On June 16, 2010, a summit of women business owners was held in Salem, Massachusetts, at the historic Hawthorne Hotel. Since the earliest Colonial times, Salem has been a major commercial center in a regional economy based on industries as varied as international maritime spice trade and textile manufacturing. Now, as the Greater Boston/North Shore region builds a twenty-first century economy based on tourism, technology and creativity, women entrepreneurs have the opportunity to play a key role. At this summit, women business owners on Boston’s North Shore shared their priorities, challenges and concerns to help the National Women’s Business Council (NWBC) to articulate policy recommendations for the consideration of the President, Congress, and the U.S. Small Business Administration (SBA).
Hosted and facilitated by the NWBC in conjunction with the Enterprise Center at Salem State University, this summit was the ninth in a series of town hall meetings held around the country beginning in March 2007. The Salem event brought together over 200 women entrepreneurs, NWBC members, and government agency representatives for candid, lively discussions of business challenges and possible policy solutions. As at other NWBC town hall meetings before and since, a subsidiary benefit was the opportunity for business-to-business networking among the region’s women business owners.
The National Women’s Business Council is a bi-partisan federal advisory council created to serve as an independent source of advice and counsel to the President, Congress and the SBA on economic issues of importance to women business owners. Council members are prominent women’s business owners and leaders of women’s business organizations. The Council’s mission is to promote bold initiatives, policies and programs designed to support women’s business enterprises at all stages of development, from start-up to success to significance.
The Enterprise Center at Salem State University (www.enterprisectr.org) acts as the North Shore’s small business incubation and growth center, helping to grow businesses at every stage of development through skill building and support, and serving as the voice of the small business community through advocacy and action.
This paper provides a foundation for the National Women’s Business Council (NWBC) to develop and launch a major initiative targeted to helping women achieve high levels of business growth. NWBC is the single government organization that focuses exclusively on ensuring that this nation’s economy realizes the full potential of one of its fastest growing segments – women-owned businesses. Integral to achieving this mission is to be a catalyst for women-owned businesses creating jobs and generating revenue.
This paper reviews the growth-trends of women-owned businesses, reports on what differentiates the women who own the largest, fastest growing businesses from those with smaller businesses, and concludes with a proposed strategic platform for action.
The phenomenal growth of women-owned businesses has been making headlines for 25 years. Women consistently have been launching businesses at nearly twice the rate of men. As important, their growth in employment and revenues has continued to outpace the economy.
Even as the nation’s economic growth slowed, employment in women-owned firms continued to expand while men-owned firms were contracting.1 Furthermore, projections indicate that the trend in employment growth among women-owned firms will continue. The Guardian Small Business Research Institute projects that women-owned businesses will create 5 to 5.5 million new jobs by 2018 – more than half the 9.7 million new small business jobs expected to be created and about one-third of the 15.3 million total new jobs anticipated by the Bureau of Labor Statistics by 2018.2
Women-owned businesses already are serious players in this nation’s economy. An economic impact study conducted by the Center for Women’s Business Research and the National Women’s Business Council documented that majority women-owned firms today are driving more than 23 million jobs – both directly and indirectly.
However, although the gap has been narrowing, women-owned businesses continue to lag men-owned businesses, and are under-represented in the top revenue categories. Only 3% of majority women-owned firms have revenues over $1 million compared to 6% of majority men-owned businesses. As of 2008 – the latest year for which data are available – the average revenue of majority women-owned businesses is 27% of the average revenue of majority men-owned businesses.
Looking at the trends from a more positive perspective, a substantial number of women now own and lead businesses over a million dollars, and many of these businesses are multi-million dollar enterprises. The number of women-owned businesses with $1 million or more in revenue grew 2,000% between 1977 and 2002. While the proportion of women-owned businesses over $1 million (3%) may seem small, this translates into more than a quarter of a million women-owned enterprises. Further, 20% of all businesses over $1 million are owned by women, and women-owned businesses are found at all levels of revenue. In fact, of the women-owned businesses over $1 million, 35% are over $5 million, 2% are over $50 million, and a fair number have revenues over $1 billion. A recent Kauffman Foundation publication reporting on a survey of high tech firms concluded that women and men entrepreneurs are equally likely to succeed given similar conditions. Clearly, the data substantiate that women have the vision, capacity, and perseverance to build thriving companies.
