Women Business Enterprises Thrive Despite Low Rate Of Outside Investors

Women have made considerable gains in the business world in the last few decades. As a recent WPO post highlighted, women now represent the majority of the workforce, owning or running nearly 46 percent of all businesses in the U.S. So why is it that woman-business enterprises (WBEs) only take in a fraction of the profits?

A major reason for this discrepancy has to do with lack of outside investments. According to the National Venture Capital Association only 4 to 9 percent of companies receiving venture-capital financing are women-owned. This statistic is consistent with a 2010 study by the Chamber of Commerce, which found women are much more likely to self-finance their businesses than their male counterparts who rely heavily on outside investors. On average, new WBEs start their life with only 64% of the capital of male-owned firms.

Even if new WBEs get off the ground, this lack of outside investments puts them at an immediate disadvantage.

“Women do not have a network of financial mentors upon whom they can rely nor the personal history of executive leadership that institutions look kindly upon,” says WPO member Collette Liantonio, President of Concepts Video Productions, Inc. “It’s a Catch 22.”

Yet many women owned businesses strive in spite of the lack of outside capital. Last spring, the Women Presidents’ Organization, in partnership with American Express OPEN, ranked the 50 fastest growing women owned businesses in the United States. The majority of the businesses started off self-funded (60%). Others relied on a mixture of their own savings, as well as loans from the bank, loans from friends/family, and an extended line of credit. Only 8% got their start from private investments.

“Female entrepreneurs, like their male counterparts, find it difficult to obtain bank financing to fund expansion of their businesses.  This is particularly true for those businesses that do not have traditional tangible assets of real estate, equipment or inventory to borrow against,” said WPO member Susan Rector, who is a Partner at Ice Miller LLP, in Columbus, Ohio.

However, various studies show it pays to invest in women. A recent Dow Jones study entitled “Women at the Wheel” found “venture-backed companies that include females as senior executives are more likely to succeed than companies where only males are in charge.” The report also concluded that “companies have a greater chance of going public, operating profitably, or being sold for more money than they’ve raised when they have females acting as founders, board members, vice-presidents, or C-level officers.”

This is an encouraging claim for many women business owners looking to bring their enterprises to the next level.

Advice for Business Owners to Sleep Through the Night During Tough Times

When the economy is struggling, business owners may find it harder to get a good night’s rest. Thoughts and ideas with how to deal with tough times can keep you stirring. WPO Facilitator Laurel Delaney recently interviewed 20 presidents of small businesses to find out what allows them to sleep through the night. The following are some tips that they shared:

>Put in a good day’s work. Being productive at work will make you feel like you have accomplished what you set out for each morning. Stay focused and committed to growing the business, so others are confident in you as a leader.

>Connect with upbeat, enthusiastic, high-energy people. Surround yourself with people who have similar business views and can offer solutions to problems. It can help your mood and productivity to be around happy, smiling people.

>Communicate with the executive team and employees as often as possible. Let them know what is going on, and steps you are taking to keep the company strong. Seek input from all employees, you never know who may come up with a new idea.

Click here to read more of Laurel’s article from OPEN Forum by American Express OPEN.

Stay Ahead of the Curve

In an economic downturn we are forced to examine businesses in a different light. To help you stay ahead of the curve, Keith McFarland from BusinessWeek offers three tips on how to deal with this downturn and even prosper in it.

1. Get rid of deadwood. Make your business efficient by keeping the people who help it and pruning those who do not.
2. Focus your resources. This is your opportunity to look at the activities or endeavors that add the least to your business and cut them out. Focus your resources on the things that add the most. I thoroughly agree with this tip, too often businesses take on too much and lose their focus. See this slow-down as an opportunity.
3. Go Shopping. Look for the deals, often in a downturn you can find deals on business services, facilities and equipment. You may also find bargains in great employees who are in businesses not as equipped as yours.

My point in this post is to motivate. There are ways to succeed and prosper in this tough time, you just have to find the right fit for your business and allow your peers who have experienced it help you.