The statistics are a puzzle.
Women-owned businesses, defined by 50 percent or greater ownership, account for 40 percent of all privately held businesses. Businesses controlled by women, defined as 51 percent or greater ownership, account for 28.7 percent of all privately held businesses.
That 28.7 percent accounts for only 4 percent of all revenues and 6.4 percent of employment, according to the Census Bureau’s Center for Women’s Business Research and Survey of Business Owners.
The growth rate in women-owned businesses indicates that women are starting new businesses at twice the rate of men, but what happens after startup is clearly different between genders. Plainly said, women-owned businesses do not initially grow as fast, nor become as large, as men-owned businesses.
Statistics show that women start businesses with less capital than men, whether borrowed or obtained from investors. These lower levels of initial capital are associated with lower growth levels in women-owned firms.
We know it’s not for lack of ability. More than 250,000 businesses controlled by women have revenues greater than $1 million per year. And before we cry “discrimination” and assume that women have insurmountable barriers to growing their businesses, such as access to capital, we have to acknowledge that there is evidence indicating that women often have goals other than financial success, such as work-family balance or corporate culture, driving their desire to be business owners. At the same time, however, there also are other studies that show women business owners are actually more concerned with financial goals than their male counterparts, as noted in scholarly journal Entrepreneurship: Theory & Practice.
Should we be worried about what statistics tell us? You bet.
We all want our economy back on track, and startups and privately held firms hold the keys. The action is in innovation and jobs growth.
We should all deeply care that we have a business environment that encourages and supports entrepreneurship and addresses the needs of small business.
And if women are starting businesses at twice the rate of men, just think of the impact on the economy if women-owned businesses grew and flourished at higher rates.
Research cited in the Entrepreneurship journal in May 2007 has shown that women arrive at innovation in a different way than men do, but the genders are equally innovative, and their ideas are of equal quality.
Lenders and investors should be equally enthusiastic toward startup proposals from both genders. We know the U.S. Small Business Administration and many banks have formal initiatives encouraging access to capital for women.
There is, however, some discouraging research that may explain the perceived funding gap. Studies have shown that when participants are given the opportunity to describe the characteristics that an entrepreneur would possess, women describe an entrepreneur as having both male and female traits, but men describe an entrepreneur as having attributes similar only to males. The participants did not know they were doing this, as the attributes are not labeled “male” or “female.”
This research, as noted in the March 2009 edition of Entrepreneurship may indicate
that despite formal initiatives by the government and banks, despite years of progress in the workplace for women, despite all the great men out there who have actively participated in raising their kids and telling their daughters to dream big, men may inherently have a hard time seeing women as entrepreneurs.
Since commercial loan officers, venture capitalists and angel investors are mostly men, the barrier to startup capital for women may be real.
For instance, only one of the 30 angel investors in the Springfield Angel Network is female.
We can’t change biases overnight, but we can immediately do things to improve the odds for women-owned businesses right here in southwest Missouri, and it starts with identifying and recruiting.
Bank presidents can sit down with their management teams and create a plan to increase the number of female commercial loan officers in their organizations. Women business owners can start to build advisory boards for their women with members of both genders.
Together, we can improve the availability of capital for women-owned businesses –and that would be a blessing to us all.
Kelley Still, Ph.D., is a certified public accountant and executive director of the Edward Jones Center for Entrepreneurship & Innovation at Drury University. She may be reached at kstill@drury.edu.[[In-content Ad]]
