5 Facts You Didn’t Know About Women-Owned Small BusinessesWhat's a girl to do? Consider becoming an entrepreneur.
Regardless of what Cyndi Lauper says, girls don’t “just wanna have fun.” In fact, a large number of women are industrious entrepreneurs, working hard to build their own small businesses.
The U.S. Small Business Administration (SBA) recently issued a brief on women’s business ownership in America. Here’s a peek into the world of female entrepreneurship and its role in the small business community.
Almost all women-owned businesses are small businesses
Based on data from the Census Bureau’s Survey of Business Owners, the SBA estimates nearly 10 million U.S. businesses are majority-owned by women — 99.9 percent of which are considered small businesses. An additional 2.5 million businesses are equally owned by women and men.
The vast majority of all women-owned businesses are solo enterprises
The data indicates that women are more likely to be solopreneurs than men. Ninety percent (8.8 million) of women-owned firms are owner-operated sole proprietorships. Further, women seem to like the microbusiness model, intentionally choosing to keep their businesses small and self-managed, as compared to businesses run by men.
Women-owned businesses typically start with less capital
According to the SBA’s brief, businesses owned by women typically have less startup capital than those started by men. While the differences are more subtle for firms with employees, nearly three-quarters (72 percent) of nonemployer women-owned businesses start with less than $5,000. Comparatively, only 55 percent of male solopreneurs start their businesses on the same size budget.
Women are less likely to take out a traditional business loan
While the difference is small, the SBA found that it’s more common for male business owners to use a business loan to cover startup and expansion costs than women. Instead, women-owned businesses tend to lean on other financing options, such as pulling funds from personal savings, using personal credit cards or home equity.
The SBA’s research did not evaluate the reasons fewer women take out business loans than men, but a related study suggests that fear of credit denial may play a role. According a 2014 SBA brief on access to capital for women- and minority-owned businesses, “studies have found that both minority and women small business owners feel disproportionately discouraged from applying for credit relative to their non-minority and male counterparts.”
Small businesses owned by women tend to be clustered in low-sales industries
According to the report, “For every dollar of revenue an average women-owned employer business earns, a male-owned business earns $2.30.” While many factors likely contribute to this discrepancy, businesses started by women tend to be in industries with lower profit margins, such as child day care and home health care services. In fact, more than half of all women-owned businesses are in the bottom 20 industries for average sales revenue. Comparatively, only a quarter of male-owned firms fall into these same sectors.
Admittedly, the SBA’s brief paints a mixed picture when it comes to women-owned businesses. But regardless of any extra challenges they may face, female entrepreneurs are proving themselves in the small business world, by helping generate more than $2.5 trillion in sales and $453 billion in payroll for the U.S. economy annually.