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

Excerpts from an excellent article by Sharon Hadary in 5/17/10 issue of The Wall Street Journal. Definitely worth a read.

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

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.

ACCESS TO NETWORKS: Networks are a vital source of business and industry knowledge, leads on contracts, and access to decision makers in finance, purchasing and the community. Based on focus groups and seminars and my own personal experience, we find that most women don’t have the connections for credible introductions into industry associations, chambers of commerce, venture-capital groups and other key networks. When women venture into diverse networks, they too often are not taken seriously and frequently are shut out of conversations and deals.

The most successful women business owners “think big” from the start. Training and coaching for women entrepreneurs must stress the importance of laying the foundation for business growth from day one, regardless of the business owner’s current plans for growth.

Training must include more about business finance, including how, when and why to use credit. The most successful women business owners take the initiative to learn about business finance—and give priority to building relationships with bankers—before the need for capital is critical.

In other words, learning to expand a business isn’t only about being inspired, but also about learning the all-important how-to’s. It’s about teaching women what works and what doesn’t work.

NETWORK, NETWORK, NETWORK: Women business owners must expand their networking beyond community and women’s entrepreneurship networks. The most successful women business owners join multiple, diverse networks to learn from their industry contacts, meet customers and develop connections to expertise. Having a critical mass of women in these networks helps women gain credibility, so women should reach out to other women and bring them into the networks.

MEASURE IT: In business, if you cannot measure it, it is not real!

THINK EVEN BIGGER: Although the size gap is narrowing between men- and women-owned businesses, at the current pace it will take many decades for that gap to close. To speed things up, I believe we need to do more than simply help women plan for business as usual. We need to dramatically transform women’s concepts of the future of their business enterprises—to move them into a place where they have the vision and the confidence to catapult their businesses to a whole new level.

To do this, we have to show women how to embrace change; to be trend-setters rather than simply react; to innovate beyond expectations; to develop global integration; and to practice social responsibility. We need to help them identify ways to make their enterprises scalable and to build teams of talented people for where the enterprise should be in five years, not just today.”

~ Sharon Hadary is the former and founding executive director of the Center for Women’s Business Research. She now is an adjunct professor at the University of Maryland University College and consults on women’s issues.

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