Women entrepreneurs face many challenges that their male counterparts do not, according to a report from Senator Jeanne Shaheen, ranking member of the U.S. Senate Committee on Small Business & Entrepreneurship.
The report entitled, “Tackling the Gender Gap: What Women Entrepreneurs Need to Thrive”, takes a deeper look into the underlying obstacles that affect women-led businesses. While women are starting more businesses year after year, their businesses do not appear to grow as quickly or receive as much funding as men-led companies. The report also highlights current statistics, and offers a “promising new way forward” for women entrepreneurs.
Women Business Owner Statistics
Women have a long history of starting businesses1 and, according to the National Women’s Business Council (NWBC), the highest number of women-owned firms2 are in the healthcare, social services, professional, scientific and technical services, admin and retail industries. Interestingly, the NWBC suggests that women start businesses because of limitations in the workforce, personal responsibilities or the challenges that come from a market that fails to meet their needs3.
The study also reveals a positive picture for women-owned businesses:
● 30 years ago, there were close to 4 million women-owned businesses in the United States. Today, there are over 11 million.
● 39% of all U.S. businesses have women majority ownership, employ nearly 9 million people and generate more than $1.7 trillion in revenue4.
● Women are the sole source of income in 40% of all households and outpace men in educational achievement5.
● The number of women-owned businesses grew 45% between 2007 – 2016, 5 times faster than the national average6
● 78% of new women-owned businesses are owned by women of color7.
Even with so much positive news about women-led businesses, in 2016, women received just over 2% of investor and venture capital funding, and women-led businesses made up only 4.9% of VC deals8.
Obstacles facing Women Entrepreneurs
The Senate report on women entrepreneurs focuses on three particularly unique obstacles:
1. Lack of role models and mentors
2. Gender pay gap
3. Unequal access to funding and venture capital
Why Women Need Mentorship
Positive role models inspire and offer guidance to entrepreneurs and small business owners. With media attention on male entrepreneurs such as Elon Musk, Mark Zuckerberg and the like, many women lack important motivation that can come from a mentor to inspire them into starting businesses.
The Senate’s Small Business report noted:
● Adults with mentors are 5 times more likely to say they are planning to start a business9.
● 62% of high school girls who are mentored on technology are likely choose it for a major in college10.
● Small business owners who have access to mentoring report higher revenues and growth rates11.
The Small Business Administration (SBA) offers access to mentorship for women business owners through Women’s Business Centers, SCORE, and Small Business Development Centers. Women entrepreneurs, with more focus on their successes, can help bring more women into business ownership through mentorship and awareness.
Addressing the Gender Pay Gap
When a woman graduates from college, she may be making only 90% of what her male counterpart is making. Working mothers may also feel the brunt of the gender pay gap as they may not actively be promoted or receive raises at the same rate as men, leading to less potential for high income or executive roles. Few women in leadership roles, missed promotions, and the gender wage gap decreases motivation and ignites frustration among women in business. Not surprisingly, these challenges, and the desire for flexibility, lead more women to start their own businesses.
Access to Funding
While overall small business loans have been on the decline, the Small Business Administration (SBA) reports 18% of their loans were for women-owned businesses. In 2014, the U.S. Senate Committee on Small Business and Entrepreneurship reported that women receive 16% of all conventional small business loans. The report also showed that when women do apply for loans, they apply for smaller amounts for fear they will be denied.
During the search for venture capital, women entrepreneurs may also face:
● Difficulty finding key contacts for funding
● Lack of female investors
● Disparity of questioning compared to male entrepreneurs
As many women feel unsupported, unheard, or misperceived, they may not feel confident to seek outside funding to help start or grow their businesses, instead relying on personal sources of income.
Looking to the Future for Women Business Owners
The National Women’s Business Council contributed positive findings to the report, highlighting women’s efforts to address these entrepreneurship obstacles, including:
● Women have been 32% more successful at raising capital through crowdfunding than men.
● Incubator and accelerator programs level the playing field for women to network and have access to training and financing.