This is a group of business owners that already is having a measureable impact on the nation’s economic health. However, there is tremendous untapped and unrealized potential for these businesses to make an even greater contribution to the nation’s economic health, particularly in the critical area of job creation.
On behalf of the National Women’s Business Council (NWBC), Hart Research conducted two focus groups on August 31, 2011, among 13 self-described “established” or “aspiring” female entrepreneurs attending the “Women in Green” Forum in Santa Monica, California. It should be noted that the findings presented here reflect the fact that nearly all of the participants are in the early stages of establishing new business ventures. It also is important to remember that our participants made a conscious choice to attend (and pay for) the Forum, a fact that may differentiate them significantly from other entrepreneurs in the green sector (or other sectors).
Every five years, the U.S. Census completes an extensive Survey of Business Owners (SBO) that examines businesses by the gender of the business owner(s). This is the only comprehensive, regularly collected source of information on the economic and demographic characteristics of businesses across the country by gender, ethnicity, race, and veteran status. The SBO is authorized by Title 13 of the United States Code and responses are mandatory. The data on women-owned businesses provided by the Census is the main source of demographic information used by the NWBC.
The 2007 data was fully released in June 2011, so the NWBC commissioned a private research company to study this data in-depth. The data will be analyzed by different characteristics to further expand the current understanding of women-owned businesses and to search for any interesting or unique findings that bear further study. It is only with a firm understanding of the current state of businesses that the NWBC can begin to probe more deeply into other areas of interest.
This project will be completed in January 2012, but this preliminary report offers some key findings, including:
- The percentage of female-owned firms in the South (36.8%) was nearly double the percentage in the Midwest (19.9%) and Northeast (18.8%). However, the proportion of firms by region is nearly equal to the proportion of the population by region.
- The average receipts of female-owned businesses in the West ($163,087) is approximately 6% greater than the national average ($153,456.)
- Health care and social assistance is the first or second highest industry in each region, when examining the distribution of women-owned businesses by industry.
- The average receipts of Hispanic ($70,634), Black ($40,367), American Indian and Alaska Native ($91,795), and Native Hawaiian and Pacific Islander ($100,873) women-owned firms were substantially less than the average receipts of all women-owned firms ($153,456). Average receipts of Asian ($167,654) and White ($167,969) women-owned firms were more than the average of all women-owned firms. This also holds true when examining the data by region.
- Four percent of all veteran-owned firms in this country are women-owned. Nearly half (48.2%) of these veteran women-owned firms are in the South.
The years from 1997 to 2007 were a dynamic period in the U.S. economy. The strong growth early in this period was negatively affected by the recession of 2000-2001; strong economic growth resumed in 2002-2007. The data for this period reflect an economy moving out of a recession and ending on a high note in 2007, before the next recession. How did women and other small business owners fare during this 10-year period between 1997 and 2007?
The primary goal of this report is to place gender in a broader perspective. Business ownership no longer can be analyzed simply on the basis of the owner’s gender; businesses owned by women and men more and more share the same general development patterns. Moreover, the strong growth of publicly held firms, which cannot be identified by the demographic characteristics of their many owners, has led to the need to focus on both privately owned and publicly held firms.
Every five years, the U.S. Census completes an extensive Survey of Business Owners (SBO) that examines businesses by the gender of the business owner. This is the only comprehensive, regularly collected source of information on the economic and demographic characteristics of businesses across the country by gender, ethnicity, race, and veteran status. The SBO is authorized by Title 13 of the United States Code and responses are mandatory. The data on women-owned businesses provided by the Census is the main source of demographic information used by the NWBC.
