Apparently the independence we women entrepreneurs seek is coming at a big price. The benefits of entrepreneurship are driving more women than ever into self-employment, yet the financial rewards necessary to make this trend stick, still elude most of us.
In October the Center for Women's Business Research published the first ever study on the economic impact of women business owners in the US.
The following data were rightly heralded by many media outlets as a great triumph:
* There are approximately 8 million women-owned businesses nationwide
* Women-owned businesses employ 23 million workers (16% of total US jobs)
* Women business owners account for approximately $3 trillion dollars of total economic impact
Pretty impressive stuff.
As someone who strongly believes that entrepreneurship is an important economic and employment vehicle for both women and the US, I am thrilled to see the growing national economic contribution by women-owned businesses confirmed. Understandably then I was disturbed by one underreported statistic.
According to the study, 87.5% of all women-owned businesses are without employees - perhaps a dramatic majority, but not necessarily a problematic one. Let's not forget that flexibility is the third most motivating startup factor for women business owners, according to a 2006 MasterCard survey, and many such women feel that the responsibility of managing employees would impinge upon that.
What is disturbing upon further examination of these statistics, however, is that the projected average annual revenue of these non-employee firms is $27,000, compared to the average annual revenue for firms with employees of $910,000. This means that 87.5% of women owned businesses are only making 17% of the revenue.
These statistics are problematic because of their implication for the personal income that these women will likely earn. Keeping in mind that average incomes will only be a portion of these reported revenues, these women entrepreneurs fall below the national median income for both men ($45,113) and women ($35,102). If entrepreneurship is to be not only a powerful but also sustainable national economic tool, it must yield sufficient financial compensation.
I recognize that entrepreneurship comes in all shapes and sizes, is driven by varying personal motivations, is often intended as a side gig, and that money is not always the primary objective. I also understand that women are flocking to entrepreneurship to create the professional life they desire and can't get in many traditional corporate settings, one that couples independence with financial reward.
But when women say that they would sacrifice some earnings in exchange for calling the shots, I don't believe that this is what they have in mind.
This revenue disparity does not then mean that all women entrepreneurs should turn their ventures into capital hungry machines with large infrastructure and many employees. And it would be wrong to suggest that women modify their model of entrepreneurship to fit the narrow parameters of the tech and bio-tech institutional funding world, where the likelihood of outside investment and presumably larger revenues are higher. There are many models of entrepreneurship each with its own legitimate financial goal, be it additional income, total economic independence, sustained wealth, or a nest egg.
However, as it stands, the financial rewards of entrepreneurship are lagging for women business owners. And we should refuse to believe that 7 million women will be satisfied with these average revenues for any sustained period of time. If we as a nation want the significant economic contributions they generate to continue, then we need to get serious about supporting them in ways that matter, namely increased access to education and capital.
Education needs to reflect businesses at all stages and a variety of models and outcomes, not just those who fit current funding parameters or are striving to be in the top 5% of small businesses. We need to increase women entrepreneurs' access to peers, mentors, resources, feedback, information and guidance about the business of running a business. Too often entrepreneurship is an isolated experience where folks waste time reinventing the wheel and where business lessons are learned too late. With a 7 million person critical mass, this shouldn't be the case.
And more than just education, women entrepreneurs need increased access to capital, both as debt and equity. Women make up less than 20% of bank funding and less than 10% of angel and venture capital investments. Those with capital should recognize the incredible amount of value in this market and engage with women businesses owners to find creative and lucrative financing options or help them better connect with existing ones.
Currently there are significantly more avenues to fund impoverished entrepreneurs in other countries than there are for the vast majority of domestic women entrepreneurs. Yet, despite all the barriers and absence of support, women entrepreneurs still manage to create $3trillion of economic impact. Just imagine what we can do if we are better resourced.
And women, what can you do? Call yourself an entrepreneur. Be seen and known. Don't hide behind labels such as "consultant" or phrases such as "work for myself." These terms are not untrue but they don't tell the whole picture. If you are self-employed, and have strategic direction and financial control over your venture, you are an entrepreneur! Give yourself the credit you deserve and advocate for the resources necessary to achieve both professional independence and financial reward.