Do Women-Owned Businesses Produce Better Results Than Male-Owned Business?

When you consider the gender gap and wage gap, women are genuinely disadvantaged in the corporate world. The question is, does this also apply to women who run their own business?

It is well known that entrepreneurship drives business growth, creates jobs and opportunities for economic mobility however, becoming an entrepreneur is also fraught with difficulties. Despite the roller coaster ride of ups and downs, more women than ever are attracted to owning their own business. This begs the question, “Do women-owned businesses produce better results than male-owned businesses?” 

To answer these two questions, it’s important to look at the historical trends for women in business.

Historical Trends For Women in Business

In 1972, women-owned businesses represented 4.6% of all businesses in the United States. That meant only 402,000 businesses were owned by women which increased to 5.4 million businesses by 1997. By 2007 businesses owned by women increased to 7.79 million and in 2019 women-owned businesses in the US sat at 12.94 million

Today, women-owned businesses employ 9.2 million people and generate $1.8 trillion in revenue which is just 4.3% of the total private sector revenue. In 2018, women of color only accounted for 4.7% of women-owned businesses who employed 2.2 million people generating $396.6 billion in revenue.

In the US, only one in four companies are run by women, but the number of women-owned businesses was growing twice as fast as all businesses, that was until the coronavirus pandemic, the long term effect of which remains to be seen. Many women-owned businesses have been affected by COVID-19 because many women-owned businesses work within industries most devastated by the pandemic.

Why Women Start Their Own Business

The gender gap continues to be a problem in the corporate world and it’s no wonder female entrepreneurs resort to opening their own business as a way to overcome this disparity. Looking at women-owned businesses in 2020, Guidant Financial and Small Business Trends Alliance (SBTA) surveyed over 3,100 small business and franchise owners nationwide. According to their report, 27% of small business owners or franchise holders are women. 

While most people who start their own business are motivated to be their own boss, this survey found that only 31% of women shared this motivation. They found that 26% of women wanted to pursue their passion and 15% were dissatisfied with corporate America. Another 6% started their own business because they were laid off and some women started their own business because the opportunity presented itself while others were not ready to retire or went into business because of a life event.

The survey suggested that wealth was not the primary focus of women-owned businesses, therefore, their businesses tended to be smaller than male-owned businesses. 

Top Industries for Women-Owned Businesses

Women are more likely to be attracted to starting a business in healthcare and social assistance, professional scientific and technical services along with other services. Men are more likely to launch businesses in construction and manufacturing. 

Being in business gives women an opportunity to control their future and arrange their time to meet the needs of their families which is one of the reasons why they are attracted to starting a business in certain industries.

The three top industries for women-owned businesses:

  • 19% Professional Services
  • 12% Retail Sale/Trade
  • 10% Health Care and Social Assistance

The three top industries for male-owned businesses:

  • 15% Professional Services
  • 12% Construction/Manufacturing
  • 9% Retail Sale/Trade
Women Entrepreneurs vs Male Entrepreneurs

SCORE is a non-profit organization dedicated to helping small business entrepreneurs. Their recent “The Megaphone of Main Street: Women’s Entrepreneurship” data report focused on the success of women in business. They surveyed more than 20,000 business owners including those in the pre-start, startup, in-business, and transition periods.

They found that women are slightly more likely than men to start businesses and also found that women are just as successful as men when it came to generating revenue. Their survey found that men and women showed very little differences when it came to the longevity of their business and men and women were also similar when it came to the change in the number of their employees.

Bridget Weston, the CEO of SCORE says “Even though women make up a large percentage of small US businesses, the gap between male and female-owned businesses is minimal when it comes to financing, revenue, and hiring practices.”

The revenue of women-owned businesses was 34% lower in their first year according to the “Gender, Age, and Small Business Financial Outcomes” report. After the first year, revenue growth for women in business was slower compared to men – which could be due to the fact that fewer women were less successful in obtaining outside financing.

