RTC RURAL
Self-Employment Steps for Vocational Rehabilitation Counselors: Helping a Consumer Start a Business


Chapter 3

The Process

Starting a business is hard work. For a person with a disability working with a vocational rehabilitation agency it requires a deliberate, detailed process. Figure 2 represents a recommended Self-Employment Process for Vocational Rehabilitation agencies. This chapter briefly introduces each step of the process. Later chapters expand on key ideas and procedures. It was developed by researchers at the Research and Training Center on Rural Rehabilitation Services after analyzing 45 state VR agency policies/procedures on self-employment. The process evolved from working with self-employment consultants, VR counselors and administrators, and consumers. It incorporates VR practice with current state-of-the art small business development practice.

Although not indicated on Figure 2 by a decision point, the decision to pursue or not to pursue self-employment can be made at any time in the process by either the consumer or the VR agency. Reasons for not continuing to pursue self-employment likely will vary according to where the process was halted.

Step 1: The Individual Expresses Interest in Self-Employment

There are consumers who already have business ideas, know they want to be self-employed and will not hesitate to tell you this. Less-assertive people may have the potential for owning a business, but will not mention self-employment as a goal unless they are specifically informed that it is an option. 

Others may not know what they want to do - they may have considered self-employment, but have made no decision, or they may not be able to find other suitable employment. In these situations, job exploration (including self-employment) is appropriate. 

Many individuals with disabilities do not know that VR can help them become self-employed. Some agencies educate consumers on their range of services (including self-employment) either verbally or in pamphlets, booklets or other publications. Other agencies feel that listing a menu of options at intake might influence the outcome of the VR process.

We believe that to make an informed choice, consumers must know about all of the services and options available through VR, including self-employment. Some agencies fear that if VR tells people that self-employment is an option, there will be more people wanting to start businesses than the agency can handle. If consumers are informed, it is realistic to expect an increase in the number of people pursuing self-employment. National statistics bear this out. VR has traditionally closed about 5,000 people annually, between 2.3% and 2.5% of its cases to self-employment. However, the 1990 Census self-employment rate for people with disabilities was 12.2%, and the recent RSA-funded "CHOICE" demonstration projects reported a self-employment rate of 15% to 40%. We do not anticipate that the VR rate will approach that of the "CHOICE" projects, but it will probably approach the Census rate.

Of course, although there may be more people asking about and pursuing self-employment in the future, just as with other options, not all will successfully work through the process.

Step 2: Counselor and Individual Discuss Advantages and Disadvantages of Self-Employment 

In this step, the counselor and individual begin a dialogue. The individual tells you about his or her business idea(s), and you get a feel for how realistic the individual is regarding the proposed business. 

During this step you explain the steps for developing a business outlined in this chapter. You explain that the agency will not commit to fund any portion of a business until a viable business plan is developed. You also discuss the agency's business funding policy, procedures, and guidelines so the individual understands the limitations that may be placed on the type or magnitude of the business he or she wishes to open. This may be foreign ground to the consumer, so you may need to reiterate the information throughout the counseling process.

Although the individual can decide against self-employment at this or any step along the way, many will decide not to pursue self-employment after this initial discussion.

Please remember that most counselors are counselors - NOT entrepreneurs or potential business owners. Most counselors are not and have never been self-employed. Many counselors think the best use of VR funds is to help an individual become employed by another rather than for him- or herself. Research indicates that these attitudes are due to VR self-employment policies and procedures, VR office atmosphere, and/or counselors' own experience(s) with self-employment. As a counselor you should guard against negative biases at this point and support the consumer in making an informed choice.

Advantages of Self-Employment

  • Independence - control over work setting and schedule
  • Employment where/when outside opportunities are few
  • Being the boss
  • Interacting with customers, suppliers, and others
  • Enjoyable work
  • Sense of achievement/satisfaction if the business succeeds
  • Control over job security
  • Control of business decisions
  • Better standard of living
  • Feeling part of the community

Disadvantages of Self-Employment

  • Pleasing the customer (the REAL boss)
  • Long, hard hours with little free time
  • Fluctuating income
  • Unrelenting responsibility
  • Possibility of business failure
  • Stress on family/resource
  • Possible exacerbation of health  problems/disability

Step 3: Self-Employment Assessment

We recommend a self-employment assessment consisting of two phases. During Phase I, the individual completes a feasibility study to develop the business idea into an initial draft of the business plan. During this step the business idea becomes more concrete and the individual begins to identify:

  • What his or her business is.
  • The business's market.
  • The business's expected expenses and income.

The forms (see Table of Contents) used in this step are Beginning to Develop Your Business Plan and the Monthly Personal and Living Expenses Worksheet. They are described and discussed in Chapter 4, "Self-Employment Assessment."

