Women are creating more businesses than their male counterparts, and African American and Latina women are driving that trend. However, women, especially non-white women, still lag in revenue and job creation.
Those are some of the top line findings from the 2018 State of Women-Owned Businesses Report, an annual report commissioned by American Express and prepared by Ventureneer with the support of CoreWoman.
From 2017 to 2018, women–owned firms—defined as firms that are at least 51% owned and controlled by women—grew by 6% compared to 1.6% growth by all firms. Women make up 40% of all firms, but their numbers have been growing at an average 4% per year for the past decade, compared to 1% for all firms. If that growth rate continues, women are on track to become the majority of small business owners.
These women-owned businesses employ 8% of the total private sector workforce and contribute 4.3% of total revenues. When firms that are equally owned by women and men are included, those numbers jump: firms at least 50% owned by women account for 48% of all businesses, employ 14% of the workforce and generate $3.1 trillion in revenues (7% of revenues).
The growth is being driven by women of color, who account for nearly half (47%) of all women-owned businesses.
Women have been notching significant gains over the past decade or more. According to the report, from 2007 to 2018:
• the number of women-owned businesses surged 58%, compared to 12% for all businesses
• Total employment by women-owned businesses rose 21%, while for all businesses it declined 0.8%.
• Total revenue of women-owned businesses jumped 46%, while revenue for all businesses increased 36%
The numbers paint a rosy picture. But digging deeper, the data suggests that women entrepreneurs are not reaching their full potential.
Room to Grow
On average, women-owned businesses employ 0.7 workers, compared to 1.9 for all privately held businesses and 3.9 for all firms (including publicly traded companies). The vast majority—88%—had revenues under $100,000 in 2018. Some of that may be due to desire for work-life balance, whether to accommodate caregiving or other issues—the authors call these women ‘flexibility entrepreneurs.’
Less than 2% of women-owned businesses (207,900 in all) generated $1 million or greater in revenues. Yet these businesses had an outsized impact, accounting $1.2 trillion in revenue—or 69% of all revenues by women-owned businesses—and more than 6 million workers, greater than two-thirds of total employment by women-owned businesses.
In particular, minority entrepreneurs, while driving overall growth, lag in terms of revenue and job creation, as data from the report shows.
Number of African American women-owned businesses: 2,402,600 (20% of all women-owned businesses)
Annual growth rate 2017-2018: 9%
Average revenue per firm: $24,700 (vs. $143,100 among all women-owned) businesses.
Number of Latina-owned businesses: 2,142,800 (17% of all women-owned businesses)
Annual growth rate 2017-2018: 7%
Average revenue per firm: $51,400 (vs. $143,100 among all women-owned businesses)
Women of all ages are becoming entrepreneurs. Perhaps surprisingly, 26% of women business owners are aged 55-64, the largest age group.
And the industries women are creating businesses in are as diverse as the women themselves. Healthcare and social assistance, accommodations & food services and administrative, support and waste management have the highest total employment. The biggest revenue generators are wholesale trade, retail trade and professional, scientific and technical services. And women are blazing trails in some untraditional fields, including utilities (151% growth in women-owned businesses since 2007) and construction (94% growth).
More Work to be Done
Women have made tremendous strides in the past fifty years, increasing their share of business ownership from 4.6% in 1972 to 40% today. Yet, as the authors note, that growth has been uneven. The offer some prescriptions, including focusing on growing the number of women-owned businesses generating $1 million or more.
In addition, they emphasize the importance of nurturing women entrepreneurs of color. “Maximizing their contributions is key to a stronger and healthier economy overall, job creation in local communities and upward economic mobility for women of color and their families,” the authors write. They recommend increasing support, including mentoring, access to capital and policy changes, for women entrepreneurs of color.
Fortunately, as we have reported, a new crop of investment funds and programs are focusing on women and diverse founders. They include the Force for Good Fund, Kapor Capital, Backstage Capital, Harlem Capital, and Sundial Brands and Unilever’s New Voices Fund, among others.
The full State of Women-Owned Businesses report (PDF) can be downloaded here.