Why Women Start Their Own Businesses and How to Fuel Them
Celebrating National Women’s Small Business Month
Women are starting businesses at an unprecedented rate and almost 40% of American businesses are now owned by women. A lot of what attracts women to entrepreneurship are things we have often found lacking in employment in larger organizations: independence, more opportunity for growth, greater work-life flexibility, our passion for an idea, and pride in our own contributions.
Most founders are happy with their choice to start a business and proud of their work. As we salute female entrepreneurs this month, we also look at the best ways to increase their odds of success.
What’s fueling the growth?
The reasons to start a business are as individual as the founders doing it. But surveys often show a few top reasons women decide to make the leap into entrepreneurship. I know many of them resonate with me and motivated me to make the difficult decision five years ago to leave a top job with a Fortune 100 company at the peak of my career. Despite the certain challenges that lay ahead, I also knew that founding my own business would enable me to pivot to my purpose and help me realize far more of my potential.
Along with such positive motivations, we can’t ignore that women are also sometimes motivated to start their own businesses because they feel under-valued in large companies. The gender pay gap remains stuck with little recent progress and women who work full time still earn only 80% of what their male counterparts earn, according to the U.S. Census Bureau. The current rate of change is so slow that pay equity won’t happen for another 100 years. Understandably, women are tired of waiting. As our own business owners, we can charge what we’re worth.
Make success more likely
Many of the issues that make it harder for women to build successful businesses are well documented. Addressing them head-on is an obvious first step to increasing the odds of success for female founders. That’s why these issues are among our top priorities at Monica Motivates. They include our commitment to:
- Educate and counsel would-be founders at the ideation stage about the impact the type of business they choose will have on revenue potential. Women are more likely to found businesses in industry sectors such as education, health care and personal and retail services where margins are smaller and revenue growth potential more modest. By contrast, men are more likely to found businesses in the manufacturing or wholesale spaces that are more lucrative. Your industry choice may be based on unique skills and passions, but you need to have an eyes-wide-open approach to the revenue implications associated with various industries.
- Help women gain access to start-up investment. One of the reasons women often start businesses in less lucrative sectors is because those industries also have lower financial barriers to entry. But with less start-up capital and fewer injections of operating cash that women-owned business receive female founders are less able to make investments in the equipment, employees and raw materials that will help them grow faster. The good news is that female angel investors and women general partners at venture capital firms are growing.
Networking with a community of fellow entrepreneurs can also help you identify important funding vehicles, including Community Development Financial Institutions (CDFI) created by the federal government to invest in economically disadvantaged communities.
- Teach women to pitch and create more opportunities to do so. Research shows that men receive far more opportunities to pitch their new businesses than are afforded to women (at a rate of nine to one). Female founders also tend to be somewhat less forceful in their pitches. The more women can carefully hone their Unique Value Proposition (UVP) and the more opportunities they are given to deliver it, the more likely they are to gain external investment and capture new business. Our Pitch University and company-specific Global Supplier Diversity Accelerator programs target these needs.
- Prioritize growth goals. Research published in the Wall Street Journal finds that one of the greatest predictors of business growth is simply the entrepreneur’s goal to grow. They also found that women entrepreneurs tend to have different performance expectations for their businesses than their male peers, expecting lower sales and employment. There can be many factors at play here, but the findings do suggest that helping women dream bigger is one element of growing a larger enterprise.
During National Women’s Small Business Month, we are especially pleased to salute the many female founders following their passion, accelerating their own advancement, designing the life-work flexibility they need and gaining control of their future by becoming their own boss. Research by Boston Consulting Group and MassChallenge found that startups founded and cofounded by women performed better over time (generating 10% more in cumulative revenue over a five-year period) than startups founded by men.
It’s time to recognize the results women entrepreneurs can drive and remove more of the barriers that make their journeys slower, harder and less financially rewarding.