Women-owned businesses are on a roll. Currently, companies owned by women account for 39% of the 28 million small businesses in the U.S., and their numbers are rising. In fact, the number of women-owned businesses grew by a whopping 45% between 2007 and 2016—some five times faster than the national average for businesses overall.
But women business owners still face some stereotypes and have some challenges to overcome. A new study by nonprofit business mentoring organization SCORE reveals some myths and realities about women-owned businesses.
For The Megaphone of Main Street: Women’s Entrepreneurship, SCORE polled more than 20,000 small business owners nationwide who have been SCORE clients. The respondents included both men and women and in a wide variety of industries, mostly with annual revenues of less than $1M.
Here are the questions SCORE sought to answer.
Are women owned businesses as successful as businesses owned by men?
As measured by business starts, revenue growth, job creation and number of years in business, SCORE found that among businesses that received mentoring, women-owned businesses are as successful as those owned by men. Overall, America’s women-owned businesses employ nearly 9 million people and generate more than $1.6 trillion in revenues.
But while those figures are impressive, they add up to just 4% of the nation’s business revenues and about 8% of its employment. In contrast, men-owned businesses account for nearly 30% of the nation’s revenues and about 35% of employment—and these figures haven’t changed much in the past 20 years, SCORE notes.
If women-owned businesses are growing in number, size and revenues and demonstrating longevity, why do they still lag behind men’s businesses in terms of overall revenues and employment?
For a long time, the conventional wisdom was that women business owners were more likely to run “lifestyle” businesses or part-time operations—for example, a stay-at-home mom with a side business to earn extra money while the kids are in school. This was thought to explain why women business owners didn’t employ as many people or make as much income as men.
However, SCORE’s data shows that 62% of women business owners (compared to 69% of men) depend on their business for their primary source of income. “[This] suggests that women-owned businesses are much more than casual hobbies,” the report notes.
The report doesn’t offer an answer as to why women-owned businesses make up such a small percentage of revenues and employment nationwide. However, if the current trajectory continues, the number of women-owned businesses will keep on growing—and eventually, the percentages of national business revenues and employment women-owned businesses are responsible for should catch up.
Do women-owned businesses face greater obstacles when seeking financing?
Both men and women in the survey have similar reasons for seeking financing for their businesses. The top purposes are to grow the business, to help with cash flow, and to buy new equipment.
However, men are more likely to seek financing than women. More than one-third (34%) of men have sought financing over the life of their businesses, compared to 25% of women.
When they do receive financing, men are more likely to get it from traditional sources, such as SBA loans or equity financing from outside investors. Some 38% of men that looked for financing in the past year received SBA loans or equity financing, compared to just 31% of women.
In contrast, the women business owners in the survey are more likely to get their financing from personal connections such as borrowing money from family members or friends (25% of women vs. 20% of men). Women are also more likely to use credit card financing, although this is a popular financing source for both genders (46% of women vs. 42% of men).
Overall, however, the most popular source of financing for both men and women business owners is non-SBA loans. More than 50% of both men and women have obtained this type of loan.
While bankers tend to have strict criteria for making business loans or SBA-guaranteed loans, alternative financing options are often a better bet for entrepreneurs. For example, compared to traditional loans, alternative financing sources are generally much easier to apply for and make decisions faster. They are also more likely to handle the kinds of small loans (say, $10,000 to $50,000) that banks don’t want to make because they aren’t profitable enough.
Want to grow your business? Get help
All of the business owners in the survey had received at least one hour of mentoring from SCORE. The survey found that mentorship increases the likelihood of a business opening, staying open, and expanding—and the more mentoring business owners received, the better their outcomes were.
Some 41% of business owners who received 2 to 5 hours of mentoring reported business growth in terms of size or revenue. Among business owners who received 5 or more hours of mentoring, that figure rose to 47%.
Whether you’re a male or female business owner, one thing is clear: Getting some expert guidance as you start and grow your business can greatly enhance your chances of success.
(Disclosure: SCORE is a client of the author.)