State of Women-Owned Businesses

Women in the United States are creating businesses at twice the rate of men, and research shows they?re upbeat about prospects for their companies even though they see the economy remaining in the doldrums for several months. In the 10 years ending early 2011, the number of women-owned businesses in the United States grew by 44 percent and those businesses added 500,000 new jobs to an economy that sorely needed them.

According to the Center for Women?s Business Research, women-owned firms have an economic impact of $3 trillion annually, which translates into the creation and/or maintenance of more than 23 million jobs. That?s 16 percent of all U.S. jobs. More impressively, female-owned small businesses are projected to create about one-third of the 15.3 million new jobs produced by 2018. The center?s research in 2009 showed women owning nearly 30 percent (28.2 percent) of all businesses in the country. Although those businesses generated only 4.2 percent of all revenues, the center found that the 417 women-owned U.S. businesses they surveyed were directly responsible for the purchase of $59 million worth of goods and services from other businesses and suppliers.

Black-owned businesses, including those owned by Black women, are increasing in number even faster than those owned by women, at triple the national rate. In 2007, before the economy felt the full force of the downturn, there were 1.9 million Black-owned businesses, a 60.5-percent expansion from 2002. Sales from those businesses totaled $137.5 billion, up 55.1 percent in the five-year period.
The growing number of women-owned businesses and the impact those enterprises are having on the economy have caught the attention of banks and other financial institutions. In January, Connecticut-based Business Owners Liability Team (BOLT Insurance Agency) released its latest infographic detailing the incredible growth rate of women-owned businesses in the country and illustrating the importance and influence of these businesses.

Last year, PNC Financial Services Group Inc., parent company of PNC Bank and a nearly 25 percent owner of BlackRock, one of the largest publicly traded investment management firms in the country, for the first time commissioned a survey to gauge the outlook, mindset and business philosophy of women businessowners nationwide. The survey was conducted between March 30 and May 11, by telephone, among 1,300 women owners or senior decision makers of small and midsized businesses with annual revenues under $10 million. It has a margin of error of +/- 4.5 percent. The findings, published in June as ?PNC Women Business Owners Outlook,? showed women owners were satisfied with their overall business performance, with six out of 10 saying their companies were meeting or exceeding expectations.

One out of two women business-owners expected their sales to increase in the next six months, but most of them had no plans to hire full-time employees as a ?soft patch? has slowed the U.S. economic recovery. The women also showed a reluctance to take on long-term bank financing or make capital investments in the months ahead, instead preferring to fund their businesses with credit cards and personal savings. Fifty-nine percent of those surveyed said they use a business credit card and 44 percent rely on personal or family savings to fund their businesses.
Bankers, naturally, argue that relying solely on that kind of financing is unwise. ?While women businessowners often describe themselves as being debt-averse, those who rely strictly on savings and credit cards leave few options to weather downturns without cashing in personal assets or taking a hit to their personal credit history,? said Beth Marcello, director of Women?s Business Development at PNC.
Insurance companies, meanwhile, grumble that small-business owners overall aren?t adequately protected from the risks associated with doing business. ?It seems that many small-business owners don?t understand that truly one event ? whether it be a customer suit, natural disaster, security breach, sexual harassment action or a host of other unexpected incidents ? can destroy a small business and wipe out its owner?s personal assets,? says Tom Hammond, executive vice president of operations at BOLT.

?On average, women owners rely on an average of 2.7 sources of money to fund their businesses, PNC found. Additional sources of capital include a line of credit from a financial institution (38 percent), personal credit card (34 percent) and a business loan from a financial institution (26 percent). Here are other PNC findings:
Business is good: Women owners are pleased with the current financial performance of their business; 11 percent say their business is exceeding expectations and 50 percent say it is meeting expectations.

Sales and profits: Fifty-one percent expect their sales to increase; 31 percent expect them to remain the same; 14 percent expect sales to decrease. Meanwhile, 41 percent expect to see higher profits, 32 percent expect them to remain the same; 24 percent expect them to fall.

Hiring: Seventy-three percent have no plans to hire full-time employees; 63 percent expect no change in number of part-time employees.

Big picture. Eight out of 10 women owners are optimistic about their own businesses, but only 41 percent intend to make a capital investment. Forty-nine percent are pessimistic about the prospects for the U.S. economy; 37 percent are pessimistic about their local economy.

On Jan. 13, President Barack Obama announced that he was elevating Karen Mills, administrator of the U.S. Small Business Administration, to be part of his Cabinet. Small-business owners, especially women businessowners, cheered. The SBA administrator already reported directly to the president, but elevating the position to Cabinet level made clear the impact of small-business activity on the economy. ?We will now have a representative at the table who is focused on our issues and who can serve as a voice for our concerns,? says Diana Tomb, president and CEO of the National Association of Women Business Owners.