Why Are Women-Owned Firms Smaller Than Men-Owned Ones?

The phenomenal growth of women-owned businesses has made headlines for three decades—women consistently have been launching new enterprises at twice the rate of men, and their growth rates of employment and revenue have outpaced the economy.

So, it is dismaying to see that, despite all this progress, on average, women-owned business are still small compared with businesses owned by men. And while the gap has narrowed, as of 2008—the latest year for which numbers are available—the average revenues of majority women-owned businesses were still only 27% of the average of majority men-owned businesses.

There are those who will say that these numbers substantiate what they always knew: Women just don’t have what it takes to start and run a substantial, growing business. But I don’t buy that: More than a quarter of a million women in the U.S. own and lead businesses with annual revenue topping $1 million—and many of these businesses are multimillion-dollar enterprises. Clearly, many women have the vision, capacity and perseverance to build thriving companies.

So what’s holding back so many women business owners?

I have spent decades conducting research, studying the data and interacting with all the players involved—entrepreneurs, researchers, educators, bankers and others. And I am convinced that the problem is twofold. First, you have women’s own self-limiting views of themselves, their businesses and the opportunities available to them. But equally problematic are the stereotypes, perceptions and expectations of business and government leaders.

Understand: I’m not arguing that all entrepreneurs, all bankers, all policy makers are guilty of such limited thinking. But I’ve talked to enough of them, and studied enough of the research, to know that these problems are pervasive, and they are having a big impact—on both individual entrepreneurs and in turn on the health of the overall economy.

In that spirit, here’s a closer look at how I believe these factors are preventing so many women entrepreneurs from fulfilling their potential—and what can be done to prepare them to accelerate business growth.

Where the Problems Are

IT STARTS WITH THE GOALS:

The value of setting high goals for growth is not just a motivational myth. Research shows that the only statistically significant predictor of business growth is not the industry, size of business or length of time in business. It is the entrepreneur’s goal for growth.

But research also shows that the differences between women and men entrepreneurs begin with their own reasons for starting a business. Men tend to start businesses to be the “boss,” and their aim is for their businesses to grow as big as possible. Women start businesses to be personally challenged and to integrate work and family, and they want to stay at a size where they personally can oversee all aspects of the business.

That mind-set is only reinforced by the training many women entrepreneurs get—at women’s business centers, for instance, or seminars for aspiring women business owners, or at adult-education courses at community colleges. This training targeted directly at women too often tends to ignore planning for future growth, focusing instead on business start-up planning, marketing advice and personal-budget planning to ensure the new entrepreneur has enough cash to carry her until the business gets going.

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