Editorial Policy

Female Entrepreneurs Still Trying to Slay Goliath

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By Eva Norlyk Smith, Ph.D.
April 15, 2011

A new report from American Express Open found that, despite the economic downturn, female entrepreneurship is proliferating.

Between 1997 and 2011, the number of women-owned businesses increased at a rate of 1.5 times the national average. But there is still a long way to go before the playing field is even, say analysts.

The report, titled “The American Express Open State of Women-Owned Businesses,” was put together by Womenable, a research and policy-development group focusing on improving the environment for women-owned businesses.

Based on previous growth trends from the U.S. Census Bureau, the report estimates that there are now over 8.1 million women-owned businesses in the United States. As of 2011, women-owned businesses are generating $1.3 trillion in revenue and employing more than 7.6 million people.

The growth of women-owned businesses is outpacing that of new businesses started by male entrepreneurs. Between 1997 and 2011, the overall number of U.S. businesses increased by 34 percent, while women-owned firms expanded by 50 percent — 1.5 times the national average.

However, despite the accelerated growth rate of women-owned businesses, most businesses owned and operated by women remain fairly small. In fact, companies owned by female entrepreneurs employ only 6 percent of the country’s workforce and generate just under 4 percent of business revenues. To put it into context, that’s about the same share of business revenues generated in 1997.

In addition, according to the American Express Open report, the growth in sales and in the number of employees in women-owned businesses lagged behind the national average. Sales in businesses owned by women grew only 8 percent between 1997 and 2011. And while employment increased 53 percent in women-owned businesses in the same period, it still wasn’t enough to keep up with the national average.

“This mix of progress and paralysis bears a deeper look,” says study author Julie Weeks of Womenable. “Reviewing the totality of small business and large corporate growth trends over the past decade leads one to the conclusion that, in the battle of David/Diana versus Goliath, Goliath is winning.”

Still, according to Weeks, the discrepancy between women-owned and male-owned businesses is most predominant for companies that reach the million-dollar and 100-employee threshold. This is the point where women business owners most clearly fall behind.

“Women tend to hold their own up to this level,” notes Weeks. “We need to understand more about what’s going on along that journey that’s causing women to falter at this stage.”

The study also found that funding sources for women entrepreneurs are relatively scarce; many women get turned down for loans and have to turn to friends or business credit cards for funding. But according to Weeks, women also don’t have access to the same degree of networking and mentoring resources.

“Lack of funding is certainly one of the reasons women fall behind, but it’s a combination of factors,” says Weeks. “Particularly at the higher levels of business accomplishment, it’s like entering a high altitude zone. There are fewer peers, fewer mentors and role models. The informal network that a lot of business owners rely on may be less available to women.”

Weeks points to several organizations offering high-level mentoring for women business owners as examples of what may be needed to level the playing field. For women with businesses not yet at the million dollar level, the Make Mine a Million program provides coaching and mentoring for women business owners who want to grow. Count Me In is a nonprofit organization dedicated to facilitating women’s economic independence and is sponsored in part by American Express Open, FedEx and Dell.

For women who have achieved at least $1 million in sales and want to network with peers to master further growth, Weeks suggests checking out the Women’s President Association. Originally founded in Canada, the association now has peer networking groups all over the U.S., U.K. and Peru.

Facilitating the growth of women-owned businesses isn’t just about fostering more equal opportunities for women. By some estimates, programs helping to accelerate women’s business success could generate at least four million new jobs and $700 billion in increased economic activity within just a few years.