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The puzzle of female entrepreneurs

Guest: Allison Martell

If you close your eyes and think about entrepreneurship, what do you see? I used to see a montage of old Venture episodes. My entrepreneur was male, young, ambitious, and very busy. He was about to realize his dreams, so he didn’t sleep very much. If he had a family, they hadn’t seen him in weeks. Soon, he would be rich.

I’m currently putting the finishing touches on a paper about female entrepreneurship, and it’s becoming clear just how little real-life business resembles television, even CBC television. (That should be obvious I know, but sometimes I’m slow on the uptake.) For one thing, more and more entrepreneurs are women. Female business owners are a market force to be reckoned with. According to the Center for Women’s Business Research, over the past twenty years, firms majority-owned by women have grown at twice the rate of all businesses – a whopping 42 per cent. Women own 41 per cent of privately-owned firms. And in the last ten years, businesses owned by women of colour have grown at 120 per cent.

I wish this was a story about female empowerment. But the thing is, self-employment can be a pretty marginal existence. Once you think about it, it’s obvious – the man who works at my local convenience store seems to work more hours than I’m awake. And it turns out that businesses owned by women are even smaller, slower growing, less profitable and more likely to go out of business than male-owned businesses. This has personal implications for female entrepreneurs – even rich women are less likely to benefit, income-wise, from self-employment than their male counterparts, and non-professional women who start businesses actually see their incomes drop. Here’s the puzzle: Why do women start businesses, if it leaves them worse off?

Self-employment is one option for people marginalized in the labour market. Unfortunately, most of these studies only include white women, but I would be surprised if women of colour are faring much better. The evidence suggests that many women start businesses to escape inflexible work hours. Women who have taken time out of work to raise children are also more likely to start their own businesses. One clever study seems to show that women who face a larger wage gap are more likely to become self-employed. This explains some of the performance gap between male- and female-owned businesses: If you’re escaping a bad situation in the waged world, you’re more likely to settle for low profits elsewhere.

It sure makes those business growth numbers, especially the one for women of colour, look more ominous.

Further Reading

If you’re really interested in this stuff, or doubt my interpretation, drop me an email or comment and I can send you a couple pages of references. Many of my sources also appear in this substantial literature review. Also check out the fact sheet linked above.

20 thoughts on The puzzle of female entrepreneurs

  1. Wargh, my computer just did somehting weird; if this ends up submitting two hacked off comments, could someone delete them?

    Anyways.

    Funny this should come up just now.

    I’m currently on the second month of a six months training program for people who are starting their own business. You only get funding if you were unemployed before.

    This is all taking place in germany, but the situation strikes me as extremely similar.
    I’m on a team with 6 guys and one other woman, which the coaches noted was a really unusual gender bias. And the monday feedback meetings that everyone atends confirm that; 60%-70% of the participants are female, and most of them are starting businesses that will only just sustain them.

    I told my mom about the project and she was kind of amazed that so many women take part, until we figured that yes, these are all small scale enterprises, most people are going to end up working very hard for very little money, and many participants are doing something that has nothing to do with their formal education, if they have one.
    A lot of the women seem to have kids, too, and one or two I talked to clearly state that as a reason for wanting more flexible hours.

    Reading your post, I also did a quick mental inventory, and it does seem like those business ideas that do take off and realyl make the inventor rich mostly get started by men. And the men also seem more likely to – at least vaguely – plan on franchises in the future, chain stores, more staff… Things that will allow them to work less adn reap more of the benefits.

    Interesting post.
    I already ruled out parenthood for myself, maybe I’ll go and become the female prodigy of the lot and start my own business empire. Mhm.

  2. Maybe it’s being raised by a single mom, but to me the mental image of entrepreneurs has always been female. Ha. The first movie image that pops to mind is that montage from Sliding Doors.

  4. Why do women start businesses, if it leaves them worse off?

    I’d say it depends on the definition of “worse off”. Is making less money, but having a nonhostile workplace worse off? Depends on what you value—your mental health or your checkbook. It’s a trade-off. Sometimes, it’s the least bad of several undesirable choices.

    I often hear “why don’t you start your own contracting firm?” from folks when they hear I’m an electrician. No thank you. I have zip, zero, and zilch interest in turning my (usually, though I’m open to some overtime) 40 hour workweek into an 80 hour workweek. I have interests outside of my job, too. But I understand why it appeals to some women. I have a good friend who has always had businesses on the side apart from her day job; she’s retired now, but supplements her pension with her business. She did it to get out of poverty (she was what the unemployment office calls a “displaced homemaker” when her husband traded her in for a younger model). I know other women who started their own beauty shops because of the high cost of paying rent for a chair in an established salon.

