of what other types of businesses like they want to go into did last year as a startup business. They could find out: what their operating expenses were; what the owners got in salary; what their profit was; what all the business ratios are; which are critical in investing and in lending? These books are readily available. They are the bibles of the industry. Investors, bankers, and business consultants use them. If you hire business consultants, this is what they are using to do the evaluations for the clients they are charging big bucks. You could do a business evaluation for five minutes or less. It is that simple to do. The book is often two pages for every industry. There are columns in these books listing the size of the business, from the startup to the business doing hundreds of millions of dollars a year. They’re off in their percentages, either a percentage of net sales or a percentage of assets. It’s very simple to learn. We teach voc rehab counselors around the country how to use this, so they quickly can come in. If you have a veteran coming in and he says, I want to earn $10,000 a month, and I want to open a coffee shop. Within five minutes, you would be able to tell him how many cups of coffee he would have to sell at $1.50 each for him to put $5000 a month in his pocket. Imagine having that information beforehand, rather than going into the business plan and writing all of those pages. This is where the business plan often is a wasted document. Very few business plans that get started are actually ever finished, because it is intimidating. Or, you have someone else write the business plan for you because of the intimidation. Yet, it is your business plan. When someone asks you a question related to the business plan, if you as the business owner doesn’t know what’s in that plan, you are going to be denied automatically. This book, the RMA book, is a critical book. You can get information on them. Their website is www.rmahq.org. Bankers get this book free of charge, if they are a member of the association. We get this too every October. It is for the previous tax year. It is a great way to find out if you deal with a business banker or someone who just does car loans. You go to your bank and say, “Can I look at your RMA book?” and they say, “I don’t know where it is.” You know that banker only has the authorization to do a car loan of $10,000, $20,000, $30,000. If you’re looking for a $50,000 loan, they have to go to a committee. But, if they have that book handy, you know that they’re a commercial banker, because they get that book free of charge. If you look in the RMA, it’s called Annual Statement Studies. If any of you have problems, if you have a client, just let me know what the business is, and I’ll send you the latest annual statement studies. Just send me an email on that and you’ll get that book. By the way, this book is free of charge at the Small Business Administration and your local Small Business Development Centers. It’s already in their reference resource library. Sometimes you can find regular libraries having it, but often the public libraries would have books that are five or six years outdated. It gives you a good indication. Someone comes in and you can give a quick evaluation. Let them know if their expectation is to make x amount of dollars a month, you could find it real quick if it is realistic or not. When investors look at the business plan, they read the executive summary, find out your NAICS number and go to your financials. They compare the numbers you have in your business plan to the RMA book. Then, if they don’t match or parallel one another, you have the next section, which is called financial assumptions, which explains how you came up with the numbers and your financial projections. If those explanations are not justified, your business plan is denied automatically, regardless of how wonderful you are. The product you’ve got, the market, all the research you did, all the friends and relatives that say they want to buy your product, or what you think is going to happen. You’ve already demonstrated that you know nothing about your industry when your numbers do not parallel the RMA book or what others in your business are doing—the financial norms. Or, you have not been able to justify why you’re numbers are less. Sometimes how our numbers can be less is a home-based business versus an industry where most people do not work from the home. That sometimes could be one justification why your expenses or your profits can be five percent higher or something like that. These are things to do. You could also quickly find out norms of your industry statistics based on your competitors. We just helped a disabled vet open a yogurt shop. He said he could do it for $30,000. I knew right off the bat that the minimum you can open a yogurt shop for is $80 per square foot. Generally, it runs about $120, and he has 500 square feet. He’s going to need at least $60,000-$75,000. He found out real quick that that is exactly what he needs. Now, he’s also found out it’s going to cost him $110,000 because of some construction issues. He’s now reconsidering his yogurt shop business. Instead of yogurt, we’re looking at another industry that is in a food service that he could add to the yogurt if he wants to keep yogurt, because he wants that location. That’s how you modify a business plan for those needs. That’s how to do a quick preliminary business evaluation, which can be expanded. When I was a business consultant for years, I would charge anywhere from $4,500 to $7,000 for a business evaluation. Basically what it was the RMA book. It’s a little trick in the industry. Consultants just hate when I say that, because I’m telling you their secret on how they get the information. So, you’ve got the preliminary business evaluation. Once you’ve got the preliminary business evaluation done, and it looks promising or potential, then you can go into the business plan. You always start out with the financial section first. You never start from page one. The last thing you write is your executive summary. The reason you want to start the financials first is because from the financials, you