Can women business owners expect to generate the same or higher profit as male owners? How has COVID impacted business outcomes?
Let’s take a look at some facts about why female business owners face unique challenges, along with practical ways to offer support.
This is part 2 in a series about the realities of being a female business owner, and how they can achieve success in the future.
Check out a summary of the 25 challenges & opportunities: Facts About Women-Owned Businesses
Businesses that are owned by women are structured and managed differently than those owned by men. Here are facts about the rise in female business ownership, how much impact minority owners have, and which strengths and weaknesses are common in women owners.
8. Problems with Marketing, Capital, Employee Retention
In a 2021 survey by Guidant Financial of over 2,400 small business owners, female owners stated that the 3 most difficult problems to overcome include:
- maximizing marketing and advertising (24% of respondents, significantly higher than in 2020)
- acquiring sufficient capital/cashflow (17%, which is lower than in the previous 3 years)
- recruiting and retaining employees (15%)
Learn more about the Employee for a Day concept.
9. Decline in Women-Owned and Black & Latinx/Hispanic Owned Businesses Due to Pandemic
Between February and April 2020, the number of small business owners in the US dropped from 15 million to 11.7 million (a 22% decrease). During that 3-month period:
- Women-owned businesses declined by 25%, compared to 20% of small businesses owned by men.
- Black-owned small businesses declined by 41%, more than any other racial or ethnic group.
- Latinx/Hispanic-owned businesses declined by 32%.
10. Impacted but Not Stopped by COVID
Over 21% of women-owned businesses lost revenue due to the COVID-19 pandemic, 12% temporarily closed, 11% reduced their budget and 9% cut their personal wages.
When asked whether they expected their business to survive the COVID pandemic, 77% of female owners said they felt confident they would succeed. While 40% of owners felt “somewhat to very unconfident” about the business landscape, 44% felt the exact opposite: “somewhat to very confident” about the landscape post COVID.
In fact, 12% even reported a positive effect during the pandemic with increased revenue, expanded business, hiring more employees, and increased wages.
11. Smaller Enterprises and Lower Profit
A report by the UN Secretary-General’s panel on Women’s Economic Empowerment shared a common constraint in opportunities for female business owners worldwide. The report found that Women-Owned Enterprises (WOEs) are generally:
- Smaller (in scale and production)
- More likely to be home-based
- In low-profit industries that have fewer barriers to entry
- Financially disadvantaged with a lack of access to credit, resources, and assets.
As a result, companies run by women tend to have
- lower profit margins,
- lower returns on capital, and
- perform worse than firms owned by males.
This seems to be due to the lack of collateral and a “finance gap” that prevents women owners from growing their business as fast as male owners’.
11. Females Less Optimistic About Future Success
A 2019 survey by Bank of America revealed that
- 84% of female small business owners expect year-over-year revenue growth,
- 73% plan to expand their business,
- 62% expect a revenue increase, and
- 25% plan to hire over the next 12 months.
However, by July 2020, a MetLife and U.S. Chamber of Commerce report indicated that female small business owners are less likely to expect future success in the coming year compared to male owners:
- Revenue: Less than half of female owners believed their revenues would increase in 2021, while 57% of male owners believe so.
- Investments: Around 1/3 of women planned to increase the investment in their business, compared to 39% of men.
- Staffing: 36% of male-owned businesses expected to add more staff, compared to 24% of female-owned businesses.
12. Women Perceive their Business Health Differently Than Men
Female business owners had a significant change in their self-ranking of business health.
Pre-pandemic, 67% of male owners ranked their company’s overall health “good” and by July 2020, 62% still agreed. In contrast, while 60% of female owners ranked their company’s health as “good” pre-pandemic, only 47% agreed with this statement in July 2020.
This 13% dip from March to July 2020 is significantly higher than the 5% dip for men. It also demonstrates a 15% difference between women’s perception of their current business health compared to their male counterparts.
In Part 3, we’ll be diving into the finances of female owners: their typical annual sales, employer or non-employer structure, which industries out-pace male owners, and how many million-dollar companies are owned by women.
Want to see what your business could do with higher revenue and profit margins? Find out more about how we can help.
If you’re ready to talk, contact us so we can discuss your situation.