Women-owned businesses are springing up in record numbers and, if these firms generate revenue and employment, the impact on the United States economy could be profound.
In the fourth annual OPEN State of Women-Owned Business report, researchers found that about 1,200 new businesses were started daily by women in 2014, compared to 750 the previous year.
Here are other key conclusions:
- There are 9.1 million women-owned businesses in the U.S., employing more than 7.8 million people and producing more than $1.4 trillion in revenue.
- Women-owned businesses are expanding in nearly every industry, leading growth in eight of the top 13 occupational fields including real estate, finance and insurance and wholesale trade.
- Companies owned by women of color now account for a third of all women-owned businesses in the U.S. Although they often employ a smaller number of employees and generate less revenue on average than non-minority women-owned businesses, their numerical growth is far outpacing that of all women-owned firms.
- Though women-owned businesses have grown at a rate of 1.5 times the national average since 1997, their share of the U.S. economy remains much the same as it was 17 years ago. Women-owned firms only employ 6% of the nation’s workforce and contribute less than 4% of business revenues.
Much of the current report is encouraging, but it’s clear there is more to be done if the nation is to fully tap into the potential of women entrepreneurs. In order to propose solutions, it is important to understand the reasons behind the size gap between men- and women-owned businesses.
According to Sangeeta Bharadwaj Badal, Ph.D., a Gallup senior consultant and lead researcher in entrepreneurship, many reasons for the disparity are rooted in both cultural biases and gender-related differences.
Female-owned businesses are smaller and less profitable than male-owned businesses because they are usually concentrated in industries and sectors that are crowded, less productive and less profitable, such as personal services or healthcare, Badal said. This can be attributed to a social pattern in which women owners often gather in industries that are least attractive to male counterparts, Badal said, or, as research has shown, it could arise from the differences in business goals between men and women.
For instance, women business owners are more likely to define success in personal terms rather than in pure profitability. They may place a higher priority on work-life balance than men, so they will choose a lower-profit business that affords them more flexibility. And, as Badal explains, men typically leverage the growing influence of social networking for business more than women, whose networks are generally more personal in nature.
Furthermore, women are less likely to be perceived as having the same skill or experience level as male counterparts, and they are often denied financial loans that would help them build their businesses, or they are granted only a portion of what male businessmen receive.
The ultimate result of this disparity is missed opportunities, Badal said. With the same education available to women as men, coupled with their willingness to stake a claim to their ideas and talents, the U.S. would be wise to foster this entrepreneurial movement.
“Women are 50% of the U.S. population and should be creating 50% of new companies and new jobs,” Badal said, adding that gender diversity in business ownership can also fuel a successful economy by providing access to valuable resources that might otherwise be overlooked.
“The real issue at hand is not getting more women to start business, but rather providing support to women who are already in business to enable them to grow their enterprises to the next level,” the OPEN report stated.
The report goes on to recommend that policy and programmatic support be used to target businesses with five to nine employees, and those aiming at the million-dollar mark.
Women-owned businesses may represent an opportunity to inject grassroots innovation and vibrancy into corporate structures while helping propel a recovering U.S. economy.