will have fairly accurate numbers, if you’re using the RMA book as a guideline. You could find out what are your industry norms. That’s pretty easy today with the Internet. For an example, what is the advertising or marketing budget for a business in your industry? You can get all this quite easily on the Internet now. I’ll give you an example. For most manufacturing companies, approximately three percent of their annual gross sales go into marketing. The manufacturing company’s projected gross sales is $1 million. Three percent of that would be $30,000. Marketing in that first year would be $30,000. Then you have $30,000, so when you write your marketing plan, you know how much money you’ve got to work with. Most people in their business plans will say, “Marketing? I’m going to the yellow pages. I’m going to have display ads.” They’re broke before they even start, and they don’t even know their industry. So give the basics of each chapter of the business plan with a verified dollar figure. Will business plans work? Are they accurate? No, it is just a good “guesstimate”. The business world is constantly changing and what you wrote today is probably outdated tomorrow. I’ve always said that the business plan is probably one of the greatest works of fiction ever written, because it is completely false. If a business plan does look anything like the real world when you go into business, it is by accident purely, because things are always changing on that. Most of the businesses in America never started with a business plan. Usually, you write your first business plan in business. After you’ve been in business, you have some sort of track record which may be different than the RMA book. You’ve verified it based on your historical data of your business, not the RMA . It’s even more factual than the RMA book, because the RMA book averages. It’s a nationwide average. It’s not your local market and often is not that accurate, surprisingly. But it’s more accurate than you guessing what it is, if you haven’t already been in the business within recent times. Being in business ten years ago and using the numbers from ten years ago is an example, because you were in that business before you went into the military. Now coming out, those numbers would not be accurate at all. The bakery industry is a great example of that. Ten years ago, the bakery industry was doing quite well. In the last ten years, there has been a steady drop in the bakery business. Now let’s look at funding. Where do you get funding for your business? Again, there is traditional and nontraditional. Traditional way is you go to the bank. You go to the SBA for a loan guarantee or something like that. First rule, banks do not lend to startup businesses. They lend money to the best customers. Banks are collateral-based lenders and that’s saying that if you have $100,000 in CDs, they will lend you $50,000 is pretty much true. Banks have a fiduciary responsibility, and that is to protect those who put their money in the bank. When you make a savings account or you put your money in a checking account, especially if you get any interest, you want the bank to manage your money properly, so that you get a return on your money. It isn’t very good, but it’s a return. It’s a security blanket that you have. You know the money will always be there. The federal government will step in with insurance with a certain amount of dollars. They are basically looking for collateral base, something to offset the loan amount other than the business’ assets. Because in a startup business, it has no assets unless you buy equipment or you add something to the business. Maybe you have some equipment or inventory, but the bank really isn’t in business for that. The Small Business Administration also does not lend money to startup businesses. I know they have the Patriot Act, but generally the SBA does not do without some type of assurance that you could pay the debt. The SBA does not lend money. They provide a guarantee on the loan amount. The SBA is a cash flow guarantor, meaning that in your business plan, you have to show a positive cash flow after all expenses of at least 125%, the monthly debt amount that you would like to borrow from a bank. It’s pretty much like a checkbook after you pay all the bills except for one loan, let’s say a car loan. Do you have 125% of that car loan left in your personal checking account after paying all your household bills? If not, your loan is denied. This is why the SBA likes the equity participation, often meaning a third down. If a disabled vet is looking for a $100,000 loan, the SBA will ask for a third down in most cases, which would be $33,000. Of the remaining $63,000, the SBA would guarantee a percentage and that percentage could be anywhere from 50 percent to 90 percent. The SBA will say, 50 percent of it we’re going to guarantee. The vet, with a third down, $33,000; a 50 percent guarantee on the balance. In that case, it would be another $33,000, meaning that only a third of the $100,000 is left unsecured. They bring that to the bank. That’s the guarantee that often the bank will accept as a collateral lender. They will use those two guarantees, the equity that you are putting into the business plus what the SBA guarantees. Then they’ll ask you for your house and first born on top of it. That’s primarily what the SBA does. Once you’ve been in business for a while, it is so much easier to borrow money in the traditional way, because you have a track record. You’ll build up assets. There are more items that could be verified. There’s a difference between a risk and a gamble. Traditional lenders and investors do not gamble. They make measured or calculated risks. Nothing is guaranteed. By the way, the SBA and the banks will look for credit ratings. Right now if you don’t have a credit rating in the upper 700s, 750 or so, the chances of borrowing money is not there for you. That’s one of the issues we work with a lot of vets and others with disabilities. We try to find out what their credit rating is right now. While we are doing the business plan, we try to build that credit rating as high as we can. The average person we work