During a Discussion about Twitter Spaces Organized by the Bipartisan Policy Center (BPC) and the US Chamber of Commerce yesterday to celebrate National Women’s Small Business Month, two participants noted that the challenges women entrepreneurs face are “unique.”
“Women entrepreneurs often have a lot of responsibilities related to childcare and caring for parents, which are often unique,” said Holly Wade, executive director of the National Federation of Independent Business’s research center. Her observation was shared by other participants; the nature of those unique challenges is evident from data on women-owned companies.
In recent weeks, BPC . published statistics offering a look on different dimensions of the state of women’s property. Here, at the end of National Women’s Small Business Month, is a round-up of additional data that outlines trends in female entrepreneurship and where they may lead.
Younger but lower entry?
According to the Census Bureau’s data Annual Company Survey (ABS), a quarter of female-owned employer companies have been in business for at least 16 years. That’s the oldest age range tracked in the survey. For men, that share is 34 percent. In other words, three in four female-owned employer companies have been in business for less than 15 years.
At the same time, however, percentage of new entrepreneurs followed by the Kauffman Foundation with Census data is consistently higher for males and the gap is not narrowing. The average percentage among women increased from 0.23% (230 new entrepreneurs per 100,000) over the period 1996-2014 to 0.26% since then. Women recorded their highest percentage in 2020, at 0.30%. Yet the gap with men has not disappeared and has even widened slightly. Over the period 1996-2014, the average difference was 0.14 percentage point. That rose to 0.16 points from 2015 to 2021. At first glance, that’s a small difference, but it translates into 20 new entrepreneurs per 100,000 men every year over that seven-year period. Spread it across the entire population of 100 million men in the United States, and that’s a big gap.
These data points paint a contradictory picture: women-owned companies are generally younger and smaller than men’s, but women have a lower entrepreneurial rate. It is always dangerous to mix datasets (even within the same statistics agency!) but this could indicate that a healthy proportion of new female entrepreneurs could transition to employer status. (The percentage of new entrepreneurs captures both employers and non-employers.)
Women are much more likely than men to have a company without an employer than employers. While 21% of employer companies are owned by women, they own 42% of non-employers. The proportion of men’s companies with more than 100 employees is almost double that of women’s companies.
These differences are important because non-employers keep reporting pandemic-related financial challenges at a faster rate than employer firms and a majority have not seen revenues return to pre-pandemic levels. Non-employer companies in general are also less likely than employer companies to have their funding applications approved.
Persistent funding gaps
The difference between employer and non-employer may explain the funding gap between male and female entrepreneurs. In 2020, during the COVID-19 pandemic, 69 percent of women-owned businesses received less than $100,000 in government support. Meanwhile, 38 percent of men-owned businesses received more than $100,000 in government aid, compared to 31 percent of women-owned businesses.
That could be a demand-side problem — if women-owned companies are smaller and younger, they might have sought smaller amounts of funding. In the most recent Women-Owned Business survey Biz2Credit found a widening gap between male and female companies in average earnings and average loan size. Women were responsible for a slightly higher share of loan applications in 2021 and their average loan amount was 34% higher. Still, loans received by male-owned companies were 67% larger in 2021, a much larger gap than in 2020 (when they were 33% larger).
“Reason for optimism”
During the Twitter Spaces discussion, all participants expressed their optimism about the future of women’s entrepreneurship. Some of that is inherent in starting and running a business: “Women entrepreneurs are naturally optimistic,” said Sandy Clitter, a business owner who spoke on behalf of the National Association of Women Business Owners. Other speakers pointed to the higher rates of overall business creation as being women-driven and to pandemic-induced increases in the digitization among small businesses.
Addressing the “unique challenges” facing female entrepreneurs and future female entrepreneurs is a priority if that optimism is to translate into business growth and job creation. Time, as Wade and Clitter both noted, is a scarce commodity for any business owner, but especially for women with additional demands such as care. Time constraints create challenges in technology adoption, government bond compliance, and other areas. So if there’s a big leverage to help female entrepreneurs and future entrepreneurs, it can be to find ways to ease the time pressure. Sounds fantastic (who doesn’t need more time?) but this could be done through support for paid time off, childcare and reduced red tape in areas such as hiring, the use of independent contractors and (if relevant), government contracts.
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