    One of the difficulties women face—even if they aren’t starting a business—is the highy gendered world of networking. Most established networking venues are exclusively male (by rule or custom—think “Masonic Lodge”, etc.). There’s the Chamber of Commerce, but that’s a really crowded room. The less crowded, more visible areas to do networking are still predominantly male.

  5. Historically, when I think of entrepreneurs, I think of the family business, led by the father – the family owned dry cleaners or convenience store or cafe where everyone pitches in.

    When I think of entrepreneurs now, I think mostly of women and their computers – SAHMoms who start a business making soap or clothes on the side, either as a stand alone site or through eBay or Etsy. I think of my (female) friend who owns a wildly successful, primarily internet based, perfume business.

    Part of this may be my own buying habits (I purchase about 75% of my bath and body products from woman owned small businesses), some may be my upbringing, but when I think suit and tie, I think investor, businessman, lawyer. Entrepreneurs get their hands dirty builidng the business.

    As for why women start their own businesses, for most of the women I know it’s one of two things. The first what Allison describes in her last paragraph. The second is passion – if someone absolutely loves doing something, be it creating art, clothing, jewelry, perfume – then the satisfaction of doing what they love offsets the drop in income as they make their way.

  6. I guess when I normally think of entrepreneurs, I think of people who are really motivated to tackle the business world and make a huge amount of money. Which is funny, because reading previous comments, I guess the image of “getting their hands dirty” makes sense too, but it just wasn’t my first instinct.

    And it turns out that businesses owned by women are even smaller, slower growing, less profitable and more likely to go out of business than male-owned businesses.

    So do you think that maybe the first few (smaller, slower growing, less profitable) may be by choice in a lot of cases? Assuming that this new entrepreneurial mindset is to just make a decent amount of money without dealing with the traditional workplace and work hours. I figured childcare may be an important factor in there too. And then I was guessing that the last one (more likely to go out of business) may be an unfortunate consequence of hovering around that line between “profit” and “in the red.”

  7. I wonder if these stats are skewed at all by the fact that people who are at high risk of crushing liability (such as business owners) put assets in their spouse’s names to try to make themselves judgment proof?

  8. “If you’re escaping a bad situation in the waged world…”

    This was my situation. I was a lawyer in a big firm. I’m now an independent contractor and partner in a small business where I head up operations in my city. When I started, I went from having made six figures to making zero in my first six months. It went up exponentially after that, though.

    “Here’s the puzzle: Why do women start businesses, if it leaves them worse off? ”

    It doesn’t, over the long term, in many cases. I think women are sometimes more risk averse and more comfortable with a link between hours worked and pay. The benefit of an entrepreneurial business, though — and why I chose one — is that you can divorce that linkage, and get paid based on whatever the performance measure is in your industry. In mine (legal placement) we get paid based on closing a deal — placing a law partner in a firm. It’s a good business for women or anyone who wants time flexibility, as you can get away from facetime and take advantage of being able to work efficiently.

    The problem for this and many other entrepreneurial businesses is that there are high startup costs. As in my situation, often a long prep time without making a dime. It’s hard to be able to afford to do that. I had no family resources and was only able to afford this through measures that might be unavailable or undesirable to many — being a Vegas stripper for two years prior and using the money to pay off school loans and fund six months of startup of the business.

  9. Self-employment is one option for people marginalized in the labour market. Unfortunately, most of these studies only include white women, but I would be surprised if women of colour are faring much better.

    Both Black Enterprise and Essence have covered this – many women of color end up leaving ranks because it is too difficult to get around all the ingrained office politics, racism, AND sexism that one has to deal with. I believe BE was examining the issue from the perspective of ascension (there are 13 women Fortune 500 CEOs. Two are Asian. The rest are white).

    There’s also all the little personal freedoms that are afforded by working for yourself. I am growing my relaxer out – that can work against me in job settings as professional hair is seen as straightened hair. (Some people make the argument that hair should be neat – however, there are well cared for and neat ‘fros, dreds, and braids. Generally when people say professional, they mean the standard press and curl.)