Financing for Women-Owned Businesses

Women are severely underrepresented among startups that seek external financing because most of them self-finance. Although 34% of men and only 25% of women sought financing to either start or grow their business, men were much more likely to obtain loans or equity financing than women.

According to data from research firm PitchBook, 98% of venture capital goes to men in business. A study conducted by the Academy of Management Journal in 2018 found that when investors asked promotion related questions, they were more likely to invest in the business than when they asked prevention-based questions. They also found that women were asked far more prevention-based questions than their male counterparts which suggests that women are treated differently from men when it comes to seeking outside finance. This concern was supported by the 2019 Bank of America Women Business Owner Spotlight report where women don’t believe they have the same access to capital as men.

Despite this, women’s growth indicators remain strong for women entrepreneurs. SCORE’s Bridget Weston-Pollack suggests that women-owned businesses are just as successful as male-owned businesses. She states, “Women-owned businesses are an impactful and fast-growing force in the U.S. economy, but much of the existing research to date has shown how women-owned businesses are still at a disadvantage in performance, contribution, and growth compared to male-owned businesses.” 

How Men and Women Differ in Their Approach to Business

All entrepreneurs whether male or female, are generally self-starters with a passion for their business. Some characteristics such as spending time with family were important, however, the biggest differences are in the way men and women run their businesses.

According to the Bank of America’s survey, women see multi-tasking as a strength and were more likely to list creativity and empathy as a key character trait for success in business whereas males tended to list confidence as their strongest attribute. It was found that women in general place greater importance on achieving personal goals while men place a higher priority on achieving their business goals. This brings us back to the question of, are women-owned businesses as successful as male-owned businesses?

Men and women approach business differently. Men tend to make decisions more quickly with the belief they should know what to do whereas women are generally more considered in their decision-making process and more inclined to seek and accept help. 

Research tells us that women tend to be more empathetic than men putting people before profits thus influencing the disparity in revenue and growth between the receivables of women-owned businesses and men-owned businesses. Women are also quicker to put family before business whereas males tend to sacrifice time with their spouse and family in the pursuit of success.  Women tend to focus on relationships in business whereas men tend to focus more on growth. 

According to the Bureau of Labor Statistics, women are a driving force behind all sizes of businesses making up 43% of full-time employees and 63.9% of part-time employees.  Both genders have similar goals in growing their business, however, men are more focused on faster growth fuelled by equity investment whereas women are more likely to fuel steady growth by reinvesting profits back into their business. 

Are Women in Business Better Than Men?

Sarah Fink, head of research at the Centre of Entrepreneurs, says, “Women entrepreneurs are more likely to work towards controlled, profitable growth with relatively little interest in merely positioning themselves for a lucrative exit, they often prefer to re-invest business profits over equity investment to scale sustainably.” This view is also supported by John Winter, CEO of Barkleys Banks’ corporate business.

According to Forbes, the research carried out by the Centre of Entrepreneurs suggests that women are more ambitious in general, less prone to being overconfident, are better-calculated risk-takers, more likely to take a long-term approach to business and in spite of numerous barriers to success, they succeed more often than their male counterparts.

The Harvard Business Review, Dow Jones along with data published by the U.S. Census Bureau among others, conclusively shows that women-owned businesses generate a significantly higher revenue than male-owned businesses. Their analysis also suggests that women-owned businesses create significantly more jobs than their male counterparts and women executives notably improve company performance when compared with men.

Despite the fact that women entrepreneurs have less access to funding due to the bias against them, they have proven to be wiser decision makers than men, are higher performing and bring in greater revenue because they tend to have more common sense, are more positive, think more critically than men and have a greater resolve to be more successful. 

On a final note, women are better communicators than men because when they are confronted with a problem, they want to get it resolved quickly whereas men tend to bottle things up. In order for a business to run smoothly, it requires a team that works together cohesively and with purpose. Women tend to be less impetuous and don’t make rash and reckless decisions which is why they are more considered in their approach to business.

Other than approach and leadership style, there is little evidence to suggest that men who own their own business produce better results than women. Women overall succeed despite facing more barriers to business ownership than men.

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