National Women’s Small Business Month is a time to celebrate and recognize the growth and success of women entrepreneurs in the United States. A woman-owned business is any business in which at least 51% of the business is owned, operated, and controlled by one or more females. To truly celebrate the growth and success of women-owned businesses it is important to understand the whole story.
Women-Owned Businesses in the United States, Yesterday and Today
In 1972 women owned less than 5% of businesses nationwide out of 402,000 businesses. Today, 40% of all businesses in the United States are owned by women. The number of women-owned businesses has increased exponentially between 1972 and 2018 with a 58% increase between 2007 and 2018.
Today there are 12.3 million women-owned businesses, employing 9.2 million people with revenues of $1.8 trillion. The number of women-owned businesses increased by 4.2% each year between 2007 and 2018, while the total number of all businesses increased by only 1.0% annually during the same period (American Express , 2018). These statistics tell a beautiful story of women-owned business growth and success; however, gender disparity continues to exist.
Women-Owned Business Growth, Wobbly and Juxtaposed
Women-owned businesses represent only 8 percent of the total private sector workforce and 4.3 percent of total revenue. These numbers are not increasing at the same rate as the number of new businesses. It is important to also note the number of people employed by women-owned businesses is nearly equal to the number of women-owned firms, indicating that perhaps, most women-owned businesses are single shingle firms; run and operated by one person, the owner.
Women-owned business growth is wobbly and juxtaposed at best. New women-owned businesses enter the market at a higher rate than all businesses. Yet, women-owned businesses lag all business in revenue and employment growth rates. Only after reaching $250K in annual revenue do women-owned business begin to experience growth in revenue and employment. So, why does this happen and how can we address it?
Factors that Limit Growth
The same factors that limited the growth of non-women owned businesses limit the growth of women-owned businesses; inexperience, insufficient capital, limited networks, and rigid work like balance.
- Inexperienced business owners don’t know what they don’t know. Limited knowledge leads to faulty decision making and lack of preparedness. These business owners are often unaware of the resources available to them to run their business and well as the regulation governing their business. Most spend more time working in the business instead of on the business. There must be a balance between the two. Being an expert widget maker is wonderful, but making widgets is a small portion of the success of any business.
- Inexperienced business owners find themselves at the mercy of contractors, vendors, customers, and regulators which can lead to the business closing.
- Female founders received 2 percent of venture capital dollars in 2017. Valentian Zarya writing for Fortune, suggested women receive less venture capital dollars because there are very few female venture capitalists (Zarya, 2018).
- Another limit on receiving venture capital funds is industry and business. Venture capitalists seek specific types of businesses to invest in. Their interest is making a return on their investment.
- The most common businesses that venture capitalists invest in are typically light on female founders (i.e. Industrial Technology, AgTech, etc).
- Loans are one way to earn capital, but only few businesses qualify. Traditional loan structures are based on credit ratings, equity, and risk. Because of these limiting factors, female founders often bootstrap their ventures, relying on personal savings.
- Several factors can limit a female business owner’s network such as the limited number of female executives and c-suite professionals in their industry. The industry of the female entrepreneur can limit her network. The construction industry which is heavily male and white might limit the networking ability of a female founder. IT is a male-dominated industry and IT professionals are not known to be serious networkers, this could limit the network of a female IT professional. There may be no formal rules concerning female entrepreneurs networking in male-dominated industries; however, perceived rules and norms can be limiting.
- Work-life balance is a joke even when working a traditional job. The suggestion that it does is limiting to women business owners as they are often challenged with caring for family members while maintaining their career aspirations. There is no balance, only tradeoffs.
What is the Significance of Women-Owned Business Growth?
Women-owned businesses grow at a greater rate than all businesses. When women-owned businesses reach the 250K revenue mark, their revenue and employment growth accelerates. Maximizing the contributions of women-owned businesses is key to a stronger healthier economy, job creation, and upward economic mobility for women of color.
Women-owned businesses have been dubbed America’s new job-creating engine by Forbes Magazine- adding more jobs to the economy than male-owned businesses. Supporting women-owned businesses is [essential to] economic development (Wolfe, 2010).
How to Support Women Business Owners?
Effective ways to support women entrepreneurs include leadership training, networking events, mentorships, access to markets, and finance. The most basic way to support women entrepreneurs is to buy their goods and services.
- Organizations such as the Women Business Enterprises National Council (WBENC), Brazen, Portfolia, and BackStage Capital are organizations that focus on working with women entrepreneurs. WBENC is the largest certifier of women-owned businesses in the U.S. and a leading advocate for women business owners and entrepreneurs. They provide development programs, mentoring, technical assistance and certification services for women entrepreneurs.
- Brazen (with an office in Chicago, Dallas – Fort Worth, St. Louis, Denver, Detroit and Philadelphia) encourage women entrepreneurs to be bold in growing their businesses. They host growth groups and power hours. Growth groups are peer advisory groups that meet monthly to discuss challenges and work on solutions. Power hours, in which members meet with mentors or subject matter experts to discuss strategy, growth plans, and ask questions.
- Portfolia is an entrepreneurial investing platform for women. They focus on consumer-facing technology. Members select a fund. The investor team reviews hundreds of companies and then select up to 10 companies for their investment fund. Founded by Trish Costello in 2014, Portolia’s process is described as transparent, diligent, educational and engaging; helping members learn the investing process.
- BackStage Capital, Founded by Arlan Hamilton, has a somewhat broader focus investing more than $4M in 100 companies led by underrepresented founders. Hamilton says, “We invest in the very best founders who identify as women, People of Color or LGBT in the U.S.” (Backstage Capital, n.d.)
All of these organizations offer mentoring which is an important component to the success of all business owners.
As we continue to celebrate National Women’s Small Business month, it is necessary to remember that while women-owned businesses and women entrepreneurs are experiencing great success, barriers such as racial and gender inequity continue to be limiting factors.