    Sending out resumes is frustrating if you have a racially coded name (like I have). Job markets are competitive, but studies have proven that those of us with black sounding names get less callbacks than people with “white” or traditional names. (There are ways around that, to be sure – I could easily send out resumes as L. Denise Peterson. But then that begs the question of would I *want* to work at a company that chucked my resume based on my name?)

    And for many of us who do not have higher level education, or do have that education but have something else working against us (certain inflections when speaking) may find that entrepreneurship works better for us in the long run. A lot of times, you can find you career plateauing and start a side business or realize you would be more successful as a self-employed person. The labor and uncertainty is tough – but hustling for yourself and starving on your own dime versus making $8 an hour while making someone else richer? No contest in my book.

    Pink Magazine is an awesome resource for female entrepreneurs – they tackled the low pay and the hours issues in some of their back issues, particularly how to break the $100,000 a year barrier and how to break the million dollar a year barrier.

  10. Sometimes the entrepreneurial woman isn’t bailing out of *business*, she’s bailing out of being a SAHM.

    I have my own extremely small IT business. In a very good month we make as much as $7K, but it is much more likely to be $2K. This is not enough to live on and vastly less what I was making in the workforce (and significantly less than what I make in the workforce now that I’m back in it.) However, my pregnancy with my first biological child left me physically extremely weak and easily tired, and just as I was beginning to recover I had another baby. I also strongly believe in breastfeeding, and for me, it was much better to stay home where I could wear comfortably schlubby clothes and breastfeed at will and sleep till noon if I had to, than to work as a corporate drone.

    But, there’s bills to pay. And I’m a feminist. And my husband is occasionally a giant asshole, and the whole “I make the money so I call the shots” is a thing he does when he’s mad, so I wasn’t willing to give him the opportunity. And having 4 years of running my own business on my resume would look a lot better than a giant blank when I went back to the workforce. And a home business has many tax advantages, whereas a SAHM existence has *none* since they got rid of the marriage penalty.

    So, instead of being a SAHM I was an entrepreneur. And I *still* have that business. In fact I have hired my brother and a friend of mine to do occasional work for me, since now that I have a real job I don’t have the time to do everything myself.

    If you compare the money I made as an entrepreneur to what I made before I left the workforce the first time, well, $60K -> $28K is quite a drop. But if you compare the money I made as an entrepreneur to what I made being home with a newborn infant, $28K is a lot better than $0!

    Women who feel the way I do, who *want* to stay at home with their newborn babies or who can’t hack a traditional workforce job given the stress pregnancy and newborn-care put on their bodies, may choose to be an entrepreneur rather than a SAHM, which rather changes the picture as to whether they are doing better economically or not. This isn’t an issue that “better childcare, better maternity leave, more family-friendly policies at work” can always solve; I can’t *ever* foresee a day when you can go to work with your 6-month infant and breastfeed him in your cubicle all day after sleeping until noon. Sometimes the work life sucks, and it’s better to make your own hours even if it means a drastic pay cut, as long as you can afford a drastic pay cut.

  11. Here is a video on black women and business. I think that all of the responses have the mark right on target. Especially when one considers the cost of daycare and raising children. Having a home business allows women to have their own money and still put the needs of their family first. I have a friend that writes copy and the occasional freelance articles for a living. She doesn’t make a huge amount of money but she has the security of having her own income. Bottom line is when we put our selves in place where we are completely dependent on a man it is a dangerous thing. Stay at home businesses are a great opportunity. If you think about it women have been doing this sort of thing on the side forever, from Avon to Tupperware we have always found ways of making a little spare cash while taking care of our children.

  12. Here is a video on black women and business. I think that all of the responses have the mark right on target. Especially when one considers the cost of daycare and raising children. Having a home business allows women to have their own money and still put the needs of their family first. I have a friend that writes copy and the occasional freelance articles for a living. She doesn’t make a huge amount of money but she has the security of having her own income. Bottom line is when we put our selves in place where we are completely dependent on a man it is a dangerous thing. Stay at home businesses are a great opportunity. If you think about it women have been doing this sort of thing on the side forever, from Avon to Tupperware we have always found ways of making a little spare cash while taking care of our children.

  13. Alara — good point about going from SAHM to entrepreneurial work, rather than by way of corporate America.

    I have always had an antipathy towards being financially dependent — possibly because there were no family resources after I was 17-18. I’ve never enjoyed being treated or enjoying others’ money socially (although I enjoyed converting others’ money to mine professionally). So the SAHM idea just never seemed like an option to me.

