The Financial Problem
Research shows that companies led by high-level women executives have higher profits than those led only by men. Clearly, women are at least as good as men at running a business.
Yet women-owned entrepreneurial businesses are struggling. A recent study by the Kauffman Foundation revealed that, on average, businesses started by women are likelier to fail, slower to grow, and half as profitable as those started by men.
What’s wrong with this picture?
A closer look at the findings reveals that women entrepreneurs fall prey to five classic missteps that hamper the success and even the survival of their businesses. You can up your business’s chance of success significantly if you’re careful to avoid the following:
1. Starting With Too Little Funding
Women are likelier than men to start a business with $25,000 or less. One reason may be that women face discrimination when seeking startup capital. Fortunately, there are funds from both the government and private organizations available to women only. Make sure you get as much funding as you need, enough to keep you going if there are unexpected down times or expenses.
2. Confining Your Business to Your Home
Running your business out of your home lowers expenses during the startup phase, but creating an office outside the home has huge benefits that may not be obvious at first. The mere fact of signing a lease for your business signals to yourself and the world that you are serious about creating a workplace. It also gives you a professional space for you to interact with customers and employees. Plus, it counters the perception among family and friends that you’re home “doing nothing” and thus available to socialize or take on chores.
3. Failing to Hire the Help You Need
One of the most striking differences between women and men entrepreneurs is their hiring habits. Men in the Kauffman study had an average 2.1 employees (besides themselves), whereas women had an average 0.8 employees. In your business, as at home, you can’t do it all. Don’t kill yourself and your company by trying.
4. Thinking Small
We’re fascinated that, among other differences, women were more likely to create their business as a sole proprietorship, where men were likelier to create a corporation. The Kauffman authors speculate that women keep their businesses small because they seek to maintain control and fear financial risk. We don’t know about the control part, but the risk avoidance clearly isn’t working, because women-owned small businesses have poorer survival rates than their men-owned counterparts. If you want your business to survive, think big and plan to grow.
5. Failing to Focus on Profits
Even when women start out with the same funding as men, their businesses are less profitable on average. The Kauffman report speculates that women may be less focused on profits. You may have started your business because you love what you’re doing or wanted more independence, but without solid profits it won’t survive for long. Men aren’t shy about the fact that making money is a priority. We shouldn’t be either.
More women are starting businesses than men, and with good reason. As the Shriver Report noted recently, women still make only 77 cents to men’s dollar in the workplace. By starting your own successful business—and avoiding the five mistakes above—you can make sure to pay yourself a fair wage.