KALAMAZOO, Mich.—More women are starting businesses than ever before. Between 2007 and 2018, the number of women-owned businesses grew by 58%—nearly five times the national average—yet, just 2.2% of all venture capital in the U.S. goes to companies founded solely by women.
Beyond access to funding, there is no shortage of challenges faced by women entrepreneurs. But a Western Michigan University researcher has found that, regardless of obstacles, female founders are able to use grit, resilience and leadership excellence to achieve profitable growth.
Dr. Laurel Ofstein, associate professor of management in the WMU Haworth College of Business, contributed to a study released by Bank of America and Babson College that identifies strategies all entrepreneurs can learn from an exclusive group of industry-leading women business owners.
In “Beyond the Bucks: Growth Strategies of Successful Women Entrepreneurs,” Ofstein and her colleague Dr. Lakshmi Balachandra, associate professor of entrepreneurship at Babson College and principal researcher on the project, interviewed 30 women entrepreneurs who have achieved an average of $43 million in revenue about their challenges and growth strategies.
The study revealed three key themes around the hurdles women face in growing their businesses:
- Market misperceptions: Women’s motives for starting a business are frequently misunderstood. Women entrepreneurs have often had their leadership position questioned due to their gender. They also find that their businesses are subject to additional scrutiny due to gendered assumptions about the markets they are serving.
- Network exclusion: Women are often excluded from traditional male-dominated networks. As business success is often based on “who you know” and not “what you know,” women entrepreneurs can experience limited, gender-based access to networks and strategic relationships.
- Managing expansion with underfunding: Women must plan for and incorporate organic capital growth. A lack of capital can also impact recruitment and retention of talented employees, a critical step for growing any business.
“While much research exists about the challenges women entrepreneurs face during the startup phase of business, very few studies have focused on the obstacles women confront in the growth phase,” Ofstein says.
“Women who have reached $5 million in annual revenue have clearly established a successful enterprise; however, $5 million tends to be a revenue plateau for any business. We found that there are gender-based impediments for women entrepreneurs in growing their businesses, even after significant success has been achieved.”
Ofstein adds that the knowledge, skills and abilities needed to push past this point are critical, as is access to substantial financial and organizational resources.
The researchers found that women entrepreneurs who participated in the study have developed novel approaches for growing their businesses and finding success, despite the challenges they faced. These strategies, Ofstein says, can help other business owners manage setbacks, grow their businesses and inspire the next generation of entrepreneurs. They include:
- Exploring capital alternatives: Venture capital funding and the startup successes it produces garner significant media attention, yet venture capital funding remains a rare event for women entrepreneurs. Other forms of capital may enable female founders to fuel growth while maintaining equity ownership of their business.
- Building for the long term: The women profiled had an attitude that building a business was “a marathon, not a sprint.” By avoiding formal investors, they also averted their expectations for rapid, possibly unrealistic, growth. This allowed their businesses to grow more organically and, therefore, more sustainably.
- Developing a strong and talented workforce: Many of the interviewees believe in investing in people and the company’s culture. While it may create a strain on profitability in the short-term, building a strong workforce may generate multiple returns in the long term.
- Buying from and funding women-owned businesses: All people can help women entrepreneurs scale more quickly by intentionally buying from and supporting women-owned businesses.
- Being and seeking a mentor: From informal coffee meetings to industry events, there are multiple forms of mentorship that can develop and showcase successful women entrepreneurs.
- Joining or creating new networks: Network-minded women, in addition to pursuing broader networks with both men and women, can bring together other women from their own industries as a way to leverage new opportunities.
- Capitalizing on personal insights and experience: Women have significant purchasing power and understand emerging needs and trends for female consumers. Forming strong partnerships with other women entrepreneurs in similar ventures offers cross-market opportunities.
“While all of these actions are important for spurring sustainable growth, I believe one of the most impactful strategies is to buy from and fund women-owned businesses,” Ofstein says. “More angel investment and venture capital funds are going to women-led businesses than in the recent past, yet there remains a large imbalance.”
Ofstein adds that businesses targeting the female demographic are often underestimated in terms of their potential for market success. However, women have significant purchasing power and are often the primary decision maker for household purchases. “The personal experiences of women entrepreneurs should be counted as a key advantage in understanding the preferences of this important consumer group, and valued when assessing future growth potential of women-owned businesses,” she says.
Ofstein notes that the research is “not just a story about barriers” that women entrepreneurs face in the marketplace. “The women in this study persevered and adapted in spite of the challenges they encountered, achieving impressive levels of business growth and success,” she says.
To access the white paper based on the study, visit Bank of America online.
For more WMU news, arts and events, visit WMU News online.