Women-owned small businesses on the rise, but obstacles remain

October 3, 2012

When Hedy Ratner started the Women’s Business Development Center in Chicago 25 years ago, women owned just 10 percent of U.S. businesses.

Although today that figure is close to 30 percent, Ratner hoped by now women would have leveled the playing field in the business world.

“We never expected to need to be in business 25 years later,” said Ratner, whose organization helps women start and grow their own businesses by offering training, mentorship and funding.

“We thought there would be equality, that women would have equal opportunity, but we don’t,” she added. “We’re struggling with building because there are still businesses that fail.”

October has been labeled National Women in Small Business Month by the Small Business Administration (SBA), which is hosting a series of weekly web chats focused on the issues facing female entrepreneurs.

According to the latest U.S. Census Bureau statistics, which are compiled every five years, there were 7.8 million women-owned firms in 2007 – 90 percent of which were small businesses.

In the decade from 1997 to 2007, women-owned companies grew at twice the rate (44 percent versus 22 percent) of male-owned enterprises, showed a 2010 report prepared by the Economics and Statistics Administration.

Despite the progress, Ratner said women-run businesses still lag their male counterparts in revenues, number of employees and funding.

Men are twice as likely as women to own a business that brings in $1 million in revenues (6 percent versus 3 percent), according to a 2009 survey of 417 women-owned small businesses by the Center for Women’s Business Research. The study also found women-owned firms generated just 4 percent of all U.S. business-related revenues.

Ratner said the main reason for this is that women tend to start service-related companies that have a hard time attracting the funding needed to grow into larger businesses.

“The percentage of equity investment, venture capital and angel investing is not going into women- and minority-owned businesses,” she said. “It’s going to the sexier businesses that are usually white-male owned in technology and that’s not where women are.”

To help ease this cash crunch for women entrepreneurs, Ratner recently began lending directly to small businesses and intends to register the WBDC as a community development financial institution (CDFI). This year her organization will lend about $1 million, mostly in micro-loans of less than $20,000.

In Columbus, Ohio, a nonprofit is offering cheap office space to women entrepreneurs. The Women’s Small Business Accelerator, which opens its doors next week, is a 6,000 square foot space with about 35 units that range in size from a small cubicle to a large corner office with windows. The prices range from $225 to $550 per month and include wi-fi, utilities and onsite mentoring programs.

“We’re ahead of our expectations,” said co-founder Mary McCarthy, who has had inquiries on about 25 percent of the units.

McCarthy, who previously owned a copier business and IT support company, said startups need all the help they can get and women tend to put their families ahead of their business.

“Men tend to get more support in starting a business and focusing on a business than women,” said McCarthy.

Julie Shifman made the transition from stay-at-home mother to successful business owner, launching her Cincinnati Ohio-based career consultancy business – Act Three – in 2007. Shifman, who had left a high-paying law career to raise her four boys several years earlier, started her business because “there was nobody at all out there to help me when I was figuring out what I wanted to do next.”

Act Three targets women from 45 to 60 whose kids have left the house and are looking to start their own business or attempting to get back into the workforce. Shifman said this demographic will likely produce a flood of small businesses over the next decade.

“There’s over 40 million boomer women and a lot of them stayed home and they’re all empty nesting right now.”

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