Studies raise the question of what prevents the growth of vital women-owned companies
CHICAGO (MainStreet) -- Last week, the Small Business Administration celebrated its annual Small Business Week, a combination of awards ceremony and how-to session for snagging federal contracts. One goal of the gathering was to highlight businesses that had grown thanks to SBA financing or mentoring, and in an interesting twist the top awards all went to female-owned companies.
The biggest honor, 2012 National Small Business Person of the Year, was given to Victoria Tifft, president and CEO of Clinical Research Management in Hinckley, Ohio. The company, which runs clinical drug and vaccine trials for the government and commercial customers, was founded in 1994 and now has more than 300 employees and annual revenue of $40 million.
The top awards for federal contractors also went to women-owned businesses. Denco, a construction and facility management firm based in Las Cruces, N.M., was named Prime Contractor of the Year, and Management Solutions, a project management services company in Knoxville, Tenn., was honored as Subcontractor of the Year.
The fact that women start and operate successful companies is hardly breaking news. But the SBA's recognition of these particular businesses is a timely reminder that gender has no impact on entrepreneurial success.
Or does it? A number of studies have shown there are still distinct, statistically significant differences between companies owned by women and those owned by men. The question is: Do those differences matter?
A report from the Ewing Marion Kauffman Foundation, Overcoming the Gender Gap: Women Entrepreneurs as Economic Drivers, examined the lack of female entrepreneurs in high-growth industries such as science and technology. Overall, about one-third of start-ups are founded by women, and that number is significantly less in technical fields.
Does that matter? Yes, because it has implications for the broader U.S economy. If more qualified women used their expertise to start businesses in high-growth fields, there would be more skilled, higher-paying jobs available for American workers.
Instead, women with high-level science or tech credentials tend to take positions within large corporations or universities, rather than going off on their own, says the report's author, Lesa Mitchell: "Women have made great strides in breaking through the glass ceiling. Yet there seem to be glass walls, as it were, that keep them from breaking out laterally."
The State of Women-Owned Business, a report commissioned by American Express(:AXP) OPEN last year and updated this spring, also found that female-led firms may be growing in number, but they're not necessarily growing in size.
There are now more than 8 million American businesses owned by women, generating more than $1 trillion in revenue. From 1997 to 2012, when the number of new businesses grew by 34%, the growth rate for women-owned businesses was 54%. Only about 2% of women-owned firms have 10 or more employees and/or $1 million or more in revenues, though -- percentages unchanged for the past 15 years.
Why? Are subtle forms of discrimination preventing women from getting loans or investments that would take their business to the next level? Or do many women choose to forgo growth beyond a certain point to maintain a work-life balance?
Consultant and public policy expert Julie Weeks, whose company Womenable prepared the report, says it's important to remember that "growth" is hardly a one-size-fits-all concept. "There are a lot of different paths to growing a business," she says. "We often have a shoot-for-the-stars mentality: Either you grow fast or you're not worth paying attention to."
If you keep in mind that 90% of women-led firms have no employees, a company that hires even a handful of workers is already making an above-average contribution to the economy. "We set people up for failure if we define success as having more than $1 million in revenue," Weeks says.
Weeks' research has shown that women-owned companies on average have a higher rate of growth than male-owned businesses up until the 100-employee mark. The struggles some female entrepreneurs face in expanding beyond that may be in part due to a lack of mentoring and role models.
"Most business development support is for people just starting up," Weeks says. "Support organizations should pay more attention to businesses at a later stage of development. We need to legitimize business owners who want to grow but in a more organic way."
Encouraging and mentoring female entrepreneurs is not only about supporting gender equality (although that's a worthy goal). Increasing the overall number of business owners in the U.S. benefits all workers -- no matter their sex.