October is National Women’s Small Business Month, a time to highlight the accomplishments of women in their industries. Today, we’re taking a look at the impact of women-owned small businesses and how women are setting the tone for the future of small business.
Starting Businesses
The US Census Bureau began providing data about women-owned businesses in 1972. Since then, the number of women-owned businesses has grown by 3000%.
Women started an average of 1,821 new small businesses per day from 2017 to 2018.
“This new data demonstrates not only the remarkable impact women entrepreneurs have on our economy when it comes to creating jobs and generating revenue but also the growing role of women-owned businesses in our communities,” said Julie Tomich, SVP of American Express Global Commercial Services, who shared that data in a 2018 report. “Over the past 11 years, we’ve seen women’s entrepreneurship and economic impact increase – especially among the growing number of women-owned companies that generate more than $1 million in revenue.”
Women of All Ages and Backgrounds
Women from all ages and backgrounds are finding ways to turn their passions into profit by becoming small business owners.
“I was miserable working a ‘good’ office job at an engineering firm. I was driven by my passion… and a desire to work for myself, to quit my job and teach and train full time,’ said one respondent in a 2018 SCORE survey focused on women entrepreneurship. “I didn’t do it sooner because I didn’t have the confidence to believe my dreams were possible. I didn’t do it later because I had to get out of the corporate world. Life was constantly throwing me ‘signs’ to quit my job and do my own thing. Finally, I took the plunge.”
In the 2018 State of Women-Owned Businesses Report, researchers found that while the number of women-owned businesses, in general, grew by 58%, the number of firms owned by women of color great by a whopping 163%. As of 2018, 47% of all women-owned businesses were run by women of color.
Age is just a number when it comes to starting a small business. In the same report, researchers looked at businesses started by age group. The study found that 48% of women business owners are between the ages of 45 and 65.
Here’s the full breakdown by age:
- 2.4% Under 25
- 13.1% 25-34
- 17.7% 35-44
- 21.7% 45-54
- 26.1% 55-64
- 19% 65 and Over
Investing in Communities
Women-owned small businesses keep local economies going and bring new jobs into communities. With the rapid growth of these businesses, women in cities across the United States are helping to build vibrant and thriving communities.
These are the states where women have been growing small businesses at the fastest rate from 2007 to 2018, according to the American Express study.
1. Florida
2. Georgia
3. Michigan
4. Tennessee (tie)
4. South Carolina (tie)
As an article from the Houston Chronicle points out, patronizing a small business means putting money back into a local economy. Local business taxes benefit everything from schools to fire departments to parks that make communities stronger, safer, and more fun places to live and raise families.
Funding Women-Owned Small Businesses
Women face a unique set of challenges in starting and growing small businesses. While the growth of women-owned small businesses is rising, that number is still noticeably behind the growth rate of small businesses owned and operated by men. One study shows that 71% of women-led small businesses are profitable while 80% of small businesses owned by men are profitable.
What challenges are women running into when trying to grow their business? The study goes on to list the factors that most affect women-owned small businesses.
- 35%: Lack of capital/cash flow
- 16%: Marketing/advertising
- 14%: Time management
- 12%: Administrative work (bookkeeping, payroll, etc.)
- 11%: Recruiting/retention of employees
- 6%: Managing/providing benefits
- 5%: Other
It doesn’t come as much of a surprise that lack of capital and cash flow has a spot at the top of the list. What might be slightly more surprising is that the study goes on to look at sources of funding for women-owned businesses.
Here’s the breakdown of the top five sources for where that funding comes from.
- 36% Cash
- 17% Friends and Family
- 11% ROBS
- 10% Lines of Credit
- 9% Unsecured Loans
SBA Loans, an incredible source of funding for small businesses, didn’t even make it onto the top five list. According to the report, SBA loans only made up 6% of funding for women-owned small businesses. That said, more women entrepreneurs are beginning to find value in looking at the SBA as a funding option.
“New business creation is prevalent in the tech field. They might know how to build an app or know the latest in machine learning, but don’t know how to run a business and might want to. That’s where the SBA can help,” SBA Administrator Linda McMahon recently told FOX Business’, Maria Bartiromo.
With women continuing to narrow the gap in business lending, we can expect to see the number of women-owned businesses continue to grow and watch as these small businesses succeed in building local economies and providing extraordinary opportunities.
Capital Collaboration is here to help when it comes to funding your small business. Learn about the types of funding we offer and get started on applying today.
