Today, women in the United States have an ownership stake of 50 percent or more in nearly half of all privately held businesses. Between 1997 and 2004, the number of businesses owned by women increased 17 percent, gross sales grew 39 percent (compared to 34 percent for all firms) and their rate of employment was twice that of all businesses (24 percent versus 12 percent). Today, one in 11 American women is an entrepreneur, and one in seven workers is employed by a woman-owned firm.

The Center for Women’s Business Research has tracked these numbers for 16 years, examining the characteristics, accomplishments and challenges of women-owned businesses. Over the past 12 months, the center has focused its studies on business growth to find out what distinguishes the women with enterprises that have achieved revenue levels of $1 million or more and/or are rapidly expanding. Most of these women tend to be company founders and first-time business owners. Although a majority of both women and men who own businesses worth more than $1 million started their firms, women owners are still more likely to have started (rather than having purchased, inherited or acquired them in some other way) their companies than the men.

The long, steady growth of women’s entrepreneurship is driven by expanding access to capital, markets and networks. Wells Fargo, for example, launched a $1 billion initiative targeted at women in 1995, and increased it to $10 billion just one year later. Having met that objective, the bank recently announced a new goal of $20 billion over the next 10 years. Women-owned businesses are also moving into the equity markets. However, as of 2003, only 5 percent of companies receiving venture capital had a woman CEO. Organizations such as Springboard Enterprises, a nonprofit group in Washington, D.C., are working to increase equity opportunities. Since 2000, Springboard has educated more than 3,000 women on how to gain access to venture capital sources. Their portfolio companies have received over $2.5 billion in equity investments, and three of their firms went public last year.

A Sensible Sector
There are also equity firms that focus on women-owned businesses. Leslie Frécon, founder and CEO of LFE Capital, a boutique private equity firm in Minneapolis, says that women-led businesses offer attractive opportunities. There is less competition from other investors for those that are underserved by traditional capital sources. She believes it makes sense for investors to target this sector to expand deal flow and build a proprietary network of potential investments, thereby increasing the possibility of selecting a winning company.

But, unfortunately, women still face blocked avenues to financial products and services. This difficulty may stem from the type of businesses that women tend to run. A majority of their companies are in the service sector, and we know anecdotally that many owners of service businesses have been frustrated by their bankers’ lack of understanding of how to value such an enterprise. That, in turn, can make it difficult to obtain adequate funding. Our research continues to show even the most financially successful women-owned businesses are less likely than their male-owned counterparts to use either credit or equity.

Women have clearly demonstrated their entrepreneurial appetite and skills. In general, our research shows that the women who are at the leading edge of growth are skilled entrepreneurs comfortable with risk, financially sophisticated, know how to use advisors and are successful even when using fewer sources of capital than their male counterparts. Female owners of million-dollar businesses are more likely to have a website that is capable of fulfilling online transactions or online ordering (56 percent compared to 38 percent) and are more likely to market nationally. If they have been this successful without high levels of investment, imagine the growth and contributions they could make to our economy with access to greater financial resources.

Sharon G. Hadary is executive director of the Center for Women’s Business Research.