Women entrepreneurs face more challenges when starting and running a business. This blog discusses those challenges, gives statistics and shows why women are experts at doing more with less.
Starting or running a business is harder for women
There are two reasons why it is harder for women to be successful at starting or running a business:
- Women are less likely to obtain capital to start a business
Women are starting businesses at a faster rate than men, but women receive only 7 percent of all venture capital funding in the United States. In addition, women receive only about 5 percent of all federal contract awards. Plus, traditional banks only lend women about 5 percent of their loans.
A survey by the Boston Consulting Group found that women control about $ 39.6 trillion of the world’s wealth, which is only 30 percent of the total. That is not strange if women have less access to capital.
A study by Fundera, which was based on 8,423 small businesses who applied for credit and self-reported their gender between February 2014 and June 2016, shows that there is a consistent and systemic disparity in how men and women entrepreneurs can finance their small businesses: women receive fewer, smaller loans for higher interest rates, which contributes to their disproportionately small influence over the national economy.
The Fundera study also showed a gap between approvals of female small-business owners and male small-business owners. 32% of the women who sought financing received approvals, compared to 35% of men. Furthermore, women entrepreneurs were offered smaller loans across every loan product from the same group of online lenders, and they received more costly debt than male borrowers did.
Finally, the Fundera study also found that women entrepreneurs have lower credit scores than men and have significantly lower annual revenues. Riskier borrowers pay higher rates, so those with lower credit scores and lower revenues generally pay higher APRs to get financing. Still, being reliant on costly debt and not having enough capital can also contribute to a downward spiral of lower credit scores and lower revenues.
- Women start a business later
A key component of the most recent Global Entrepreneurship Monitor, a study that involved 5,944 people between the ages of 18 and 74 living in the United States, is that it was more common for women to start their businesses later in life. Men typically launch new businesses between the ages of 22 and 34. For women, that number is a lot higher: between 35 and 44.
Kim Garst presumes that this trend is largely due to many women choosing to stay at home and raise families in their 20’s and early 30’s. They may have trained for a particular career prior to their family commitments, but after raising a family, they are now ready to get back out into the workforce or to find/create a job that allows a better work/life balance.
She says that “as much as we may not want to admit it, often society still tends to expect women to “do it all”: to be the primary caregiver, to manage the household, to be successful in their business or career, and to do it all with grace. Despite all the talk about gender equality and sharing responsibilities within the home, the statistics are clear: women still do far more work within the home than men. While 85% of women report spending some time on household activities each day, only 67% of men say the same.”
Why women entrepreneurs are experts at doing more with less
There are also two reasons why women entrepreneurs are experts at doing more with less:
- Women entrepreneurs need less funding
The Global Entrepreneurship Monitor has also found that startups run by women, on average, took just $ 10,000 to get underway. That is half of what men took to get their business started! Most women in the survey even said they needed just half of that amount and they often turned to family and friends for funding rather than venture capitalists.
Some experts claim that women are more efficient spenders, and since they have less to start with, they use those funds more wisely from the start.
In addition to this talent, women have just as much ability as men to dominate the industries they are in. The National Women’s Business Council Annual Report says that, among successful companies, men receive six times as much funding as women. Companies that have women on their executive teams are likely to have a higher valuation at Series A (64 percent). And, over the long term, women business owners typically outperform nearly all companies, except blue chips.
- Women entrepreneurs are better at managing time
Garst also celebrates the time management skills of women entrepreneurs. She says that women between the ages of 35 and 44 are likely to have children at home. They have often been the primary caregiver, and are unwilling to sacrifice this role simply because they have started a business.
These are women who have less time overall, but who still have a fierce determination to start and grow a business. They may have less time to commit to their business, but they make it work by being ruthless in how they manage their time.
This can put an extraordinary amount of pressure on female entrepreneurs, especially those who are dedicated to raising a family. Yet, perhaps because of this challenge, many women entrepreneurs step up to the plate and become masters of managing their time – even when they are being pulled in many directions all at once.
Women are more successful as entrepreneurs than they (and men) think
According to research from The Center For Entrepreneurship and Barclay’s Bank, 62% of male entrepreneurs say their business is currently successful, compared to just 42% of women who believe their business is prospering. This would make sense if these statistics matched the financial reality. However, in the same study, women actually reported higher profits than their male counterparts. That means that women entrepreneurs (even those more financially successful than men) are more likely to minimize their business success.
Garst believes that women are more likely to start a business out of necessity, resulting in a “do or die” attitude toward entrepreneurship: “It is widely recognized that entrepreneurs start a business with two distinct motivations: either out of necessity or out of opportunity. Several studies indicate that women are more likely to start a business out of necessity. These women tend to approach entrepreneurship with determination and steely resolve: they need to make this business work, for their own sake and for that of their families. Success is the only option…even given the limited time and financial resources they have to work with.”
She feels this is a major motivation for women entrepreneurs to keep pushing and working long hours. It is all in an attempt to achieve business success, even after they have already achieved it.Business & Finance Articles on Business 2 Community