This post originally appeared on the American Sustainable Business Council's website.
Let's face it investing in women-owned businesses translates into wealth creation. Even if the wealth that's created is modest, it means more sustainable household income and healthier communities.
Last year in another ASBC blog "Boosting Women-Owned Businesses Will Boost the Economy", I wrote that small business ownership is a key strategy for wealth creation and helps women close the wealth gap.
"Households with a woman microbusiness owner earn an average of $13,000 more than households with only wage earners. That can be the difference between sending your kid to college and buying a home."
In that piece, I argued for more federal resources to help women business owners succeed. These included; more SBA funding for Women Business Centers, DOL formal recognition and support of self-employment; and more USDA funding for rural development where women owned microbusiness are critical to local economic health.
The good news is that since the post was published, important steps have been made that move us toward that goal; the bad news...we've still got a long way to go.
First, effective October 14, 2015 federal agencies are allowing contracting officers to award sole source contracts, i.e. buying preferences to women-owned companies whose industries have been underrepresented. Government contracting is a popular business growth strategy and sole source contracts open up opportunities for women-owned businesses to scale and grow.
Take Dawn Hall, for example. She owns AttainIt, a company that distributes everything from lab equipment to maintenance, repair and operations products. Government contracts helped the company grow from $13.5 million in sales in 2009 to $29 million in 2015 and doubling the employee count from 13 to 25. The company offers employer-paid health care benefits and more than 35 percent of the AttainIt's employees live in a historically underutilized business zone (HUBZone).
Second, two similar bi-partisan bills were introduced in the Senate and the House. In October 2015, U.S. Senators Jeanne Shaheen (D-NH) and Maria Cantwell (D-WA) introduced the Women's Small Business Ownership Act of 2015. A month later, Representative Suzan DelBene (D-WA) introduced the Women's Small Business Ownership Act (H.R. 4027) in the House. Both bills reauthorize and increase authorized funding for the WBC Program to improve business training and counseling opportunities for women entrepreneurs. The Women's Business Center (WBC) Program authorization increases 28% to $21.75 million, grant awards to WBCs increase to $250,000.
According to the National Women's Business Council as of 2012, almost 10 million women-owned businesses - a 27.5% rate of increase from the last time this survey was done in 2007. Women-owned businesses account for $1.6 trillion in revenue (and increase of 35%) and employ 8.9 million people. Since 2011, African American women-owned businesses grew by 67.5% and Hispanic women-owned businesses grew by 87.3%Growth is the good news. Dig a little deeper and there's still evidence of a significant gender gap.
CFED (Center for Economic Development) looked at business value by gender and found that women own businesses at a lower rate than men. Women-owned businesses in every state also have significantly lower sales on average than those owned by men. In fact, the average revenue of businesses owned by men is three times higher than for businesses owned by women. In industries where women-owned businesses make up more than 50% of the total businesses (administration, education, healthcare, and other services), their receipts range from 8-20% of total receipts.
Clearly, there's a long way to go.
The aforementioned policy efforts are crucial to support growth of women owned businesses and generate more income and wealth. The Women's Small Business Ownership Act of 2015 and increased funding for WBC's help with coaching. A healthy ecosystem for any entrepreneur includes coaching and connections to markets, but also capital. Outside capital is a key indicator in the success of a businesses; less capital means fewer employees hired, lower revenues, and higher failure rates for start-up businesses. Access to capital has a huge gender gap. For every $20 in loans to men, women are loaned $1. Babson College found that if women in the US had the same capital access as men, 6 million jobs would be added to the economy in five years.
ASBC's Working Group for Women has made access to capital a priority and will engage on several policy efforts to promote more access to capital for women as well as minority-owned business. It makes economic sense to invest in women business ownership in this country to boost household income and shore up the middle class.
Claudia Viek is CEO of the California Association of Micro Enterprise Opportunity, and co-chair of ASBC's Working Group for Women.