by Rob Spiegel
Some people believe that women make better entrepreneurs than men. Though the number of women-owned businesses has gone up, the receipts from women-owned businesses is still much lower than men-owned businesses.
There is an emerging belief that women make better entrepreneurs. Whether they make better entrepreneurs than men is a tough call. What we do know from various studies is that women-owned business is on the increase. We know that women tend to launch service-based businesses. And while the number of women-owned businesses has been on the increase for more than a decade, the receipts from women-owned businesses falls far short of receipts from men-owned businesses.
Recent research presents interesting trends for women entrepreneurs. According to the Center for Women’s Business research, the number of women-owned businesses in this country grew at twice the rate of all firms between 1997 and 2002. The Small Business Administration finds that women-owned businesses account for 28 percent of all privately-owned businesses and they employ 9.2 million people. They contribute $2.38 trillion in revenue to the U.S. economy.
These positive statistics are cited frequently on business Websites for women. I sure they are meant to encourage and inspire potential women entrepreneurs into taking the plunge. There is however, a less positive side to statistics about women-owned business trends that are not often presented at the Rah-Rah Website. These statistics show that women-owned enterprises have not yet caught up to business norms.
The Small Business Administration (SBA) conducted detailed research on small U.S. business from 1990 to 1998. The research drew from a number of government agencies including the Internal Revenue Service’s Statistics of Income Division. The SBA and IRS crunched data specifically to see what progress women were making on the privately-owned business field.
The results show that women are gaining in business ownership. The number of sole proprietorships owned by women grew dramatically from 1990 to 1998 in numbers, gross receipts and net income. The number of sole-proprietorships grew from 5.6 million in 1990 (which was 33.5 percent of the total) to 7.1 million in 1998 (which was 36.8 percent of the total). Big gain in number, but only a slight gain as a percentage of businesses in general.
The receipts from women sole proprietorships grew over the period from 15.2 percent of the total to 18 percent. That’s a gain for sure, but when 36.8 percent of the businesses are women-owned and that chunk only produces 18 percent of the receipts, it’s clear that women-owned businesses are not producing nearly the revenue of their male counterparts.
The SBA found that most women’s sole proprietorships – 87 percent – are quite small, with receipts less than $50,000. The 13 percent that produced more than $50,000 per year accounted for two-thirds of the receipts from women-owned sole proprietorships. Only 2.7 percent of women-owned sole proprietorships produced $200,000 and above annually. Also, 70 percent of women-owned sole proprietorships were in the service industries.
One statistic stood out as a potential answer to the disparity between the receipts produced by women-owned businesses and men-owned businesses. Two-thirds of women operators of sole proprietorships were married. This percentage declined slightly over the eight-year period. This likely indicates that many of the small sole-proprietorships owned by women are run by stay-at-home mothers who run a service-based company part time. The statistics don’t clarify that, but it seems a reasonable assumption, especially with the widespread interest in home business among stay-at-home moms.
There are also statistics that indicate that women do not sustain a business as long as men. The SBA shows that more than 50 percent of start-ups are women-owned businesses. This has been the case for more than a decade, yet the total number of women-owned businesses is only 28 percent (36.8 percent of sole proprietorships). This seems to indicate that women come in and out of business ownership. Again, stay-at-home moms with a part-time business that is abandoned as kids mature could explain why the high number of women-owned startups has not lifted the percentage of women-owned businesses overall.