Why are most women-owned business still smaller than $500,000 in revenue?
More than 1,000 women business owners gathered earlier this month in Miami at the national conference of the National Association of Women Business Owners (NAWBO) to identify opportunities and challenges to building their companies and having an even more significant impact on the economy.
While women are launching businesses at a rapid pace — 1.5 times higher than the national average — their companies still remain small in scope, with only 4 percent reaching earnings of $500,000 and only 1.8 percent surpassing the million dollar mark, according to American Express small business research.
Fortunately, there are myriad efforts underway to boost those percentages — from training on leadership, to new forms of financing, to laws that encourage government contacts to include women. “We have come far but we can’t take our eye of the ball,” said Julie Weeks, president and CEO of Womenable, a for-profit social enterprise to enable women entrepreneurship worldwide.
The country now celebrates 25 years since the passage of HR 5050, federal legislation known as the Women’s Business Ownership Act of 1988, which was critical in boosting women entrepreneurs’ access to capital and independence and led to a surge in women-owned businesses. Virginia Littlejohn, a former NAWBO president, said she recalls a member trying to get a loan for her business in the 1970s. Divorced, the bank wanted her to have her ex-husband co-sign the loan. When she refused, the banker wanted her to have her 17-year-old son do it.
There also have been laws passed that help women to get government contracts. But Billlie Dragoo, the 2013-2014 NAWBO National Chair, still finds that the capital available to women business owners isn’t as plentiful as it is for men. “Women still have to use their personal savings and credit cards,” she said. Dragoo considers access to growth capital the next frontier and she’s trying to do something about it. In her state of Indiana she is forming a venture capital fund for women-owned businesses to tap. “I would like to see it happen across our 60 chapters,” she said.
Speaking in Miami, Anna Colton, Bank of America’s Small Business Banking national sales executive, said the reasons why women are struggling to land venture capital may be the type of businesses they run. Venture capital firms tend to invest in high tech and life sciences, but women tend to have professional services firms, she notes. Colton feels that could change when venture capital firms are made to understand the growth and success of women-owned businesses.
Still, Colton feels women business owners wear many hats and often overlook the need for financial expertise to grow their businesses. A recent Bank of America survey found only 23 percent of women who own business feel financially savvy. Colton says her bank has personal advisors assigned to work closely with each women business owner. Bringing in that expertise, “that’s how you create work life balance,” she says.
For several decades, the top four issues for women business owners have been 1) access to capital 2) access to government contracts 3) access to expertise and mentors 4) and gaining enough respect to secure a seat at the table. Today, there are more than 8.6 million women-owned businesses who still encounter those challenges.