October is National Women-Owned Small Business month, and it got me thinking about what it means to be a woman business owner. Like any good researcher, I started by looking at the data and speaking to a few other women business owners, some of whom are quoted here.
It turns out that my company, Willow Research, is just a drop of water in a big long wave of American women starting businesses. Over the past 40 years, there has been a sharp and steady increase in the number of women-owned businesses in the U.S. Today, women account for 40% of all US business owners, up from just 5% in 1972.[i]
But, when I dug deeper, I was shocked and troubled by how little impact women-owned businesses have, even today. While we account for 40% of all businesses in 2018, we represent just 8% of all employment and 4% of all business revenue. [ii]
In other words, while women are going into business in big numbers, we are barely making a dent in the labor force or in the economy at large. Instead, most women-business owners are going it alone.
“Everyone assumes I’m established because I’ve been on Good Morning America, the Home Shopping Network, in Entrepreneur magazine. But, I still fold, package, and ship all my orders myself. I do everything myself.”
(Female small business owner, 4 years in business, no employees)
Analysts and scholars have posited a number of reasons for this disparity, including women’s preference for self-employment (over employing others) to maintain control over work and family demands, the age difference between men and women-owned firms, the tendency for women to go into certain service industries with lower revenue potential, and the relative paucity of outside financing for women-owned businesses.
“There’s a cap on the physical number of hours I can spend with individual clients, which means there’s also a cap on income and growth potential.”
(Female small business owner, 10 years in business, no employees)
Women are more likely than men to self-fund their businesses with personal credit, and just 2% of venture capital dollars were invested in women-owned businesses in 2017.[iii]
But, studies have shown that early capitalization in business, like in politics, is critical to long term growth, which means that women who don’t sufficiently capitalize their business at the outset may remain at a disadvantage for the long haul.
The gaps are even greater for minority women-owned businesses. The number of minority women-owned businesses grew by 163% between 2007 and 2018, compared to a 16% growth in non-minority women-owned businesses.[iv]
While minority women are opening new businesses in record numbers, annual revenues for African American and Latina women owned businesses in the U.S. are far below those of Asian American and White women.[v]
Collectively, the data tell me that, 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.
When I started Willow Research a little over three years ago, I knew I didn’t want to go it alone. After decades of working in an office environment, I really valued the energy, support and contributions of my colleagues and I didn’t want to let that go. Unlike most women-owned businesses, I decided right from the start that we would have employees. But we are still a small business.
A lot of women, myself included, are somewhat risk averse when it comes to business. We don’t like to carry too much debt or be dependent on bankers or investors, so we focus less on growth and more on cash flow and building up our reserves. And, a lot of us go into business for personal reasons – to have more control over our destiny and live life on our own terms.
“I’m not happy doing work I’m not passionate about. [At my last job], even if I had my boss’s job, or their boss’ s job, I wouldn’t get to where I wanted to be.”
(Female small business owner, 4.5 years in business, 2 employees)
Yet, it takes a leap of faith to start a business, so we are bigger risk takers than we might realize. And having established a solid foundation at Willow, I believe it’s time for us to take another leap of faith for growth. We go into business for personal reasons, but maybe it’s time to set our sights higher.
There are more women running for elected office this year than at any time in our history, and that is truly momentous and meaningful. But if we really want to close the gap on gender and racial inequality, women need to have true economic power and the influence and outcomes that creates.
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.
[i] “The 2018 State of Women-Owned Businesses Report,” commissioned by American Express.
[iii] Zarya, Valentina. “Female Founders Got 2% of Venture Capital Dollars in 2017.” Fortune. January 31, 2018. http://fortune.com/2018/01/31/female-founders-venture-capital-2017/
[iv] “The 2018 State of Women-Owned Businesses Report,” commissioned by American Express.
Willow Research is certified as a women’s business enterprise by the Women’s Business Enterprise National Council (WBENC), the nation’s largest third-party certifier of the businesses owned and operated by women in the United States.