Despite Challenges, Female Entrepreneurs Drive Jobs and Revenue
There was a time in the United States when it was uncommon (if not impossible) for a woman to attain the professional heights their male colleagues enjoyed. Over several decades, however, female professionals have increasingly attained leadership positions in a variety of industries.
While some female professionals elect to work for established businesses and organizations, a growing number of women are pursuing entrepreneurial aspirations. In the U.S. business community, women-owned companies make up 29% of enterprises, according to the American Express Open Forum study on women-owned businesses. There are an estimated 8.3 million women-owned businesses in the United States generating about $1.3 trillion in revenue and accounting for 16% of U.S. employment.
Trends in female entrepreneurship suggest women-owned businesses will play a large role in the future of the American private sector. The Guardian Life Small Business Research Institute projects that women-owned businesses could create half of the 9.72 million new small business jobs expected by 2018. Fostering this potential requires an understanding of the factors driving trends in female entrepreneurship, as well as the obstacles that disproportionally impact the growth of female-owned businesses.
New Business Leaders in the New Economy
In the late 1970s, the volume of women leaving a post as homemaker and entering the workforce surged. Once largely relegated to paraprofessional positions (e.g., secretary, nurse), this “quiet revolution” led to the ever-growing prominence of women in leadership roles throughout industry and government. In 2010, American women earned more advanced degrees than men for the first time, which suggests skilled female professionals will continue to capture senior positions across numerous industries.
Even as the quiet revolution continues, a new revolution is growing, with women increasingly leaving corporate positions to found new businesses. This trend is driven in part by challenges women continue to face in corporate America.
A report by Georgetown University’s McDonough School of Business and the U.S. Chamber’s Center for Women in Business looks at the number of women in top management ranks at mid-size companies over 10 years. The report shows some growth in the number of women in executive positions over the decade surveyed, though never exceeding 6%. The 2008 recession, however, brought that growth to a halt, with the greatest impact on female executives between 27 and 39 years old. Slowing prospects for advancement has driven some female professionals to strike out on their own.
Women are also leaving corporate America because of company culture. A Guardian Life Index report shows that women who leave a company to start their own business often share dissatisfaction with the corporate culture and office politics. Some women also find company structure to preclude a healthy work-life balance.
Anne-Marie Slaughter, a professor at Princeton University and previously director of policy planning at the State Department, wrote a much-debated opinion piece in the Atlantic about the difficulty of balancing high professional achievement with growing and raising a family. Speaking of her career and time in government:
“The minute I found myself in a job that is typical for the vast majority of working women (and men), working long hours on someone else’s schedule, I could no longer be both the parent and the professional I wanted to be…Having it all, at least for me, depended almost entirely on what type of job I had. The flip side is the harder truth: having it all was not possible in many types of jobs.”
But launching a new business can be as all-consuming as any corporate role. Growing a business demands time, attention and effort – the same can be said for parenthood. Leslie Bradshaw, co-founder of the creative agency JESS3 and a Fellow at the National Chamber Foundation, says her company is her baby. While parents post pictures of their children on social media sites, Bradshaw is posting about her company.
“When I think about being an entrepreneur, I think of long hours and sacrifice,” she says. “But what happens when I want to have children and raise them with a certain set of values?”
One advantage for female entrepreneurs (over corporate professionals) is that as a company grows, it can be shaped to fit the lifestyle and goals of the owner. The same cannot be said for ascending the ranks at an established corporation. The opportunity to shape the workplace culture provides incentive for female professionals to leave established companies or organizations to launch their own enterprise.
The Venture Capital Challenge
A challenge for all entrepreneurs is raising capital. Though women own nearly one third of all U.S. companies, they receive less than 10% of available venture capital (VC), according to a Kaufman Foundation report. This could be in part because there are few women investors in the VC industry – just 8% of investment professionals at the top 25 VC firms are women.
One possible reason for this is that the VC industry remains a “good-ol’ boys kind of network,” says Bradshaw. In attending business school, male businessmen develop a network of contacts that can prove valuable in the future when it comes to acquiring VC.
“A lot of the venture capital firms’ networking activities that I see are geared towards men,” says Bradshaw. “For example, a whisky and cigar night. I can’t imagine two things I’d want to do less.”
Yet, it is these kinds of interactions that build relationships that can make capital easier to acquire. The Commerce Department reports women are less likely than men to use financing, starting companies with just 64% of the capital their male counterparts enjoy. Difficulty accessing capital can prevent new enterprises from thriving, but there is a silver lining. Companies that succeed despite limited funding retain equity and learn to operate efficiently on a narrow budget, which can help a company long term.
Recession Produces Stronger, More Resilient Businesses
The 2008 recession tested all U.S. businesses. In the years before and after the economic downturn, the Open Forum report found that women-owned businesses in the $25,000–$49,999 revenue range experienced the fastest growth rates, while growth slowed for businesses in the $250,000–$499,999 range. Those earning $1 million or more, however, showed stronger growth after the recession than before it.
A National Federation of Independent Businesses’ report on lessons from the recession finds that women-owned businesses that survived the worst of the downturn are stronger and more competitive for it. With slowing sales, weak demand, and economic uncertainty, all businesses need to find ways to balance the books. During the worst of the downturn, some women business owners focused on tactics to grow sales, such as looking for new markets and customers or boosting sales and promotion efforts; other women-owned businesses elected to reduce their workforce. These tactics, says NFIB, helped some companies survive the downturn and have since become institutionalized, making the businesses more competitive than before the economic downturn.
‘Feel, Absorb, and Embrace the Risk’
In addition to being able to do more with less capital, successful women business owners embrace risk and aren’t intimidated by their male competitors. Simone Bruni, founder and CEO of Demo Diva Demolition in New Orleans, started her demolition business following Hurricane Katrina. She launched it with $250, which was spent on business cards, company-name magnets for her car doors, and a stack of company-branded pink and black yard signs. She spent the next two years steadily growing her company, reputation, and revenue, subcontracting all her business until she was able to begin buying the equipment needed for her company to do the work directly.
The demolition business is largely male-dominated, and Bruni says others in the industry were certain her growing business would eventually flop: “I was expected to fail. I even imagined it myself.”
Yet, today there is a certain satisfaction in her voice when she recalls the men in the industry who “backslapped me with an arrogant attitude,” expecting her imminent failure. It was not the fear of failure or her colleagues’ impressions, however, that ultimately drove her success.
“What set me apart at the time was harnessing my own fears,” says Bruni. “Whenever you’re going into business, you have to feel, absorb, and embrace the risk. After Katrina, I thought, ‘who will help me?’ But what I thought was my weakness became my strength. I had to do it myself.”
At a time when the United States is struggling to expand its economy, the growth trends in female entrepreneurship will yield innovations, jobs, and revenue—all of which are critical for the future of American business.