How are women business owners faring these days?
Better, even though The Global Entrepreneurship Monitor (GEM) 2018-2019 Women’s Report, coauthored by researchers from Babson College and Smith College, says the number of startups by women worldwide still lags that of men. Total Entrepreneurial Activity (TEA) represents the percentage of the adult working-age population, ages 18–64, who are new entrepreneurs. The global TEA rate for women in the GEM Report was 10.2%, about three-quarters of that for men.
GEM studies the economies in 59 countries, and the report shows approximately 231 million women are starting or running new businesses in those regions. There’s been progress in the number of established businesses owned by women. (GEM defines a business as “established” if it has been operating for more than 42 months.) Worldwide, 6.2% of women-owned established businesses, compared to 9.5% of men.
Globally, younger women (ages 25-44) had the highest entrepreneurial participation rates.
Reasons for startup
The intention to start a business within the next three years is approaching parity between male- and female-owned businesses. The global average for women with that intent is 17.6%, about four points less than men. The lower the average income in the country, the more women planned to become entrepreneurs. For example, in low-income countries, 37.8% of women intended to start within three years, while in high-income countries, only 12.6% planned to do so.
More women (27%) around the globe started their businesses “out of necessity,” compared to men (21.8%). Conversely, fewer women (68.4%) started their companies “to pursue an opportunity” than men (74%), resulting in what GEM calls a “7% gender gap.”
GEM notes that there are vast differences by region in the necessity and opportunity motives. In North America, just 9% of women started their businesses out of necessity, compared to 79% who started to pursue an opportunity. But there are differences in North America as well. In Canada, entrepreneurial women are 10% more likely than men to say opportunity is their motive for starting a business, while in the United States, women business owners are about 10% less likely than men to entrepreneurs to cite opportunity as a startup motivator.
American women entrepreneurs
The picture is brighter when focusing just on the U.S., according to the annual State of Women-Owned Businesses Report, commissioned by American Express. In 2019, American women started an average of 1,817 new businesses per day between 2018 and 2019, down only slightly from the record-setting 2018 number of 1,821.
These businesses represent 42% of all American businesses—nearly 13 million—employing 9.4 million workers and generating revenues of $1.9 trillion. The report, which is based on U.S. Census Bureau data, found that over the past five years:
- The number of women-owned businesses increased 21%, while all businesses increased only 9%.
- Total employment by women-owned businesses rose 8%, while for all businesses the increase was far lower at 1.8%.
- Total revenue for women-owned businesses also rose slightly above all businesses: 21% compared to 20% respectively.
Also, over that five-year time period, there’s been a lot of growth in the number of women who are operating side gigs or hustles. The Amex reports calls these women “sidepreneurs” and says they’ve grown at a rate that is nearly twice as fast as the overall growth in female entrepreneurship: 39% compared to 21%, respectively.
Much of that growth comes from minority women, where sidepreneurship is two times higher than all businesses: 65% compared to 32%, respectively. In fact, while the number of women-owned businesses grew 21% from 2014 to 2019, firms owned by women of color grew 43% and African American women-owned firms grew even faster at 50%.
Challenges for women entrepreneurs
That doesn’t mean there aren’t challenges for women business owners. According to the 2019 Bank of America Women Business Owner Spotlight, the fourth annual study exploring women entrepreneurs’ goals and challenges, women in the U.S. say their biggest concern is access to capital. While women entrepreneurs do believe their access to capital has improved in the past 10 years, 58% say they don’t have the same access to capital as men business owners. Only 34% of the women think women business owners will eventually gain equal access to capital (on average, they think that will happen in 2033). And sadly 24% of the women don’t think women will ever have equal access to capital.
But a report from Bank of America and Babson College, Beyond the Bucks: Growth Strategies of Successful Women Entrepreneurs, which is part of a larger research collaboration between Babson’s Center for Women’s Entrepreneurial Leadership (CWEL) and Bank of America Private Bank, shows successful women entrepreneurs who faced challenges “created alternate paths to success for themselves.”
“The research found gender-based barriers, such as misperceptions regarding market opportunities and access to traditional networks, are challenging, but none of these setbacks stopped these women from achieving success,” says Karen Reynolds Sharkey, business owner executive, Bank of America Private Bank.
The three key challenges noted in the report were:
- Market misperceptions: Women entrepreneurs’ competency and market knowledge is routinely disregarded, including market opportunities they identify.
- Network exclusion: Women entrepreneurs often experience limited, gender-based, access to established social and business networks, creating less access to knowledgeable mentors and capital expansion.
- Managing expansion while underfunded: Barriers to start-up and growth capital create new, ongoing challenges, including constraints on funding for recruitment, access to new markets, and overall expansion.
“Through this research, we identified several actionable strategies women entrepreneurs are using to turn the challenges they face into opportunities and grow their businesses,” says Lakshmi Balachandra, Ph.D., assistant professor, entrepreneurship at Babson College and the principal researcher on the project. “These include building on their skills and strengths and leveraging their personal insights for sustainable growth.”
Supporting women entrepreneurs
The GEM Women’s Report offers some recommendations to help support women entrepreneurs:
- Address stereotypes about who entrepreneurs are and what entrepreneurship is. Report co-author and Babson College Vice Provost of Global Entrepreneurial Leadership Candida G. Brush says, “An inclusive approach is more beneficial and far-reaching than a continued emphasis on past models.”
- Learn from each other about the best ways to build successful businesses and vibrant entrepreneurial ecosystems. “We should learn from the data to guide the development of an ecosystem that works well for all, informed by social, cultural, political, and economic contexts,” says co-author and Babson Professor Emeritus Patricia Greene.
- Change the dialogue about entrepreneurship to match reality. Entrepreneurial ecosystems often focus on the access to capital, but lack of access may be a symptom rather than the root illness. Lack of profitability [not access to capital] was the number one reason cited by both men and women for business discontinuance. Other reasons for discontinuance were related to selling the business or retiring. Brush says, “This suggests that women could benefit from more training on how to capture value when exiting a business.”