with has a credit rating in the low 600s- 610-620, which does not qualify for traditional lending. If a disabled vet is getting into government contracting, especially government contracting that requires bonding, without a credit rating, they will not get bonding. That’s another issue if the vet wants to go in because of a preference. They believe that they want a construction, hauling, or transportation business. The business would get more government contracts. But, they need to get bonds. They find out that they don’t qualify for bonds, because they don’t have a good credit rating. Getting bonding is always credit-rating based. They’re not going to bond or a performance or an assurity without a good credit rating. Veterans get quite disappointed with that because they don’t know what they are getting into. The nontraditional way of funding is different. If the veteran understands business, very seldom do they need money to get in. They might have to get into a business that they never thought they would get into, such as buying or acquiring a preexisting business that is being offered for sale. We do quite a bit of this. There are some wonderful programs out there such as franchises that-VetFran through the Small Business Administration that has a number of franchisors who have special considerations for veterans and disabled veterans. Years ago, they would not consider many disabled vets, but now they are. In some instances they actually have funding resources. Most veterans get into business from personal resources, family, friends, and credit cards. That’s it. That also holds true for those who are not veterans, who are not disabled. There are studies all the time that 70-80 percent of people who start a business, do so through personal resources. But getting into business without money is easier than most people think. We do quite a bit of this. The key on doing this is the person’s personality. You can take over someone’s business or get into a business with no money down. Sometimes there’s an option to buy. Sometimes as a manager has the option to buy. The person has to like you, before they will consider that. Personality, appearance, and communication skills and how comfortable you are. It also takes a certain kind of patience and understanding about a business, to get into a business with no money down. It’s done quite often in a lot of industries during certain times of year when buying the business is better. Food service is an example. For most communities, January/February are the best months to get into the food service businesses. Those businesses that rely on the Christmas holidays for a bulk or majority of sales, and it’s been a poor Christmas, you can count on January, February, March, April, having some great opportunities to buy businesses. [I’ve bought] a number or businesses over the years with no money down. Some have done well and others didn’t. At least [I had] nothing at risk. I was able to get a salary out of it during those years, and I got a whole lot of learning experience in that area. Vendors are another way of getting money. If someone is going into business, find out what you need the money for to get going. If it is food, sometimes a food vendor will provide some money. We’ve had others in the chemical business get funded by competitor, for the simple reason they wanted to control the market that the business was in. Recently, a plastics company just funded a custom packaging company to start their business. They do custom packaging of cases and containers mainly for cameras and lenses and shipping containers. It took us eight months to get the funding, but it was there. There are so many ways of nontraditional lending. Most people do nontraditional lending, whether or not they are a veteran or have a disability. The more savvy the business owner is, the less they use banks and the SBA. You always need a bank, and you may need an SBA sometimes for assistance and resources of funding. But, those are generally unique funding needs, or for a short term a line of credit. Banks are generally for lines of credit. You need a quick $5000 to buy inventory or cover payroll or something like that. That’s a primary need that many business owners use banks. That’s the traditional/nontraditional. There is no reason not to find or not to be able to get into business because of money. If a person says, “If I only had the money,” my experience is they usually don’t understand business, or they’re getting into the wrong business. Again, as I said, the biggest mistake is people have in their mind what they are going to do. They’ve set up their plans and their rules, and other people are not playing their game, but they’re not in any power to play the game. If the focus is to get into business and generate something, then it doesn’t matter what business you’re in. Maybe you have to switch the type of business, the market, or the focus to be able to get into business. Make money first, and then you would be able to do what you want to do. One area that I would like to talk about that is not covered is the nonprofit arena. The nonprofit arena is a big arena. Nine percent of all people employed in America today work for the nonprofit sector, and many people don’t look at it. They hear the word nonprofit. Nonprofit is an accounting [term]. Nonprofit means that you’re exempt from taxes in most instances, depending on the type of nonprofit that you’re in. It doesn’t mean that you don’t get paid, and you don’t make money. There are some new tax laws now. Two years ago they implemented by the IRS where public charities can actually open businesses. Public charities can go into partnership with for-profit businesses. I see very few in the nonprofit sector taking advantage of these. We are now looking at two businesses to go into partnership with as sources of revenue. It’s quite exciting what’s happening in the nonprofit sector, yet too many people have been educated and trained in the looking for grants and handouts to fund their nonprofit interest. So this is just a factor that I wanted to just mention casually. That it is another form of business that holds quite a few opportunities, especially