Between 2007 to 2012 — the period before and after the Great Recession — the number of women-owned businesses jumped 27% while privately held businesses grew only 3.3%, according to the Survey of Business Owners by the Census. Average revenues for women’s businesses decreased from $154,300 in 2007 to $143,700 in 2012 and privately held businesses revenue grew from $417,400 to $440,200 during the same period. One reason for the decline in revenue among women’s businesses was a surge in startups, which had not yet achieved their full revenue potential. Another reason is that many of these businesses were necessity businesses: The entrepreneur’s only viable employment option was to start a business. These entrepreneurs also tend to be sidepreneurs, working only part-time.
Like the canaries in the coal mine, women’s businesses were already experiencing a downturn. Their numbers increased by 5.4% between 2018 and 2019, privately held companies only increased by 2.4%, according to the American Express 2019 State of Women-Owned Businesses.* However, after a slow but steady rise, women-owned businesses’ average revenues declined from $143,100 in 2018 to $142,900 in 2019, while all privately held businesses rose from $468,000 to $474,900.
On the flip side: Women are also going for the brass ring. Between 2007 and 2012, million-dollar-plus women-owned businesses increased by 21% compared to 3.3% for all privately held businesses and between 2018 and 2019, it was 4.2% compared to 2.4%, respectively. These are the women I write about in this column.
While we are entering uncharted territory, some navigation markers will hold for the coronavirus outbreak. Women tend to have smaller businesses than men for many reasons, among them:
- The motivations behind starting a business also forge the journey and the specific paths taken. For example, flexibility (to accommodate care-giving responsibilities, they need to control when and where they work), necessity, and lifestyle (pursue their passions and work when and where they want) entrepreneurs are more likely to be sidepreneurs who generate less revenue. Women are more likely to be all three.
- Women also tend to be in low-margin low-revenue industries, such as child care, personal care, and home healthcare. Smaller businesses less profitable businesses will fare less well and many may shutter.
- Money is the crucial ingredient companies need to grow. Undercapitalized companies have lower sales and profits, generate fewer jobs, and are more likely to fail. Women have less capital because, on average, they earn less than men, are less likely to be promoted, and go in and out of the workforce because of care-giving responsibilities. For women, debt is by far the dominant form of outside funding. Evidence finds that minority and women entrepreneurs are dissuaded from applying for credit,ask for less financing than men do, are approved less often, and pay more for credit.
- Women are often the primary family caregivers and household managers. As a result, they also have more demands on their time that can play into the decisions to start and grow their businesses.
- Evidence finds that entrepreneurs with larger and more diverse networks grow their businesses bigger. Women tend to build deep and narrow networks, while men build wide and shallow ones. The weaker ties built by casting a wide networking net are the greatest source of new ideas, information, and opportunities, according to Mark Granovetter, a sociologist often cited by Reid Hoffman, executive chairman and co-founder of LinkedIn.
In this time of great need, it behooves the entire women’s entrepreneurial ecosystem — policymakers, funders, supporting organizations, educators, researchers, the media, and the women themselves — to expand or create policies and resources that will address women’s specific needs.
If one lesson was learned from the recovery of the 2007-2009 financial crisis, it is that access to capital for small businesses matters. Small businesses were hit harder than large companies by the recession. Loans to small businesses were already in decline before 2008. Still, the financial crisis accelerated the process and slowed small businesses’ recovery. During the financial crisis (between 2008 and 2013),big banks reduced lending to small businesses by 20% but increased loans to larger companies by 4%. While women are making progress, the coronavirus crisis should be a time to press harder on closing the gaps in both debt and equity financing.
Women entrepreneurs need to take advantage of not only SBA grants and loans being offered but also take advantage of those provided by corporations. In addition to my friends at Alice, check out A Common Thread, Amazon, Facebook, GoFundMe’s Small Business Relief Fund, Google Ad Grants (current customers only), James Beard Foundation Relief Fund, SheaMoisture, and Yelp Support.
The ability to start a small business and grow it into a success embodies the American Dream. Increasingly, it is women — especially women of color — who are grabbing for the brass ring. Women of color represent 39% of the total female population in the United States but account for 89% of the net new women-owned businesses over the past year. The disparity between one entrepreneurial segment and another has an enormous effect on the U.S. economy. For example, if women-of-color matched the number of employees and revenues of businesses owned by white women, four million new jobs and $981 billion in revenue would be added to the economy. The diversity boom is good news for entrepreneurship in the U.S., which faces a declining growth rate for businesses in general.
Women entrepreneurs are an untapped economic engine. The recovery and vitality of the U.S. economy are at stake and everybody needs a chance to participate equally.