Many consumers will be intimidated when confronted with this task of developing a more concrete business idea. Business development experts say that at this point many people decide not to pursue self-employment because they have difficulty moving beyond the conceptual to a more concrete stage. You will need to decide if an individual's inability to complete a feasibility study is because of his or her disability or another reason. Could the person complete the study with your guidance and encouragement? Is some sort of assistive technology needed? 

Phase II is an assessment of the individual's potential for self-employment. At this point you are not assessing the business idea or business plan - just the individual's potential for self-employment. This assessment discloses the consumer's strong and weak characteristics and highlights training or education to pursue. We recommend using Herzog and Goodman's Business Assessment Scale for this purpose. Chapter 4, "Self-Employment Assessment" provides a complete discussion of assessment.

Step 4: Develop the Individual Plan of Employment

The employment goal is identified after Step 3. If the decision is to continue and pursue self-employment, indicate in the Individual Plan of Employment (IPE) a specific occupation or occupational grouping based on the type of business the consumer wishes to start. Self-employment IS NOT determined as the specific goal at this time, however. This should have been explained to the consumer during step 2, and should be reiterated now.

Step 5: Identify Sources for Training, Education, and for Preparing for Self-Employment

Ideally, the assessment phase identified knowledge and skills that the consumer should pursue to enhance the business's success. Services, education, or training may help the consumer develop a business plan or remedy any deficiencies in skills or knowledge. Locating training resources in rural areas might be difficult - you and the consumer may have to be creative. For example, if he or she needs computer training but classes are not available locally, consider paying a local computer wizard to provide the training. 

Other learning opportunities might include an apprenticeship or work in the type of business the consumer wishes to open. If the consumer has no small business experience, some business experts recommend that he or she spend as much time as possible observing or working in a similar business - of course the level of involvement and length of time is up to the business owner. The business owner should be willing to discuss his or her business practices and strategies.

Step 6: The Individual Successfully Completes Services, Training, or Education (Steps 6 and 7 can be completed concurrently with Steps 8 through 10.)

If everything goes as planned, the individual will successfully complete needed services, training, or education. If the person does not successfully complete services, training, or education, then it is important to ascertain why. The individual may have been dissatisfied with the training or services - it may not have met his or her needs or may have been too academic. If so, perhaps another, less academic method should be explored. After spending time in a business or an apprenticeship, the individual may have realized that he or she does not want to start that type of business or work at the level needed to make the business a success. Perhaps another type of business could be pursued, or the person should consider working for someone else in the type of business described in the IPE. 

In either case, proceed to step 7 and determine whether either the consumer or the VR agency is still interested.

Step 7: Determine Continued Interest

This is an opportunity for the agency to re-evaluate the individual's initiative and drive, and to determine how invested he or she is in starting the proposed business. It also is an opportunity for the consumer to re-evaluate his or her desire to become self-employed.

Step 8: Individual and Counselor Work with Consultants to Develop Plan, Marketing and Funding Strategies 

If there is continued interest, the next step is to take the business plan from a draft to a comprehensive document. A good comprehensive business plan will be the new business's road map, can be used to obtain necessary funding, and is necessary for judging the potential for success. 

Most people have no experience with developing business plans, so we recommend that a consultant help. There are many consultants available - Chapter 7, "Resources and Resource Partners" discusses consultants and business development resources. Chapter 5, "Who Does What in the Process?" discusses the consultant's role in developing the business plan. Chapter 6, "The Business Plan" discusses the business plan.

Step 9: Counselor and Individual Evaluate All Business Plan Drafts

With the consumer, evaluate all drafts of the business plan for completeness and thoroughness. After completing this manual, you will be able to evaluate a plan and request any necessary clarification and changes from the consumer.

Step 10: The Business Plan is Complete

A completed plan is necessary for step 11.

Step 11: Re-Evaluate the Individual and the Proposed Business

At this critical point in the process the agency evaluates both the consumer and his or her proposed business to determine if VR will provide support. We recommend administering the Business Assessment Scale a second time to evaluate both the individual and the business idea, in conjunction with previous assessment(s), the completed business plan, the business consultant's input, other sources (e.g., training placement), and your own experience with this person.

Step 12: Amend the IPE and Determine Parameters of VR Contribution

>Up to this point, self-employment has not been formally identified as the employment outcome. If the agency has decided to support the business, amend the IPE and determine the level of VR funding for the business. In this step, the VR agency establishes a funding range and describes how funds are to be used (e.g., to purchase equipment, inventory, or marketing services). The agency's contribution is finalized if the business is so small that additional funds will not be sought.

VR establishes funding parameters at this time so its contribution can be reflected when the consumer applies for a loan or develops a Plan for Achieving Self Support (see Chapter 8). Often a consumer can use VR's contribution to leverage money from other sources. 

A basic tenet of business development is that the potential business owner must contribute financially to the business. A personal investment is considered critical for instilling a sense of ownership and reducing the likelihood that the business owner will walk away if the business falters. The individual is serious about the business if he or she is willing to invest something valuable besides time. 

