Did you know that just 31 years ago women were legally unable to obtain a business loan in the U.S. without a male relative co-signing? After the passing of HR 5050: Women’s Business Ownership Act of 1988, which eliminated discriminatory lending practices by banks that favored male business owners, the number of women-owned businesses skyrocketed. Between 1972 and 2018, the number of women-owned companies increased by 3,100 percent (most of which occurred after the passing of WBOA). From 2007 to 2018, the number grew by 48 percent.
Women-owned businesses have now become a critical part of the U.S. economy, with:
• More than 12.3 million businesses owned by women
• Women-owned firms accounting for 40 percent of all privately-held firms
• Women-owned small businesses employing more than 9.2 million people and generating $1.8 trillion in sales in 2018
In fact, according to a report from SCORE, women are slightly more likely than men to start businesses today. The top reason for starting a business is to pursue passion, which 48 percent of female entrepreneurs cited as a motivator.
In 2019, the number of female Fortune 500 CEOs reached a new record, too. However, the number is at still only at 33 female CEOs of Fortune 500 companies. Undeniably, women face unique challenges as business owners in today’s economy.
Here’s a look at some of the top challenges female business owners face, how these have changed over the years, and some tips on how to overcome these challenges.
Business Performance, Marketing, and Sales Challenges
A recent survey by business consultancy PlanBeyond found that compared to male business owners, confidence and optimism for women who own businesses are lacking. Some key findings of the report include:
- Women are 21 percent less likely than men to feel very optimistic about business performance in 2019.
- Out of women business owners, 25 percent don’t believe they have a strong sales plan in place for 2019.
- Nearly 40 percent of women business owners say marketing skills are absent from their business, which is a 24 percent higher rate than male business owners.
One of the biggest factors affecting female entrepreneurs’ confidence is access to business funds. Limited fund access was the top business performance concern for women. In fact, female small business owners are 43 percent more likely than men to be concerned about limited access to money and how that impacts business, which brings us to our next challenge women small business owners face: financing.
The average size of a loan for women-owned businesses is 31 percent less than for male-owned businesses. The difference can be attributed to a variety of factors.
In some cases, female business owners are choosing to finance their businesses with their own capital and personal savings. 61 percent of female entrepreneurs choose to fund their businesses with personal finances rather than business finances. This can impact their personal credit score when their credit utilization ratio is high.
Using personal financing instead of business financing can also hinder women business owners because it doesn’t give them the opportunity to build a business credit profile. If they choose to get funding later, not having a business credit profile can pose significant challenges for getting funding.
Some women small business owners use their own finances for a business because they fear getting turned down for capital. According to a Small Business Credit survey published in 2017, women-owned firms reported not applying for financing for fear of being turned down at a higher rate than men: 22% compared to 15%.
For more financing tips for female business owners, check out “A Guide to Financing for Women-Owned Businesses.”
Tips for Women Small Business Owners in 2019
Looking at the trends and challenges women small business owners face in 2019, here are some tips for women to succeed in today’s business landscape.
1. Take Action on What You Need
To stay confident and in control, women business owners should write out a detailed business plan that keeps them focused on facing potential pain points. Two areas women identified as business challenges in the PlanBeyond survey were sales and marketing, which can affect business owner confidence and optimism. Think about where you need help, and outsource as needed so you don’t neglect areas that can make you feel like you’re struggling.
2. Consider Funding Options Beyond Personal Savings
A large number of women business owners cite finding funding as an issue, but there are options for women who want reliable and fair funding. Securing business financing helps women business owners build business credit. Online lenders like OnDeck may provide a good option, since their application process is gender neutral and looks at a number of factors during the approval process.
3. Build Your Support Network
Now is a better time than ever before for female entrepreneurs to start their own businesses. There are so many supportive communities and free business resources for women small business owners. The American Business Women’s Association, Ellevate Network and National Association of Women Business Owners are all organizations for women business owners.
Support systems for women business owners are crucial. You can find potential partners, mentors and employees. You can get advice and share insights to help each other. And you can discover referrals and recommendations that help you grow your business.