The 2007 data was fully released in June 2011, so the NWBC commissioned a private research company to study this data in-depth. The data was analyzed by different characteristics to further expand the current understanding of women-owned businesses and to search for any interesting or unique findings that bear further study.
The number of women awarded patents has soared over the last several decades far beyond previously reported figures, and the percentage of trademarks granted to women has more than doubled, a new study commissioned by the National Women’s Business Council found.
This second part to the NWBC research project, Intellectual Property and Women Entrepreneurs, covers the qualitative research from the original report and centers on six focus groups with women entrepreneurs and business women. The focus groups were conducted in different parts of the nation. Two of these focus groups were with women who had successfully obtained a patent or trademark, two were with women who had applied for but did not receive a patent or trademark and the remaining two groups were with women who had never applied for a patent or trademark.
Like all entrepreneurs, women business owners face many challenges in making their entrepreneurship dreams a reality. Some of the challenges faced by women may be specific to women, due to the historical and cultural context within which they do their work. Women have the challenge of confronting and overcoming the historical barriers of being kept out of business and capital markets until the late 1980s. Even today, women’s access to information (or lack thereof) about financing strategies and opportunities may be limited due to a lack of access to the social networks where many key decision makers and capital players make deals. A lack of information about financing a business may result in more women raising lower levels of capital or pursuing only debt financing, which can limit their growth potential. Even more challenging are the cultural and personal challenges that women may face. Many women business owners also need to manage family-related responsibilities that still fall disproportionately on women despite progress in this area. Finally, some women struggle with being comfortable with living through and overcoming risk and failure, a critical skill set for any entrepreneur. Women still trail men in size of business and business receipts, and women need to become more comfortable with risk in order to grow their businesses. All of these issues hit close to home for many successful business owners, yet, they are important to continue to explore, particularly in relation to how women start, grow, and expand their businesses.
The National Women’s Business Council (NWBC) initiated this research to understand the reasons behind the general lag of women-owned business growth in terms of business size and receipts, as compared to firms owned by men. Other studies have indicated that, on the whole, women and men approach entrepreneurship differently. In order to assist women, and the nation, to advance economically, the NWBC looked to the research to provide insights on key considerations when reaching out to women entrepreneurs to encourage maximum growth of their businesses. The research centered on questions about three key attitudinal areas associated with business ownership and growth: risk tolerance, motivations, and expectations. The research team also listened for instances where culture could be influencing behaviors or experiences.
About the Research
This research was conducted by Public Policy Associates (PPA), Incorporated, a public policy research, development, and evaluation firm headquartered in Lansing, Michigan. The research was qualitative in nature with the goal of exploring attitudes and preferences; as such, it is not meant to be representative of all women business owners. The research was based primarily on focus groups and telephone interviews with 81 women entrepreneurs from three metropolitan locations in the United States (Houston, Los Angeles, and Washington D.C.). The participants were organized into four segments of women business owners: (1) having high-growth expectations, (2) having moderate-growth expectations, (3) having children at home, and (4) making frequent use of outside advisors (such as lawyers and accountants). These categories were selected by the NWBC and PPA because the team hypothesized that these business and personal characteristics might have an influence on attitudes about risk and motivations for starting a business. Overall, the women in the study tended to be more diverse, more educated, and older than the population of women business owners nationally. However, they were roughly similar in terms of business size (defined as gross receipts and number of employees).
Risk – It’s about managing risk, not avoiding it.
- The study participants who were most risk tolerant also held high expectations for business performance and growth. Business owners who already have high expectations and are comfortable with risk appeared to be on track to grow their businesses.
- Utilization of outside advisors was not associated with greater tolerance for risk. However, most participants used one or more outside resources, and all participants recognized the value of such resources, particularly during the startup phase. Participants recognized that external advisors could assist in mitigating risk during growth. NWBC has concluded that finding the right advisors can help a business owner develop confidence and become more comfortable with risk.
- Because of the inherent instability of micro-businesses in the market due to business cycles and changes in market dynamics, the riskiest strategy may, in fact, be the unwillingness to take necessary risks.
