Last month, we looked at the current ecosystem of African-American-owned business in honor Black History Month. And this month, in honor of International Women’s Day, we are exploring the state of women-owned business: the strides and continued challenges.

Similar to people of color, women face their own unique challenges when it comes to launching a business. The main hurdle is getting the financing they need. Just as women employees seek to close the wage gap within traditional employment, women business owners are fighting to close the investment gap so they can receive the same access and amounts of financial backing as their male counterparts.

In order to forecast the future of 2019 and beyond, let’s look at the latest statistics and trends reported among women-owned businesses. We’ve sourced the following data from two recent reports, the 2018 State of Women-Owned Business Report by American Express, and SCORE’s Megaphone of Main Street: Women’s Entrepreneurship, Spring 2018 report.

The rate of Women-owned businesses is on the rise

  • As of 2018, there are 12.3 million women-owned businesses in the U.S. Looking back 3.5 decades to 1972, there were only 402,000 women-owned businesses comprising just under 5% of all businesses.
  • Today, women own 4 out of every 10 businesses in the U.S.
  • From 2007-2018, the number of women-owned businesses surged by a whopping 58%/ Meanwhile, all businesses increased only 12%.  
  • Last year, more than 1,800 new women-owned businesses were launched every day. Women of color founded 64 percent of those new businesses.
  • Women are more likely to start a business than men.
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Take a closer look at what these numbers mean:

Despite challenges, such as lack of access to capital, women are starting business at a much higher rate than men. If the investment gap closes, and women have equal access to business capital as men do, it’s quite possible that women would become the majority within the small business owner ecosystem.

Women-owned businesses are contributing a larger economic impact on the overall economy

  • Women-owned businesses more than 9 million people, which comprises 8% of the total private sector workforce.
  • Women-owned businesses generate $1.8 trillion in revenue. However, this figure is just 4.3% of the total private sector revenue.
  • From 2007 – 2018, the employment level produced by women-owned businesses rose 21%, while employment for all businesses declined by nearly 1%.

Take a closer look at what these numbers mean:

While the number of women-owned businesses is growing at a fast clip, their impact on the overall economy isn’t keeping pace with that growth. From 2007 – 2018, the employment level of women-owned businesses only rose 2 percent, while their revenue contribution increased less than .5%. This means that women-owned businesses per capita are growing in number but struggle to scale to become larger and win more market share.

Women of Color are Growing Businesses the Fastest

  • In 2018, women of color comprised 47% of all women-owned businesses, employed more than 2 million people and generated more than $386 billion in revenue.
  • In the same time period, businesses owned by women of color grew by 163%

A closer look at what these numbers mean:

Women of color are not only achieving the fastest rate of growth within women-owned businesses but are also growing the fastest among the overall small business owner ecosystem. For more statistics on African American women business owners, see our article here.

Black Women Smiling with head phones

Access to Financing & Revenue is a Challenge

  • 25% of women were likely to seek financing for their business compared to 34% of male business owners. More women use credit cards to fund their businesses, while men use equity investors for funding.
  • 88% of women-owned businesses generate less than $100,000 in revenue, so these businesses aren’t scaling or experiencing much growth.
  • Only 1.7% of women-owned businesses generated more than $1 million in revenue. While it’s a modest number, it’s still a large increase of 46% over the past 11 years.

A closer look at what these numbers mean:

Just as women experience a wage gap compared to men when it comes to employment, they also experience an investment gap when it comes to accessing funding. If women were given equal access to investment and did not have to rely so heavily on credit, it’s likely that they would be able to scale their businesses at a far greater rate and have a much bigger impact on the overall economy when it comes to their revenue.

Most Popular Industries for Women-Owned Businesses

  • Half of all women-owned businesses are concentrated in three industries: “other services” (e.g. beauty salons and pet care), healthcare and social assistance, and professional, scientific and technical services.
  • Women-owned businesses employ the most people in healthcare and social assistance (20%), accommodations and food services (16% ) and administrative, support and waste management services (13%).
  • The growth rate in the number of women-owned firms between 2007 and 2018 increased the most for these five industries: utilities (151%), other services (126%), construction (94%), accommodations and food services (85%) and administrative, support and waste management services (70%).

A closer look at what these numbers mean:

One of the most promising statistics is that one of the most popular industries for women-owned businesses is professional, scientific and technical services. There is a huge debate in the STEM (science, technology, engineering and math) sector about the under representation of women. Women are much less likely to study math and tech, hold roles in STEM and land executive-level or managerial positions in the sector. Interestingly, women-owned businesses are creating their own opportunities in the field, and if the tech industry doesn’t act fast enough to level the playing field, it’s likely that we’ll see even more growth of women-owned businesses in the STEM sector.

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What’s Ahead

The above data shows that women business owners have made a lot of progress, especially in the last decade. Women of color are also making huge contributions to the ecosystem of female-owned businesses. We can interpolate from the data that women are creating opportunities for themselves in the STEM industry, which is renowned for under-representing women in traditional employment settings.

Given the tremendous growth in numbers of women-owned businesses over the last ten years, we can expect to see a continued increase in 2019 and beyond. But it’s not enough for the numbers alone to grow; women owned-businesses have not seen much growth in the past decade in terms of revenue and their rate of employment. This means while new businesses are being created, they aren’t growing or scaling. If the small business ecosystem removes some of the unique barriers that women face, specifically access to investment, then we should expect to see women-owned businesses scaling at a faster rate and having a larger overall impact on the economy in terms of revenue and employment.

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