How much should the consumer contribute from his or her own funds? Recommended amounts range from 10% to 30% of the startup funds. Some microloan organizations even accept such things as a car or wedding ring as collateral from low-income business owners who have no money of their own to contribute. There are some who think along different lines, they believe that because people with disabilities are at an inherent disadvantage, VR should provide total business funding whatever the cost. You should refer to your state's policies for guidance.

Step 13: The Plan is Submitted to Potential Funders for Start-Up Funds

Potential funders include family, friends, banks, microloan programs, and Social Security Administration Plans for Achieving Self-Support (PASS). Chapter 7, "Resources and Resource Partners" discusses many possible sources of funding except PASS. Chapter 8 describes how to use a PASS plan for self-employment.

Some state VR agencies require that the business be turned down by other funding sources before VR will contribute its own funds. It is understandable that outside resources must be explored first before VR commits to funding a business. However, the approach is problematic. VR agencies must understand why a loan was turned down. Does the lender fund business start-ups and/or make small loans? Was there inadequate collateral or a poor credit history? Couldn't the applicant convince the funder that he or she could repay the loan? Was the likelihood of the business succeeding in the proposed location so questionable that the funder did not want to set the applicant up for failure? Did the applicant meet the funder's guidelines? Was there bias against a person because of his or her disability? These are all valid reasons, and you should explore them prior to a final decision. 

There may be cases where available funds do not match start-up projections. When this happens, revise the plan and pare it down if possible. Perhaps the business owner can open on a smaller scale and grow the business. However, no matter how hard the VR agency, the counselor, and the consumer try, you all must accept that (as also happens to people without disabilities), sometimes businesses fail to open for many reasons - including inadequate funding.

Step 14: Finalize VR Funding and Open the Business

Now that VR knows all the funding sources and amounts, you can reevaluate previously-established parameters, finalize VR's contribution and specify how start-up funds will be used.

Step 15: Assist the Business Owner With Developing a Support System

Although self-employment experts agree that follow-up support is important to business success, VR agencies do not generally offer long-term, ongoing supports. VR might provide support in a crisis, but not the day-to-day networking and consulting that business owners need. Before a business opens, contract with a consultant to review the business's monthly or bi-monthly financial statements, discuss the business with its owner, and report back to the agency. Encourage the business owner to develop his or her own support system such as finding a mentor or networking with other business owners.

Step 16: Close the Case

Generally, VR and the business owner mutually agree to close the case without having pre-defined or -delineated circumstances. However, some agencies have indicators for case closure. These include meeting the requirements of a core indicator, plus one additional indicator. Indicators may vary. In Alabama, the core indicator is that the individual has been in business for 90 days, has not been provided additional agency support, and has reinvested in the business to support ongoing expenses. Additional indicators include: terminated SSDI, decreased public benefits, realizing a net profit from the business, significant gross business income, or increased equity such as equipment or savings.

Step 17: Evaluation by the Business Owner and VR

Evaluation by both parties provides valuable information on the agency's services and their impact on the individual and the community. We recommend that the business owner evaluate the VR agency annually, for up to three years. This provides information to the agency on the effectiveness and usefulness of its services - information it can use to improve self-employment procedures. Conversely, we recommend that the agency evaluate the business annually for an unspecified period. Evaluations provide the agency with data on the effectiveness of its services and the return on the money and time it has invested in the business. Evaluations also assess how VR-funded self-employment start-ups affect the community, and chronicle the longevity and cycle of self-employment.


Discussion Questions

  1. Is it reasonable to expect a consumer to invest in his or her business? Why? If yes, how much?

  2. What factors should be considered when determining whether or not VR will invest in a business?

  3. How do you determine the amount of VR's contribution and how it will be used for the business start-up? How does this compare to the investment of your agency towards assisting a consumer with obtaining a college degree?

Chapter 3 Study Guide: The Process

  1. To fully implement the philosophy of consumer choice in VR, consumers must be informed about all options and services available through VR, including ___________.

  2. What are 3 advantages of being self-employed.

  3. List 3 disadvantages of being self-employed.

  4. Many consumers feel intimidated when they must begin to develop the business plan and _______ the process. What is the counselor's role if and when this happens? 

  5. Once the counselor and consumer have reviewed assessment results, they should formally identify the specific __________ or occupational for the IPE.

  6. One outcome of conducting an assessment is identifying the consumer's and and ___________  determining the education or training that will help the consumer establish and run a successful business.

  7. List three functions of a business plan.

  8. Sometimes, despite the best of efforts, a business may not get started because the consumer can not secure adequate ____________ . 

  9. As part of the self-employment process, the consumer and counselor should develop a plan for needed _________ support for the consumer once the business is launched.

Study Guide Answers: Chapter 3 - The Process



July 1998, 1st Revision June 1999, 2nd Revision February 2001