- Investing in hiring new staff or consultants was seen as a highly risky activity and was viewed with caution. There seemed to be difficulty among some owners in delegating daily management responsibilities, as owners were concerned about finding employees that they could trust.
Motivations – The original personal motivations for becoming a business owner drive the subsequent path that a business takes, and perhaps the owner’s willingness to take risks.
- The business owners in this study were mostly motivated by independence, flexibility, and work-family balance. Wealth creation in terms of net worth, as defined by these women, was not a motivator that these women had in common.
- One distinction among the segments was that more women in the high-growth expectations segment said that they started their businesses in order to capitalize on an opportunity or to fill a gap in the market than women in any of the other segments.
- The original personal motivations for becoming a business owner may well drive the subsequent path that a business takes, and perhaps the owner’s willingness to take risks. NWBC has concluded that these original motivations need to be considered potential influencers on business growth planning.
- Women entrepreneurs who are highly motivated to grow their firms take tangible, consistent steps toward that end.
Expectations – Women define growth in similar ways, but have different timelines and strategies for achieving it. In many ways, growth appears to be a choice.
- Growth was not a central focus for many at the outset of their businesses; rather, the focus was on startup and stabilization. With more experience as a business owner came more attention to growth, ostensibly from an increase in confidence in running the business.
- There did seem to be difficulty among some owners in delegating daily management responsibilities (e.g., processing payroll), which may be compromising business growth potential. The owners were concerned about finding employees that they could trust, as mentioned above in the section on risk.
- This study found that women entrepreneurs with high-growth intent are, in fact, making strategic decisions that best positioned them for growth, particularly through marketing.
Cultural Influences – Women business owners juggle multiple roles.
- The owners saw success in business as a reflection of their personal and professional success. However, the point at which an owner considers herself sufficiently successful seems to be influenced heavily by a need to balance business success with success in other areas of her life.
- Perceived expectations and norms around women’s responsibilities and roles (e.g. within their households) had at least some influence on business growth decisions, as well as ownership decisions. Risk taking, motivations, and expectations were all affected.
- Women business owners are taking a holistic view of work and personal life. Women expressed concerns about adding focus on business growth to their current workloads, which include home and workplace leadership roles and responsibilities.
- Women business owners with children at home defined risks in terms of family finances, personal time, and personal reputation. In the high- and moderate-growth segments, the owners pointed to risks associated with business investments and finances more frequently.
Policy and Program Implications
The factors that influence the growth of women-owned businesses are dynamic and interrelated. Motivations for starting a business can impact both expectations for growth and tolerance of risk. NWBC believes that policy and programming for women business owners should help women to see how to remain true to their motivations for business ownership while accomplishing business expansion and wealth creation. This study reveals a number of considerations:
- Programs: We need to focus as much on expansion as on startup and stabilization. Particularly valuable may be training on second-stage business assessments, expansion planning, or similar resources for those women business owners who are beyond the startup stage, but are not confident about how to pursue growth on their own.
- Programs: Women in this study appeared to struggle from front-line service provider to CEO as their business grew. Programs should emphasize problem solving to achieve goals and encourage the use of resources and tools. Training on organizational development, human resources, and hiring may assist women in finding the right people as advisors or employees, and increase their confidence in making smart decisions about expanding their workforce and delegating responsibilities.
- Messaging: In addition to advocating for ‘risk taking,’ organizations working with women business owners should focus on risk management and positioning for opportunity as part of business growth planning and implementation. It may be that owners who appear to be willing to take big risks are in fact just better at seeing how to manage or mitigate the risks required for successful business ownership.
- Messaging: Programs that recognize that business ownership is a viable path to generate wealth, including adequate retirement savings, and that provides strategies to help owners get to that point, would likely be valuable to women business owners of all ages. In general, the value of business growth in connection with other goals, like helping one’s community or family, may resonate better.
- Messaging: Acknowledge the multiple roles that women business owners play (work, home, community) and their desire to perform well in their roles.