Women Are Changing the Face of Entrepreneurship
October is National Women-Owned Small Business Month, which is a good time to reflect on the status of women-owned businesses. While not much has changed in the data since last year, the long-term trends are still astounding, and raise some really big questions.
At this same time last year, I took a look at American Express’s annual report on the state of women-owned businesses and blogged about it. Here are the central observations from last year’s blog:
- The number of women-owned businesses in the U.S. has been rising steadily and significantly over the past forty years but most women-owned businesses remain small both in terms of number of employees and revenues.
- The disparity is even greater for minority women-owned businesses, which are opening in record numbers but have much lower revenues than non-minority women-owned businesses.
- In that post, I concluded: “If these trends continue, there are potentially serious consequences for society—for the success (or failure) of women-owned businesses, for the persistence of income inequality by gender and race, and for the influence and impact of women in the labor force and the economy.”
Worsening trends
Of course, with big, long-term trends like this, not much usually changes in a year. Indeed, the 2019 American Express report on women-owned businesses shows these trends continuing and even worsening:
- In 2019, women-owned businesses make up 42% of all U.S. businesses, but account for just 8% of all employment and 4% of all business revenue.
- And, the revenue disparity between minority and non-minority women-owned businesses is widening, with real consequences:
- The authors of the Amex report estimate that, if we closed the revenue gap between minority and non-minority women-owned businesses, the U.S. would gain four million new jobs and generate $981 billion in revenue.
At the end of last year’s blog post, I argued: “Perhaps the most important thing we can do, as women business owners, is to grow our businesses, serve more clients, and employ and mentor more people, so we can have a bigger voice and begin to make a real impact on the economy and society at large.”
That is still an important goal, as women-owned businesses are no better situated this year than last year. However, some other data has come out that has broadened my thinking about women-owned businesses, and female labor force participation in general.
- Not only are women starting their own primary businesses at record rates, they are also starting side businesses. Between 2014 and 2019, the number of all part-time entrepreneurs in the U.S. grew by 32%, compared to a 9% growth rate in all entrepreneurs. The trend is even more dramatic among women in general, and minority women in particular.
Do we need a new definition of “success”?
The big questions I am left with are: “What is motivating so many women to start their own businesses—whether full-time or part-time? Do women business-owners want to grow? And what does that mean for their business success?”
Other researchers and academics have noted that women are more likely to start businesses out of necessity than opportunity, and often for complex reasons that both “push” them out of traditional employment (e.g., hitting a glass ceiling, job loss) and “pull” them toward entrepreneurship (e.g., greater flexibility, independence, higher income potential).
The fact that women are also starting side gigs in record numbers suggests that women may be adapting to a traditional labor market that just does not work for them. If we really want women-owned businesses to succeed and grow, it is important to understand what is driving them to entrepreneurship in the first place and how those motivations relate to successful business outcomes.
At the same time, there remains a significant and very real disparity in the revenue of women-owned businesses compared to male-owned businesses, and in minority women-owned businesses, in particular. As women represent a larger and larger share of business owners, the revenue gap in women-owned businesses may exacerbate the persistent gender and racial inequality in the U.S. and could even become a destabilizing factor in the economy in general.
Though little has changed since last year’s blog post, I am still alarmed by the trends and left with a lot more questions than answers this year. Supporting women-owned businesses, and stimulating their growth, will require a deeper exploration of how and why women are choosing entrepreneurship over traditional employment, and of the unique values that female entrepreneurs bring to the table.
Women are literally changing the face of entrepreneurship, and we need to better understand what’s behind this trend.