    You’re right — even the good guys (and gals) will leverage the breadwinner thing in an argument. Even if it’s unspoken, but the non-BW finds herself doing a bit more of the unpleasant chores or not having quite as much spending money as the BW.

    La Lubu — I think you have something re the networking channels. Guys seem to get plugged in much easier. Coming from a family in which there was an active disincentive to figure out money, investing, etc. (my parents thought it was vulgar and that I should embrace a classy life of academic, artistic or helping-profession-oriented poverty as they had done) it took the constant coming-up-short at the end of the month to get me to the “fuck it” point where I was desperate to learn. But even then, there were no obvious channels.

    As UnFit says, men seem more likely to choose or be guided into entrepreneurial businesses that generate passive income. I’ll always be grateful for the internet boom, despite losing much of my savings in the bust, because otherwise it wouldn’t have clicked in for me that I could get into a business that didn’t pay hourly and therefore would have exponential rather than incremental growth possibilities. I think if more women see the possibilities in that model, which would require ways to network to share information and ideas about this, we would see more evening out of the profitability of male-run vs femaile-run startups.

  14. One drag on the average earnings of self-employed women would be the traditionally female jobs that normally are categorized as independant contracting instead of employee status. I’m thinking here of hair and other beauty workers, or substitute teachers, of house cleaners. Those low-wage jobs aren’t official “employment”, instead the worker is legally considered self employed.

    The other angle I see a lot as a female entrepreneur, is the housewife-turned-small-income thing as mentioned in #10. Some of them are just looking for small, causal income to fund some extras or spending money. Some are developing real businesses and valuable resumes but as observed in the opening post, they are often WAY underfunded so they stay financially tiny. I see very few willing or able to take big risks and loans and that’s a drag on growth. I think we already know the reasons men on average feel more willing/able to take those risks.

  15. I started a business and it failed miserably. part of it was that I was so burned out by the work,(in home therapist for autistic children) that when my clients succeeded and aged out, I just couldn’t focus on doing what I needed to do, find a survival job, market myself, etc to garner more clients. I also didn’t plan ahead financially, (put money away, because there was no money to put away), woefully undercharged for my work, and screwed up taxes so badly that some days I feel like taking the classic throw myself out the window just like the myth of the 1939 Stock Market Crash(no husband or family who would have to cover for me so it wouldn’t matter).

    All of my entrepreneurs are in the same boat, they either work for a network marketing(sample conversation, “no, really, burned out, if I just get one more person to sell, and she gets one more person to sell, I won’t have to work ever again!”)or they do side jobs, hoping that a starlet will wear the knitted scarf and get photographed, and then they will have lots of customers and never have to work again.

    But, oh, when I had clients, I Loved working for myself, there were tradeoffs, crappy almost nonexistent health insurance,(try a 10,000 deductible) for starters, but I could come and go as I pleased, I could dress the way I wanted, I could do things with my clients that if I worked for an organization I couldn’t have done because of rules,(one organization wouldn’t let therapists hug children). One of my friends said it must be nice to be so free, and I said back, it comes at a cost.

    Now, I can’t find a job, I don’t know what I should do, but I did try working at corporation. Talk about Fail. I just couldn’t switch gears, and was not a good little corporate team player, which I blame on my 7 years of freedom of working for myself.

  16. Allyson, I’m interested in your post and in the research you’re conducting. I am a woman entrepreneur who owns a marketing research consulting company. A few years ago, I became very interested in what makes entrepreneurs “tick” and have been doing primary research with both male and female entrepreneurs since then. We’re just wrapping up a two-year study where we’ve interviewed over 600 entrepreneurs about their paths to business ownership, their motivations, and how they are doing in their businesses today.

    You are right that many self-employed individuals are making less money working in their own enterprises than they did when they had traditional employment. I did too, for the first three years of business ownership, until I learned the business ownership skills necessary to maximize my income. But even though my income went temporarily backward, there was no question that starting that business was the right thing for me, personally.

    We could look at the lower incomes of the self-employed/entrepreneurial path as bleak … or we could turn it into the very empowering story you say you wish this was. Because based on much of my research, I do think it’s empowering.

    Both women and men we’ve interviewed are very clear in saying they started their businesses so they could be in control of their own futures. True, some leave the traditional workplace because they’ve been burned by bad bosses or corporate politics. Others, though, have a big dream/vision/passion that they are pursuing. They believe in themselves and what they are doing.

