"When Michael Payne is called up for National Guard duty, Castle Helicopters loses not only its CEO, but also one-fourth of its workforce. With 21 years service in the Guard, including several overseas deployments, Payne knows all too well how his absence can affect the business he founded in 1994.
"As a small business owner, you learn not to put all your eggs in one basket," he said. "But no matter how many contingencies you may plan, you always fear that you may have left something out."
Those fears have grown for many Kentucky small business owners who serve as members of the National Guard and Reserve. The U.S. War in Iraq entered its fifth year on March 19, and President Bush told the nation in January that an additional 21,500 U.S. troops were needed to quell violence in Baghdad.
The Army's vice chief of staff, General Richard A. Cody, recently said that National Guard combat brigades would be increasingly called upon to relieve the active-duty troops in Iraq, with the Army Guard Reserve expected to grow from 20 percent of the force to 30 percent.
This is part of an ongoing trend, according to David Orange, executive director of the Kentucky Committee for Employer Support of the Guard and Reserve (ESGR) in Frankfort. The ending of the Cold War and the draft are among the factors influencing the way the United States depends upon Reserve forces. According to ESGR, nearly 50 percent of the nation's total available military manpower is currently comprised of Reserve components.
That means that Reserve forces, including small business owners like Michael Payne, will be spending more time away from their businesses. Payne is planning for another deployment in Afghanistan in July. Working as both an employee and employer makes for particular challenges, he said in regard to his four person company.
"There's no question that deployment has the greatest impact on a small business," said Orange. "That is a reality based on numbers. With more small businesses in Kentucky, well, just do the math."
The number of small businesses such as Payne's significantly impacts the nation's economy. According to the U.S. Census Bureau, small businesses (those with less than 500 employees) represent 99.7 percent of all employer firms and pay more than 45 percent of total U.S. private payroll. Small businesses are also responsible for generating 60 to 80 percent of the new jobs created in the past decade.
In Kentucky, small businesses make up most of the employers in the state. The U.S. Deptartment of Labor estimated Kentucky had a total of 339,200 small businesses, based on the most recent data. Self-employment increased by 8.3 percent from 2004 to 2005.
Kentucky small businesses are concentrated in construction, retail, real estate, professional and technical services, health care and agriculture.
Statistics on the number of National Guard and Reserve members employed by small businesses or self-employed are not released due to privacy concerns, according to SBA officials in Atlanta.
Small businesses that are owned by or employ military reservists called to active duty may qualify for loans through SBA programs. Military Reservist Economic Injury Disaster Loans (MREIDL) can be utilized by small businesses because an essential employee was called to active duty, said Tom Causey, SBA Kentucky District Office. The SBA Web site provides details on these loans, but Causey said that many people are not aware of the program, despite efforts to get the word out.
Christian Loftus of Lexington said his dream to have his own company was put on hold when he was deployed to Afghanistan six months after starting his information technology business, DevNull Technologies. With his business partner still working full-time at another job, he was forced to transfer his clients to other providers.
In Afghanistan, he not only served as senior medic for his base, but also, due to his technology background, was in charge of IT for medical systems throughout the country. He also provided IT leadership for other bases as well as allied forces.
When he returned from this duty, he was even more enthusiastic about re-starting his company. "A lot of people don't realize the skill set people develop when they go through the military," he said. "No matter how stressed I am today at work, it doesn't compare with being in the back of an ambulance with a soldier who is bleeding. You learn to handle stress, to lead."
Today, DevNull Technologies has eight employees, plus the two founding partners.
National Guardsman John Devore was not as fortunate. He had started his own business in trucking. Initially successful, when he was deployed to Kuwait in 2003, as a sole proprietor, he was forced to close the business.
In Kuwait, he suffered from extreme heat stroke, resulting in a number of health problems. As a result, he would pass out unexpectedly and suffer from chronic fatigue, among other symptoms, he said. He was unable to re-start his business upon return.
Devore is currently awaiting medical board review. While such reviews typically take three months, his has taken nearly three years, he said.
Depending upon the outcome of the review, Devore said he may be eligible for programs in Kentucky that assist service-disabled business owners.
Kentucky National Guardsman Shawn Howell was in Iraq for a year. In Tirkirk, he was responsible for assessing Iraqi police stations as well as training police forces. Howell described his experiences in Iraq as "pretty rough." Twice, roadside bombs blew up the truck in which he was riding.
Before he left, he and his wife had just built a $200,000 home, and his wife had foregone her job with a bank to be with the couple's four young children and run their home-based marketing company.
When he returned, his mortgage company, restrained by federal law from raising his interest rate while he was on active duty, raised it to the highest possible amount, he said bitterly. "There I was, fighting for American freedom," he said, "but as soon as I came back, one of the largest banks in America screwed me."
The family's small business was not enough to support them. As a result of this and other factors, the family suffered financial hardship and was forced to sell their home.
Howell, however, says he carried his "get the mission done" attitude with him back from Iraq and closed the home-based business while "double-jobbing" to get back on his feet. After months of hard work, he and his wife have now started a travel business, while he continues other employment.
If the war in Iraq continues through 2010 as currently predicted, it is possible that Kentucky units will be tapped again, Howell said. He would have no hesitation about serving his country again. He will, however, try to better prepare both his family and his small business for that possibility.
Thomas Black has three businesses in Corbin: Absolute Mortgage Solutions, Thoroughbred Title and Closing and Signature Realty. He has also been in the military for 22 years.
"It's a double-edged sword," he said of his military and business careers. "Because of the Guard, I have to be absent from my companies. But the companies have been successful because of what I have done in the Guard."
Black even breaks his companies down into areas that parallel those in the military such as administration, logistics and training. He currently employs 12 people in the three companies.
"If you are in the Guard, you may be deployed at any time," he said. "You have to structure your business so it will remain if you are not there. There is nothing that you learn in the Guard that you could not apply to a small business," he said.
"The biggest challenge is that leadership is absent," Black said of the effect deployment has on small business. "That means you have to prepare every person to be a leader at all times. As an owner, you have to lead, you have to mentor and you have to trust."
Chris Loftus said a small business such as his must emphasize communication. "We make sure that everyone knows each other's jobs by sharing information and using collaboration tools internally," he said. "And we make sure everyone is involved in the decision-making process."
Michael Payne agreed. "Part of my philosophy I call 'trying not to keep a secret,'" Payne said. "As a small business owner, you have to hire people who have a diversified business sense, and then you cross-train as much as you can."
Payne said he is like many small business owners who depend upon family members to step in. His wife handles customer service concerns and government matters in his absence.
Kentucky National Guard and Reserve members often cite their military involvement as a vital reason for owning a small business.
"Without the training, the mentoring, the leadership roles I have had in the Guard, I don't think my company would be successful," said Black. "College is important, but it did not teach me to be a leader, to think on my feet and to mentor others."
Michael Payne agreed. "I'm a poster child for the Guard," he said. "Everything I learned in the Guard — discipline, decision-making, commitment — I've put into my business. They're both about opportunity."
Read more about employees in the National Guard and Reserve and the impact of their deployment on business in the June 1 issue of Business Lexington.