● Entrepreneur ecosystems are being created to help better support women entrepreneurs through government policies, and accelerate their growth.
The report also made recommendations to the private and public sector to help support women in business. The recommendations focused on:
● Fair pay
● Student loan repayment programs
● Promoting STEM to girls in school
● Increasing federal funding for SBA’s entrepreneurship programs and incentives for loans to women
● Zero tolerance of sexual harassment
● Media push back against gender stereotypes
● Reducing gender biases in the workplace
● Supporting working mothers
The good news is that more business women are speaking out about their own challenges and successes, including several in the Senate report. As more women come forward and talk openly about the gender wage gap, the struggles of starting a business and how they paved their own paths, other women will be inspired to do the same.
Related:
Experian study: The State of Women Business Owner Credit
[1] https://en.wikipedia.org/wiki/List_of_American_women%27s_firsts
[2] https://www.nwbc.gov/sites/default/files/FS_Women-Owned_Businesses.pdf
[3] https://www.nwbc.gov/sites/default/files/NWBC%20Report_Necessity%20as%20a%20Driver%20of%20Women%E2%80%99s%20Entrepreneurship%20Her%20Stories.pdf
[4] American Express OPEN, “The 2017 State of Women-Owned Businesses Report,” (November 2017)
[5] U.S. Department of Labor Bureau of Labor Statistics, “Economic News Release: Employment Status of the Civilian Population by Sex and Age,” (accessed on October 2, 2017)
[6] American Express OPEN, “The 2016 State of Women-Owned Businesses Report,” (April 2016) (online at http://about.americanexpress. com/news/docs/2016x/2016SWOB.pdf)
[7] American Express OPEN, “The 2016 State of Women-Owned Businesses Report,” (April 2016) (online at http://about.americanexpress. com/news/docs/2016x/2016SWOB.pdf).
[8] https://www.sbc.senate.gov/public/_cache/files/2/5/25bd7ee9-a37b-4d2b-a91a-8b1ad6f5bd58/536DC6E705BBAD3B555BFA4B60DEA025.sbc-tackling-the-gender-gap.december-2017-final.pdf
[9] Sangeeta Bharadwaj Badal and Rajesh Srinivasan, “Mentor Support Key to Starting Business,” Gallup (November 25, 2011) (online at http://news.gallup.com/poll/150974/mentor-support-key-starting-business.aspx).
[10] https://www.sbc.senate.gov/public/_cache/files/2/5/25bd7ee9-a37b-4d2b-a91a-8b1ad6f5bd58/536DC6E705BBAD3B555BFA4B60DEA025.sbc-tackling-the-gender-gap.december-2017-final.pdf
[11] U.S. Small Business Administration, “Impact Study of Entrepreneurial Dynamics: Office of Entrepreneurial Development Resource Partners’ Face-to-Face Counseling,” (September 2013) (online at https://www.sba.gov/sites/default/files/aboutsbaarticle/Impact_ Study_of_Entrepreneurial_Development_Resources_2013_09.pdf).
[12] https://www.sbc.senate.gov/public/_cache/files/2/5/25bd7ee9-a37b-4d2b-a91a-8b1ad6f5bd58/5
36DC6E705BBAD3B555BFA4B60DEA025.sbc-tackling-the-gender-gap.december-2017-final.pdf
[13] Small Business Administration, “SBA Lending Statistics for Major Programs as of 9/30/2016,” (accessed on October 15, 2017) (online at https://www.sba.gov/about-sba/sba-newsroom/weekly-lending-reports/archive/sba-lending-statistics-majorprograms-09-30-2016).
[14] Dr. Susan Coleman and Dr. Alicia Robb, “Empowering Equality: 5 Challenges Faced by Women Entrepreneurs,” Third Way (April 26, 2017) (online at http://bit.ly/2ghm6yb).
[15] PwC, “Women Unbound: Unleashing Female Entrepreneurial Potential,” ( July 2017) (online at https://www.pwc.com/gx/en/diversityinclusion/assets/women-unbound.pdf).