    In the case of women specifically, many recognize that traditional 9-5 work models may not allow them to live the lifestyles they want. Over the years, there’s been a strong message to women that they “can’t have it all” — that you have to sacrifice something, whether it be children or your career.

    Traditional businesses have generally been slow to accept the job sharing, work at home, and flex time arrangements that might give these women an opportunity to create what they seek through starting businesses. So, many women entrepreneurs I’ve interviewed are rejecting the traditional model and carving their own paths. They’re going solo in many cases, trying to find the balance that is right for them, based on their own very personal ideals of success. Those ideals may/may not have increased (or even parity) income as a priority.

    I think, in short, that for both men and women, our definitions of success are changing. More and more, I hear people talk about their desire to find balance .. to have great work and a great life, too. That money is not the only (or even the primary) hallmark of success. In their determination to create their lives the way they want them to be, more and more people are turning to entrepreneurship — which gives them the opportunity to be masters of their own fates.

    If we play this out over the long term, if more and more people take the reins of their own careers, doesn’t it have the power to change the traditional work model for the good of everyone? Look at all the press Google has received for it’s creative work model, for example. When the best and brightest feel empowered to go solo rather than accept a rigid structure that does not work for them, what will Corporate America do to retain great help? Will it become more flexible? Will it continue turning increasingly toward outsourcing? In either and both cases, the individual stands to gain freedom, flexibility, and self-determination while large businesses get the best of what each individual has to offer by tapping into him/her when they are at their best/happiest/most motivated rather than “punching the clock”.

    I think the best things we can do is to help those on an entrepreneurial journey to understand the risks, to get clear on their priorities and personal definitions of success, and then to help them learn (through forums like this one where people share their advice and stories, as well as through educational resources) how to develop the skills most quickly that will save them time, energy, aggravation, and risk in building their businesses their way.

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  18. i want to highlight one huge point,i think men are the worst perpetrators of women they have cause misery for women since the beginning of time-they rape women,sexually abuse young girls,assault women,degrade and humiliate women and women ended up feeling inferior and worthless because of men.men are the cause of misery and this misery come in all sort of shape,men use religion to oppress women,they use culture to oppress women,they also use modernity to oppress women.for instance women singers have to sell sex to impress men,act weak and powerless to impress men act like chickenheads to impress men if a woman shows her power then she is called names and even our own mothers are already indoctrinated because as a girl-child you are taught the value of having a man and to do almost anything to impress them.so many women and girls have low self esteem problems because of the way men want us to be,thin,beautiful to according to their standards and if you dont fall in that category as a girl feelings of worthlessness,ugliness and not loving yourself enter into your life,then you start to sleep around with these men because you want their approval and starve yourself so that you could look like that skinny model in that magazine.why should we as women suffer and even die so that we could be loved by men.lesbians are raped because men see them as threat,men have these problems of being easily threatened by strong women who do not see them as superior so they “teach lesbians how to be women”.

  19. PP, I read you over at your place and followed to read the feedback from different perspectives over here. As a business owner myself I will share my feelings on the above subject. I personally believe that leadership is a quality that is inherited. I found myself at the most basic level wanting to make the decisions and feeling uncomfortable when others either had that responsibility or were appointed to it. While making money is a needed, it was not the driving force. I could make money working for someone else. The drive to make the decisions and know that while I’m not right 100% of the time, the real satisfaction comes from knowing that I built something and am contributing to the whole. (I have employees). Fear is also a huge factor in starting your own business. The problem being that we build that monster so huge that we/I almost missed the opportunity to be a business owner. Whatever your gender don’t let the fear monster stop you if you have that leadership feeling. If you don’t have it then feel secure that those that do need you as you need them.

  20. Hey, while I agree with most of the responses I’m kind of torn in the middle and can’t decide on which side to lean on. It’s pretty safe to say that a lot of women that go into entrepreneurship for several personal reasons, including the big wage gap. However, I’m not so sure that there can be a definite answer to, “Why do women start businesses, if it leaves them worse off?” And in fact I think that such question can scare off probably some of the most potential successful women out there. I just recently came across this website called savorthesuccess.com designed exclusively for female-owned businesses. The website hosts a number of women who’ve started their own business on a range of different fields and they all prove to be examples of success.

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