At first glance, it might appear that women are poised to take over the marketplace as they open small businesses in droves. According to American Express Open’s review of business census figures, the number of women-owned businesses increased by a whopping 68% between 1997 and 2014, a pace that outstripped new male-owned businesses by a large margin. So why are so many women forgoing traditional workplaces to forge ahead on their own?
Factors Leading to the Rise in Women Business Ownership
A number of factors are driving women’s exodus from traditional jobs and to opening their own businesses. The market crash of 2008 made the job marketplace increasingly competitive, making it more difficult for women and men alike to find jobs. Some women reacted by opening their own businesses.
Women have also tired of the lack of flexibility they typically encounter within traditional jobs. Women are attracted to owning their own businesses in a drive to have better work-life balance. Women also still face the proverbial glass ceiling, crowding middle management jobs while having difficulty attaining senior executive positions.
Pros of the Growth of Women Business Ownership
There are several benefits to the growth of women business ownership. For many women business owners, they derive a sense of empowerment as they take control of their own careers and lives. They are able to find a flexibility to balance work and life that is difficult to achieve when working in a traditional corporate environment.
Business ownership is also becoming increasingly diverse. The increase in women-owned businesses includes a significant number of women of color leaving the traditional workforce. According to the Detroit Free Press, women-owned businesses represent half of all businesses owned in Detroit, the highest rate in the nation. Additionally, businesses in the city are now 70% minority-owned, a staggering increase from the still-high 47% of 1997.
The increase in female business ownership also provides a much-needed injection into local economies. According to CNBC.com, more than 10 million businesses in the United States are owned by women, employing 13 million people and adding $1.3 trillion dollars to the economy. This infusion is crucial in today’s sluggish economy.
Cons of the Growth in Women’s Business Ownership
The strong growth in women’s business ownership is not all positive, according to some. The increase may be indicative of troubling problems women face in the traditional workplace.
Some women who have children find their bosses unsympathetic to the demands motherhood brings. Women who once worked 12-hour days without complaint suddenly need to leave to pick up their children from daycare, school, attend school meetings and other activities. Supervisors are not always flexible and may have problems understanding that family comes first, but prioritizing family doesn’t mean women aren’t capable of doing or passionate about their jobs.
Women have also grown disillusioned. Despite progress, women still make less money than men for the same work. While more women are graduating from college and filling more entry level and middle management positions than men, fewer women are able to break through to top executive positions, leading to female career dissatisfaction for many.
With the exodus of women from traditional workplaces, the corporate environments find themselves increasingly devoid of vital female talent. Women bring perspectives to companies that differ from those of men. When traditional companies lose this vital input, creativity falls and thus the companies suffer.
While women might derive more personal satisfaction upon opening and owning their own businesses, they often face an uphill battle. Since a majority of women-owned businesses boast receipts of less than $25,000, the ability to financially support themselves with these ventures is limited. Additionally, women face difficulty with obtaining loans from banks and financing companies due partly to lower cash flow and partly due to overt industry sexism. According to Fox Small Business News, women’s business loan approval rates are 15 to 20% lower than those enjoyed by their male counterparts – an alarming statistic. Women thus have less ability to access the capital resources needed to grow their businesses.
Trends for Future Women Business Owners – Growth or Decline?
The rates of newly-opened women-owned businesses show no signs of declining. Women are opening businesses at a rate of approximately 1,288 each day, according to a report by the Harvard Business Review. At the same time, these businesses tend to be smaller than those led by men and to have less access to debt and equity financing access as a result.
Businesses opened by women continue to lie predominantly in the education, retail and social service industries. Many are home-based and employ few people. In order to encourage women business owners, it is becoming increasingly important to assist them in obtaining needed financing to help their businesses grow.
As more women leave the traditional workplace and open new businesses, the change has brought countless positives and an important injection of diversity into the economy. But still, as women begin new businesses every day, new funding sources geared toward them should be made available. Providing capital resources will help these businesses grow and provide more jobs for everyone. In addition to the disproportionate challenges new women business owners face, the exodus of women from the traditional workplace speaks to problems women continue to face in corporate environments – and they still need to be addressed.