For the past two decades, I’ve been focused on the success of women-owned businesses. In 2008, I wrote a book called The Girls’ Guide to Building a Million Dollar Business. At the time, fewer than three percent of women-owned firms had reached $1 million or more in revenue. Fortunately, when I wrote the book my business had already crossed that threshold, and I wanted women to understand the fundamental business principles needed to achieve that same success.
Here we are five years later. While the number of women-owned businesses continues to grow, nearly two-thirds are struggling with annual revenues of $50,000 or less.
Why do female entrepreneurs lag behind?
Why do female entrepreneurs continue to lag significantly behind men? In my opinion, it’s all about money. First, when women start businesses they typically use their personal funds, credit cards, or loans from family or friends. Only a small percentage of female entrepreneurs seek start-up capital.
More importantly, women business owners tend not to seek growth capital for their businesses. When they do, their success rate falls well below men. According to a recent survey from Biz2Credit, women-owned firms have higher operating costs, slimmer margins, and lower credit scores than businesses owned by men. Therefore, it makes it difficult for them to find the capital they need to grow their businesses. The Biz2Credit research shows that loan approvals for women owned firms are 15 – 20 percent lower than male-owned companies.
3 strategies for getting ahead
So what do women business owners need to do to build million-dollar plus organizations? Here are a few suggestions.
Focus on the money. Despite the strides women have made in business, there is an underlying sense that it’s unfeminine for women to aggressively strive to make money. When I’ve worked with aspiring female entrepreneurs, they often tell me they aren’t interested in the money. Really? Then why go into business, I ask. Women need to be more focused on growing their bottom line profits without feeling ashamed to admit it.
Be a business leader, not a den mother. Women tend not to think of themselves as a CEO, but more like a hands-on member of the team that should be involved in every aspect of their business. Their employees become like family members to them, and therefore decisions are frequently made based on emotions as opposed to business needs. A growth focused organization must have a leader that can step back from the day-to-day details and engage other people to do the work. You have to let go to grow. Growth organizations need leadership that can build a dynamic team.
Educate yourself on funding options. Women aren’t seeking equity capital at the same rate as men. Various expert calculations find women receive less than 10 percent of all equity financing. In part, that number has to do with bias, but also it’s the result of a lack of understanding of this type of financing. Organizations such as Springboard Enterprises and Goldenseeds are working to change this scenario by educating women on how to position their businesses to attract equity capital. It’s often this type of funding that allows a smaller company to accelerate growth.