What Women Business Owners Can Do Today to Make Greater Gains
Women-owned businesses are rapidly transforming the business landscape. A recent Wells Fargo report highlighted an encouraging trend: the number of women-owned businesses is not only increasing, but also growing at a faster pace than those owned by men.
But the “good news” can be deceiving. Despite this growth, women-owned businesses often lag in scale and financial backing compared to their male counterparts. This gap is even more pronounced for businesses owned by women of color.
The State of Women-Owned Businesses
Wells Fargo statistics reveal that women own only 39.1% of all new businesses in the United States. These businesses typically face unique challenges that hinder their growth potential. 81% generate less than $100,000 annually in revenue. In addition, according to WBENC, most women-owned employer firms (82.2%) employ fewer than ten workers.
Revenue Discrepancies: Women-owned businesses generate 70% of the revenues of male-owned business. Women-owned businesses generate average annual revenues of $475,707 compared to male-owned businesses, which generate average annual revenues of $675,643.
The average salary of the female owner is $57,712 while the average salary of the male owner is $108,067. This average salary for the women-owned business owner is 54% of the salary of the male-owned business owner.
Women-owned businesses are generating 30% less revenue than male-owned businesses – and their owners earn 46% less salary than their male counterparts. Furthermore:
- 80% of women-owned firms generate less than $50,000 in annual revenues
- 13.3% generate $50,000 to $250,000
- 4.3% generate between $250,000 and $1 million annually
- The remaining 2.4% generate more than $1 million annually
Employment Discrepancies: According to Wells Fargo, women-owned businesses generally have fewer employees compared to the average small business, indicating limited operational scale and growth capacity. Specifically:
- 12% of women-owned businesses have no employees
- 80% of women-owned businesses have one to 19 employees
- The remaining 8% have 20 or more employees.
By comparison, small businesses overall have an average of 16% with no employees, 78% with 1 to 19 employees, and the balancing 6% have more than 20 employees.
Funding Disparities: According to Forbes,[JH1] women-owned enterprises receive only 33 percent of all available business funding, with 25% of the women who apply being denied a business loan. In comparison, 19% of male business owners are denied business loans.
Today, there are ever-increasing numbers of funding initiatives that are women-owned or targeted to women-owned businesses. However, women-owned businesses are far less likely to secure lending for business growth.
Bridging the Gap
The huge disparity between men and women on both the revenue and employee statistics is rooted in primarily these issues:
- Mindset: Women business owners often pride themselves on having a debt-free business. But debt plays a crucial role in business growth, providing the funds needed to make investments into the business. Growth-minded business owners view debt not as a burden, but as a tool for growth. The strategic use of debt can help scale operations, expand market reach, and enhance business capabilities.
- Strategic Financial Planning: Without a strategic plan and a clear financial forecast, it’s challenging to secure funding. Women business owners need to understand and articulate their financial needs and how they align with their business growth plans.
- Financial Preparedness: Many women business owners do not maintain financial practices necessary to be considered for funding. This includes having well-prepared financial books and regular financial reporting.
- Funding Disparities: The underrepresentation in funding is not due to a lack of initiatives, but often due to readiness and approach towards financial management
Role of a CFO in Empowering Women-Owned Businesses
A Chief Financial Officer (CFO) can be instrumental in turning these statistics around. By providing expert financial management, a CFO can help women business owners in several ways:
- Financial Accuracy and Transparency: CFOs ensure that financial records are accurate, complete, and transparent, which is crucial for making informed business decisions and for presenting to potential funders.
- Strategic Financial Guidance: CFOs assist in strategic planning and align financial goals with business objectives, helping owners understand the implications of their financial decisions.
- Navigating Funding Options: CFOs can guide business owners through the complexities of various funding options, from lines of credit and asset-based lending to venture capital. Learn more about which funding option might be best for your business.
Charting Your Next Step in Growth
Women-owned businesses have made significant strides, reshaping the business landscape with increasing numbers and accelerated growth rates. However, the journey towards substantial revenue, team expansion, and broader impact is still fraught with challenges. To elevate their enterprises to the next level, women business owners must address their apprehensions about debt and embrace the strategic use of financial tools to fuel growth. Overcoming external barriers such as funding disparities and internal hesitations about financial risk is essential. By fostering financial empowerment and adopting proactive business finance strategies, the potential for growth and profitability is immense.
Engaging with a Chief Financial Officer (CFO) can be transformative, providing the expertise and support needed to navigate these challenges effectively. With the right guidance, women entrepreneurs can ensure their businesses not only survive but thrive in today’s competitive market. This commitment to strategic financial planning and openness to investment will unlock new opportunities for innovation and success.
