© Bank of America Corporation. All rights reserved.
They overcome financial hurdles to start businesses at a higher rate than men.1 How women do it offers lessons for all aspiring entrepreneurs.
THE LIST OF SUCCESSFUL COMPANIES STARTED BY WOMEN includes many iconic brands—from Zipcar to SoulCycle. And that list is bound to grow. Women’s entrepreneurial activity continues to climb, according to a 2019/2020 Global Entrepreneurship Monitor survey. Women own more than a third of privately held companies, and one in five firms with revenues of $1 million or more is owned by a woman, according to the National Association of Women Business Owners, as of September 2020.
What’s the appeal of entrepreneurship for women? It may be the ability it gives them to circumvent the corporate glass ceiling. By founding and owning their own businesses, women place themselves in charge. For mothers juggling work and family, entrepreneurship can also offer more flexibility, allowing them to set their own hours. All of which may help to explain why over 1,800 new women-owned businesses are started per day, according to the 2019 State of Women-Owned Business Report from the Women’s Business Enterprise National Council.
For all its appeal, however, starting a business poses unique financial challenges for women. Women have fewer mentors and role models to coach and guide them. They can have a more difficult time securing funding—and they are less apt than men to ask for seed capital. In fact, according to the Bank of America 2019 Women Business Owner Spotlight, more than half of women entrepreneurs say they do not have equal access to capital compared to their male counterparts, though 84% believe that access to capital has gotten easier in the last 10 years. The barriers women face in obtaining start-up and growth capital can create ongoing challenges, including slower growth and difficulty recruiting talented employees, according to Beyond the Bucks: Growth Strategies of Successful Women Entrepreneurs, an October 2019 research report by Babson College and Bank of America.
“Women need a supporting human and financial capital network behind them—something men have enjoyed for a long time,” says Kay Koplovitz, co-founder and chairman of Springboard Enterprises, a network dedicated to building high-growth life sciences and technology companies led by women. Here, Koplovitz and others who have built successful companies offer advice for women thinking of taking the plunge.
Look to Other Women for Funding
Helping today’s women entrepreneurs find financing are the many women who came before them. As an increasing number of successful businesswomen become investors, they’re taking other women entrepreneurs under their wing. “Women are very good at building sustainable businesses if they have access to financing and get to compete on a level playing field,” says Koplovitz.
Several venture capital firms run by women specialize in providing funding for women who have good business ideas and solid business plans. They include Plum Alley Investments, Golden Seeds and Springboard Growth Capital, another of Koplovitz’s companies. Bank of America partners with the Tory Burch Foundation to offer access to capital for women entrepreneurs, as well.
When looking to more traditional sources of venture capital funding, women entrepreneurs can often face misperceptions about why they’ve started a business in the first place, according to the Beyond the Bucks report. Stephanie Kaplan Lewis, co-founder and CEO of Her Campus Media, experienced this firsthand. "We are women running a female-focused, female-at-its-core, company,” she says. “In the beginning, some people thought that it was kind of fluffy and weren't sure if it was just a fun side project, as opposed to the real, viable, sustainable, profitable business it is."
The report found that women entrepreneurs developed strategies to overcome those misperceptions. Those who focused on creating products and services for women have an added advantage—their own experiences and insights. Because women have significant purchasing power, “the women’s market presents enormous potential for business growth,” the report states. What’s more, forming partnerships with other entrepreneurs in women-focused ventures can create numerous cross-market opportunities.
Delegate to Keep Your Balance
Being the CEO of your own company requires an intense commitment of time. Many of the women entrepreneurs interviewed in the Beyond the Bucks report recognized that investing in their employees helped them to create a workforce that could manage the daily operations of the business without constant oversight, freeing them to focus on strategic planning and fund raising. They referred to this as “working on the business—not in it.” Delegating tasks and creating engaged teams helped them grow their businesses.
“It’s not all about the bottom line and hitting numbers. It’s also about making sure people are satisfied and fulfilled, have growth opportunities, and see a path forward,” says Sabena Suri, co-founder and chief strategy officer of BoxFox, an e-commerce gifting company. “As a female founder, you can lead with that philosophy and that skill set and that’s not a bad thing.”
Limit Your Financial Risk
“Entrepreneurs frequently are somewhat optimistic about financial projections,” notes Joe DiNicola, a Small Business East Division executive at Bank of America. You need to be prepared to operate at a loss for a while, and it’s important to verify every assumption. Can you actually rent an adequate space for $1,000 a month? Have you double-checked your product cost estimates? “Only when you get clear answers to such questions can you begin to consider your funding options,” he says.
It’s common to rely on personal or family savings as the primary initial source of funding for business startups. However, women tend to rely slightly more heavily on personal or business credit card use, according to the U.S. Small Business Administration, as of 2017. And that can be risky, because it automatically commits the owner to inflexible monthly payments that can limit the amount that can be invested in building the business.
Working with a financial advisor to consider your options and manage those risks can help. That’s what Lisa Young, a transportation planner based in Fullerton, California, did when she decided to set up her own business. Sammie Kothari Peng, her advisor at Merrill, helped guide her financially and provided encouragement as she made the leap to being her own boss in 2015. “We prepared a budget. We prepared, really, a pros and cons. What that would mean for her from a financial standpoint, and a personal standpoint,” recalls Kothari Peng.
Believe in Yourself—and Pay It Forward
Every woman starting her own business is bound to find the partnerships she forges with her mentors and advisors invaluable in helping her overcome the hurdles she’ll face along the way. Don’t forget to commit to doing the same for tomorrow’s entrepreneurs when you’ve succeeded in your business goals. Having more women in powerful positions of influence was identified as the single most important factor to help pave the way for the next generation of women in business, according to the 2019 Bank of America Women Business Owner Spotlight.
1 The State of Women-Owned Businesses, 2019, Women’s Business Enterprise National Council.