today. As I’m talking about this, I’m thinking of a number of disabled vets I know who started nonprofits around accessibility issues and sporting. Their nonprofits have grown where they are not only getting salaried, and quite well, but they have gone on to other business ventures, including the nonprofit. I’m thinking of one in Alaska right now that was started out by a disabled vet. He now has a business in addition to the nonprofit. That’s another sector to look at. This is a lot of stuff for you in voc rehab, because you were not trained in these areas when you went through your masters. It’s going to be the trend of the future of self-employment. Right now, we’re going through economic times where employment is getting more and more difficult. We hear about lay-offs all over the country. Certain industries, of course, will not have layoffs. They may even increase, but those types of industries tend not to hire people with disabilities, except in lower paying jobs. I’m talking mainly construction type jobs. The pipeline is an example. Very few people with disabilities, unless they have the credentials of a desk type job, an engineer or chemist or something, generally would not be employed for them. Self-employment is becoming an option. It is also becoming an option as a secondary source of revenue for people employed, because their jobs are not paying them. They are starting some part-time businesses, or partnering with someone else, or then the husband goes to work and the wife opens a storefront. On weekends when the husband is not employed, he also works the storefront. We are seeing a lot of people in retirement years or demographics have changed. Before, the average person with the disability that we helped in business was in their 40s, now we see two distinct markets, the under 30 disabled vet mainly due to the conflicts that are going on now, and then you have the disabled vet who is 60 or older, who is now getting into business. That’s because many of them, their Social Security benefits—disability will convert to regular Social Security benefits when you get older 65, 66, 67, whatever their ages. They are looking at self- employment now as a source of revenue, feeling that they are not going to jeopardize their Social Security benefits as much as they did in their younger years. We’re seeing a lot of VA pension vets looking at self-employment, but as we tell the VA pension vets-you’ve got a hobby right now. The difference between a hobby and a business is called a one dollar in profit. In most areas, if you keep it as a hobby, it’s fine but as soon as it looks like it will be profitable to you, you lose your VA pension. Then, of course, the unemployable vet, some of them are looking at self-employment. But, we don’t see that much activity in the unemployable vet right now. Maybe one out of twenty, one out of thirty, that come to us will actually look at self-employment. Of course, we are seeing a tremendous amount of self-employment among disabled vets who are homeless, incarcerated, or ex-offenders. They are realizing that you can get into business, and no one is asking your credit or background or anything unless you go for a traditional loan. We have quite a few vets that are ex-offenders, who are in communities contributing to the community. Most people don’t know that they were prison at one time, because it never comes up. They just clean up their act and go with it. Like we tell those incarcerated, we are just going to make it legal what got you in jail the first time. Some wonderful entrepreneurs are those who are in jail, especially the homeless because they are all self-employed in some way—panhandling, washing windows, or jumping in the back of a restaurant to wash dishes so that they have enough money to survive on or pay whatever their addiction is. We just have to convert them into taxpaying viable citizens that are running businesses, not people living on the streets. Pretty much that’s it. I just want to bring up a couple of resources. One is with disabled vets or any veteran you are working with, check your state’s professional and business codes and see if they have any special considerations for veterans. Many states have codes for those in the vending, hawking, or pedaling business—exemptions from the fees associated with licenses and permits. For example, there is a gentleman who has a coffee shop in California. It is in a resort community. He is a disabled vet. But, they have an ordinance against vending carts. However, in the California code, he is exempt from that. He has the only vending cart in this community, and he averages $450 a day in his vending cart selling coffee alone. That gives you an idea of how much coffee he does, seven days a week, with an average of $450 a day in coffee. That’s not counting pastries or anything like that. That’s one resource that you have, and it’s a wonderful way. By the way, if you find someone such as the vending, hawking, peddling exemption, this includes not only them, but anybody who works for them or family members. It includes things such as vending machines inside buildings, so you don’t have to always be on the street. Someone could have six, eight, or ten hot dog stands in the community and not pay any licenses or anything like that. They still have to get their licenses, but they are exempt from all fees. There’s a disabled vet who is paraplegia, in Venice Beach, California. He has had a hot dog stand for years, and it saves him $950 a year just in fees, because he is a disabled vet on the boardwalk in Venice Beach. That is just one of the possible resources in the community. Again, check your business and professional codes for your state to see if there are any exemptions for veterans, specifically disabled vets. If you have a vet looking in that area, don’t forget to have them consider that type of business. Again, once you’re in business, other business opportunities could go. In my 41 years of owning businesses, I’m starting my 24th business right now. I knew nothing about any of the businesses I was in. Sometimes, one business leads to the other. They are all exciting and fun as far as I’m