By: Tameka Montgomery Issue: Innovation, Growth, Job Creation Section: Business
Overcoming Barriers to Growth
Here are the facts: According to a 2011 report by American Express OPEN, there are estimated to be more than 8.1 million women-owned businesses in the United States, employing nearly 7.7 million people and generating nearly $1.3 trillion in revenue.
If U.S.–based, women-owned businesses were a state, they would rank second behind California and above Texas as the state with the largest economy. If they were a country, they would be the 13th largest economy in the world, ranking above Australia and Mexico.
Women-owned businesses are launching at nearly twice the rate of male-owned businesses. The Guardian Small Business Research Institute projects that women-owned businesses will create 5-to-5.5 million new jobs by 2018—more than half the 9.7 million new jobs expected to be created and about one-third of the 15.3 million total new jobs anticipated by the Bureau of Labor Statistics by 2018. These figures sound impressive; however, a closer look reveals something I find concerning.
While the number of women-owned businesses is growing, they appear to have hit another glass ceiling. The average women-owned business employs 0.95 people and generates, on average, $160,000 in annual revenue. The average annual revenue of male-owned businesses is 3.5 times more than women-owned businesses. Furthermore, only three percent of women-owned businesses reach $1 million or more in revenue as compared to six percent of male-owned businesses. Clearly, there are some barriers to growth that are causing women-owned firms to underperform and not reach their full potential.
I believe there is nothing inherently different about the capability of a woman to grow a thriving company. That begs the question, “How do women grow businesses that can have serious economic impact through job creation and increased revenues?” I am not suggesting that all women should seek to grow multi-million dollar businesses; however, I do think that the possibility and the vision for this goal should be given more serious consideration by women entrepreneurs, as well as the community resource partners working with them. While portions of this issue can be addressed through regulatory changes and the commitment of large corporations to do business with women-owned businesses, I would like to focus on a proactive approach by the woman business owner. Women who have grown high-performing businesses share these traits:
1. They set goals, goals, goals:
We have heard it said over and over that people who have clearly defined and written goals achieve higher levels of success than those without. This model holds true in running a business. A report done by the National Women’s Business Council indicates that “research shows that the only statistically significant predictor of business growth is not the industry, size of business or length of time in business; it is the entrepreneur’s goal for growth.”
Women business owners must resist the temptation to postpone establishing performance goals until the business is past the start-up stage. Women who have built successful companies set high goals for growth early on. Identifying these goals sooner than later can have an impact on the way they operate their businesses and could play an important factor in their abilities to pursue growth opportunities in the future. “Establishing high growth goals from the outset makes the business owner think differently about her business and drives decision making. Women with the faster-growing businesses say they behaved as if they had $1 million firms long before they achieved that level of revenue,” cited further in the report by the National Women’s Business Council.
2. They fall in love with running the business:
Many people start a business because they have a passion for something or a particular skill or expertise, not because they have business acumen. More often than not, the business owner is wearing multiple hats and may even fear giving up control because she may feel that the service delivery will not be at the standard or quality that she desires. However, if the business is going to grow, the business owner has to transition from doing everything to delegating. The Business Council’s report goes on to state, “Women say their goal is to keep the company at a size where they personally can stay involved in product or service delivery to ensure the quality and customer service that is their critical market differentiator.” This mindset can be a significant barrier to growth. Entrepreneurs who have gone on to build substantial businesses understand the importance of making the transition of always working “in” the business to working “on” the business. The key is to build a team and invest the time in creating the systems and processes so that the culture and values of the entrepreneur herself can be replicated by her staff.
3. They don’t fear the financials:
Recently, in a conversation with the founders of the company 10 til 2, co-owner Jodi Olin indicated that she recognized early on the importance of having a partner with a strong financial background. She insisted, while looking for a third partner, that this prospective individual had to have this skill in order to create a well-balanced leadership team of founders. While the numbers can be intimidating, in order to grow, an entrepreneur must change her attitude about managing her company’s finances.
The report goes on to say, “Women business owners who are focused on growth and expansion…are much more likely to embrace financial measurements as a major component of their business strategy. They produce more financial reports more often, review them regularly and use them to drive business decisions.” Lack of financial vision is an area of weakness that we see often at the Denver Metro Small Business Development Center. Many entrepreneurs do not understand the financials and do not recognize the role they play as a decision-making tool. To gain better control over the business, it is a good investment of time and resources for an entrepreneur to learn how to understand her financials and not hand this responsibility to an outside accountant or bookkeeper. The increased level of confidence that will come with this skill will increase the entrepreneur’s ability to build banking relationships and approach the use of outside capital in a thoughtful way.
4. They set performance indicators:
The quote “what gets measured gets done,” is a great reminder to identify your most critical measurements and remain focused on these key performance indicators. Beatriz Bonnet, owner of Syntes Language Group, shared with me that she knew early on that she wanted to build a business that had value. To do that, she invested time in understanding the metrics that are used in business valuation. She has incorporated these metrics into her business and uses them as a guidepost to remain on track for building a company with value.
5. They leverage multiple networks:
Women are great at building relationships; however, as business owners, it is not uncommon for women to limit their networking to groups specifically designed for women. While there is value in the camaraderie of being with other women, entrepreneurs should engage in more diverse business networking settings. Leveraging networks to build business and industry knowledge can be instrumental in gaining access to decision makers and being exposed to marketing channels that could help grow the business. The key to joining these groups is a high level of engagement. The level of engagement will determine the amount of value gained from the membership. Opportunities should be sought out to take on leadership positions that will increase access to other leaders and decision makers.
6. They are bold and courageous:
Life coach and author Margie Warrell asks, “What would you do if you had no fear of failing?” While business success is not guaranteed and everyone’s definition of success is different, I believe that women choose to become business owners because they have a vision for themselves that is far larger than what is possible within their current circumstances. To achieve that vision and build a business that is able to break the barriers to growth, women entrepreneurs must boldly and courageously press forward as if “failure is not an option” as stated by Lisa Buckley, CEO of American Automation Building Solutions. If women-owned businesses are to increase not only in numbers, but in size, incorporating these strategies of existing high growth companies would prove beneficial. Additionally, resources designed to support the growth of these businesses should also include programs and resources with a focus on the potential of women entrepreneurs to start and run high-growth companies and move beyond basic business-planning services.
Tameka Montgomery is the Executive Director of the Denver Metro Small Business Development Center a resource partner of the U.S. Small Business Administration. To learn more about the Denver Metro SBDC visit: http://www.denversbdc.org