During a Discussion on Twitter Spaces hosted by the Bipartisan Policy Center (BPC) and the US Chamber of Commerce yesterday to celebrate National Women’s Small Business Month, two panelists noted that the challenges facing women business owners are “unique.”
“Women business owners often have to juggle the many responsibilities of childcare and parenting, which are often unique,” said Holly Wade, executive director of the Research Center at the National Federation of Independent Business. Her observation was echoed by other participants; the nature of these unique challenges is borne out by data on women-owned businesses.
Over the past few weeks, the BPC has published statistics offering insight into various dimensions of the state of women’s business ownership. Here, as National Women’s Small Business Month comes to a close, is a roundup of additional data that provides a picture of trends in women’s entrepreneurship and where they may lead.
Younger but lower entry?
According to data from the Census Bureau’s Annual Business Survey (ABS), a quarter of women-owned employer businesses have been in business for at least 16 years. This is the oldest age group tracked in the study. For men, the share is 34 percent. In other words, three out of four women-owned employer businesses have been in business for less than 15 years.
At the same time, however, percentage of new entrepreneurs Tracked by the Kauffman Foundation with census data, it’s consistently higher for men, and the gap isn’t closing. The average rate among women rose from 0.23% (230 new entrepreneurs per 100,000) in the period 1996-2014 to 0.26% since then. Women recorded their highest rate in 2020 at 0.30%. However, the gap with men has not disappeared and has even widened slightly. Over the period 1996-2014, the average difference was 0.14 percentage points. This has risen to 0.16 points from 2015 to 2021. At first glance, this is a small difference, but it translates into 20 new entrepreneurs per 100,000 people each year over this seven-year period. Spread that across the entire population of 100 million men in the United States, and it’s a big gap.
These data present a contradictory picture: Firms owned by women are generally younger and smaller than those owned by men, but women have lower rates of entrepreneurship. It’s always dangerous to mix data sets (even within the same statistical office!), but this may mean that a healthy proportion of new female entrepreneurs are able to transition to employer status. ( percentage of new entrepreneurs covers both employers and non-employers.)
Women are much more likely than men to own non-employer firms than employer firms. While 21% of employer firms are owned by women, they own 42% of non-employers. The proportion of male-owned firms with more than 100 employees is almost double that of female-owned firms.
These differences matter because nonemployers continue to report pandemic-related financial challenges at a higher rate than employer firms, and the majority have not seen earnings return to pre-pandemic levels. Non-employer firms are also generally less likely to have their funding applications approved than employer firms.
Constant gaps in funding
The difference between employer and non-employer may be part of what explains the financial differences between male and female business owners. In 2020, during the COVID-19 pandemic, 69 percent of women-owned businesses received less than $100,000 in government aid. Meanwhile, 38 percent of male-owned businesses received more than $100,000 in government aid, compared to 31 percent of women-owned businesses.
This may be a demand-side issue – if women-owned firms are smaller and younger, they may have sought smaller amounts of funding. In its latest survey of women-owned businesses, Biz2Credit found a growing gap between male- and female-owned businesses in terms of average revenue and average loan size. Women did represent a slightly higher share of credit applications in 2021 and their average loan size was 34% larger. Yet loans received by male-owned businesses were 67% larger in 2021, a much larger difference than in 2020 (when they were 33% larger).
“Reason for Optimism”
During the Twitter Spaces discussion, all participants expressed optimism about the future of women ownership in business. Part of that is inherent in starting and running a business: “Women business owners are natural optimists,” said Sandy Cleeter, a business owner who spoke on behalf of the National Association of Women Business Owners. Other speakers pointed to higher levels of overall business creation driven by women, as well as the pandemic-induced increase in digitalization among small businesses.
Addressing the “unique challenges” faced by female business owners and future female entrepreneurs is a priority if this optimism is to translate into business growth and job creation. Time, as both Wade and Cleater pointed out, is a scarce resource for any business owner, but especially for women with additional demands such as caregiving. Time constraints compound challenges in technology adoption, government compliance, and other areas. Thus, if there is an area of great leverage in helping women business owners and would-be entrepreneurs, it may be in finding ways to ease the burden of time. It sounds fantastic (who doesn’t need more time?), but this can be done through support for paid leave, child care, and reduced red tape in areas such as hiring, use of independent contractors, and (when applicable) government contracts.