Fighting Tooth and Nail: What Is Still Holding Today's Female Business-Owner Back

05/14/2015 11:34 am ET | Updated May 14, 2016

Successful, driven women are entering the small-business world in droves, but something is still holding them back. How can it be that women own 10.6 million businesses in the United States, employ 19.1 million workers, and account for $2.5 trillion in sales [1], yet are far less likely than their male-owned counterparts to survive past five years or surpass $50,000 in gross annual gross revenue? [2] The answer, it appears, is painfully simple and sadly, not new (or popular). Women and men are different. It is vitally important to accept the distinctions between gender preferences and behaviors without accepting discrimination or gender-stereotyping in order for women to continue to grow in the small-business community.

According to analysts at Ernst & Young, women-owned businesses make up nearly half (46 percent) of privately-held companies in the United States. However, about 75 percent of those companies make substantially lower profits than their male-owned, exact counterparts. Furthermore, the survival rate of women-owned firms tends to be about three percent lower than that of male-owned firms according to U.S. Census Data. So what are women doing -- or failing to do -- in their small businesses that their male counterparts are doing in a more successful manner? I've isolated three distinct themes that show up again and again when dealing with this topic:

1. Female business owners cannot afford to be "timid"

Reticence is a typical trait of many new small-business owners and entrepreneurs of both genders, and I would posit that, while nearly impossible to document, this trait plays a dominant role in the demise of the majority of small businesses that fail. This reticence prevents many new business owners from simply telling others -- be they potential investors, would-be clients or even new hires -- exactly what the business-owner needs in order to be successful. The result is that the business does not get adequate support from those best-positioned to support it, the owner (the only one who knows exactly what is needed) ends up overwhelmed trying to do it all, and the business folds.

Interestingly, this is of particular import to female business owners because women tend to project success onto luck, help, or hard work according to Facebook COO Sheryl Sandberg, who said in a recent TED talk that while men will cite themselves as to why they achieve success, women have a hard time acknowledging our own roles in our own success. "If you ask men why they did a good job, they'll say 'I'm awesome," she explained, adding, that a woman, when asked the same question, will say, "Someone helped them; they got lucky, [or] they worked really hard." Since every business interaction is, in large part, a "pitch" to persuade someone to do something, be it work for you, sell or buy your product, or promote your brand, because women are less likely to credit themselves for their successes they may also feel less confident exercising a hard "close" to make the things that rely on others to happen actually happen. It seems like a simple problem to fix, but it is important to actively remember how fortunate anyone with whom you choose to work is to be involved with you and your business, and they are likely to respond positively if clearly told what you need from them.

2. We must "act big" in order to grow

According to the U.S. Economics and Statistics Administration, women-owned businesses are less likely to have additional employees, more likely to have started up (and continued operations) on extremely limited capital, and be run by women working fewer hours, on average, than their male counterparts. Furthermore, women tend to start businesses in industry sectors where firms are typically smaller, such as healthcare, social assistance, and " professional, scientific, and technical services." Because our businesses tend to be smaller, it follows naturally that our growth is smaller as well in many -- albeit certainly not all -- cases.

Does this mean that women need to change their focus when it comes to establishing a balance between work and family (something that nearly everyone agrees plays a larger role for women in the workforce than men)? Does it mean that we need to branch out into other sectors simply for the sake of branching out? Of course not! These are just numbers and statistics. What we should be learning from them is not that we need to change our expertise or priorities; we should be learning that we need to be acting with confidence and, when appropriate, taking necessary risks like adding employees or seeking more working capital in order to continue to grow. 17 percent of female-owned companies will never have any employees. It is indisputable that in at least some of these cases, the business would grow and thrive with the additional support.

3. Women-owned businesses lack effective social networking strategies

When you first read that, you probably rolled your eyes. Every gender stereotype out there tells us that women should be better at networking than men. However, some researchers speculate that women are less likely to allow their social networking and their work-related networking to overlap, unlike men who, according to a 2009 study published in Small Business Economics, are more likely to navigate business and investment social networking more aggressively and with greater success particularly when it comes to raising capital. While there is limited research on this topic, it appears that female-owned businesses are far less likely to show tangible benefits from social, business-related networking (e.g. investment funding or professional support) than male-owned businesses.

The good news is that this is probably an easy issue to solve. Most women report in many studies across all spectra of business and investing that they "lack confidence" when it comes to business, money, and investing. However, when one reads the fine print in these studies and reports, what this actually translates to is that women are far more risk-averse than men and do not make financial decisions of any sort without a lot of information and careful consideration.

That's why their investments, when they make them, tend to perform far better than their male counterparts'. To effectively remove this networking issue from your female-owned business, you simply need to separate the actions associated with networking from the association of risk. After all, putting "hooks in the water" so that you have options for funding, support, or leveraging useful professional contacts later is not the same thing as making a firm decision to implement any of those options. Networking is about options, and effective business/social networking is about establishing options rather than making firm, nonnegotiable commitments.

When dealing with gender distinctions, we, as female small-business owners, must remember that acknowledging a difference does not mean that we are accepting a handicap. In many cases, female-owned small businesses are thriving, and simply because we do things in a different manner than might be considered "traditional" or "conventional" in a still-largely male-dominated society does not mean that we are doing them incorrectly or in an inferior manner. Observing our gender differences and then leveraging them to our professional advantage when appropriate truly is the key to truly "taking over" the small-business world.

[1] Center for Women's Business Research, December 2004.
[2] Fairlie, Robert W., and Robb, Alicia M. "Gender Differences in Business Performance: Evidence from the Characteristics of Business Owners Survey." February 2009.