concerned. There’s also another program, if you have a veteran who is legally blind. I bring this up, because a number of veterans coming back with brain injuries and are also legally blind. You do have the Randolph-Shepherd Act or the Blind Enterprise Program. The Randolph-Shepherd Act is preference to legally blind in government buildings for vending, coffee shops and newsstands. Alaska is an example of strong blind vending program. I remember them about 10 or 12 years ago. They gave a report that was quite impressive compared to what other states were doing. Don’t forget disabled vets who have sight loss—those with legal blindness, that’s legal the 20/200 or worse. I’m not sure how the blind—the Randolph- Shepherd Act will work with the new paired organ issue that was just passed in Congress for veterans. For those who don’t know about it, if one eye is service connected for blindness and the other eye is not, and there is other issues involved, the paired organs are both affected as far as service connection goes and benefits. I believe that should cover the blind Enterprise program, but I am not sure about that under the Randolph-Shepherd Act. I’ve been rattling on here. We’ve got the basic thing right now is to set up the business. What business should you go into? Any business will work. It is up to the veteran to make it work with all the resources available. You may have to start out slow because of funding or a disability. But as they keep on saying in the military, “Keep focused on the target, your head low, and you’ll get the mission done.” The veteran has to do that, too. This is a part of the exercise in business, and it’s just a start. I look at it as past boot camp. You are now in advanced infantry or other training, specialized training. You’re learning about business, deciding what business you’ll go into. First of all is the reason why you are going into business, and what are your expectations. The same thing is associated with the money, and what are your expectations. That could quickly be evaluated right up front and you would be surprised. I don’t know any business owner who wouldn’t say that if I knew then what I know now, when I first started my business, I probably would not have gone into business, because it is a learning experience in business. Although many business owners too said they wouldn’t switch anything. They love what they do. You’ve got to get as much information up-front, factual information, so you can make an intelligent business decision. That’s what business is about. The planning and analysis of it is the key to success in business, because when you don’t have any money, you can’t pay for your mistakes when you go. So many people are in business today due to inheritance or wealth. They’ll start out with $1 million or $2 million, and their business will finally get going after wasting a lot of money. Those of us who are vets with disabilities, often can’t pull ourselves up by our boot straps and go. For some of us, especially those of us who are beaten up both psychologically and mentally, the rejection of not doing well, might be something we cannot recover from. This is why knowing our personality, and how to handle things is critical. Dealing with someone who’s IQ might be down five or ten points due to brain injury or some other factor, knowing the weaknesses upfront and having partners help them, whether it is a family member or others, is critical. Veterans should try to keep 51 percent ownership of the business, especially if you are going into government procurements, selling to the government, which I covered briefly last time we talked. There are no guarantees in selling to the government. It is not an easy way to go. I want to give up one story right now. A young gentleman we know in the St. Louis area. He is 100 percent service connected disabled vet. He is in a consulting business. He works about three hours per month in his consulting business. Last year he did $22,000 in sales; $14,000 was in gross profit before taxes. After taking out much of his business expenses, which includes living expenses (he works from the home), his net profit before taxes was $200. He does this constantly every year. He spends two months a year in Europe. He has a brand new car. He buys a new car every two years. All these are business expenses for him. Here is an example of a fellow who is not even paying self- employment tax. He’s been in business 12 years as a 100 percent service connected veteran. He has quite severe disabilities, yet his goal in business is just quality of life. When he built his home, 40 percent of his home was his office. He built exclusively for his office, because he lives by himself. It’s all office and a bedroom to the side, rather than most people have a home and use a bedroom. He built his office and added a bedroom to where he lives outside St. Louis. That’s an example of a young man who’s doing very well in the business world and no desires to go any farther. He’s now looking for a partner. I wanted to give this example of someone in business who’s working very little, doing mediocre in business sales, twenty-something-thousand a year in gross sales. He has $10,000-$15,000 a year which is added to his income he has already from his disability benefits that is giving him a more comfortable lifestyle. I think with that I’m going to end right now and open it up for questions. One last thing, the next time we talk, I’m going to talk about the unusual ways the homeless get into business and how a disabled vet coming out of prison can go right into business. And possibly when they are incarcerated by helping them with the business, it could help them get out of prison earlier. We have one gentleman coming out of Arizona in September, who we’ve been working with for two years and he’s getting out five years early, because he is going right into business. We’re going to cover the most nontraditional of the business owners and how they are doing it and competing in today’s marketplace and slowly transitioning. Then we’ll cover the tips on how to be successful in business with a disability, and how to use your disability as an advantage in business.