Women in business have come a long way over the past few decades — even more so as the U.S. continues to recover from the effects of the pandemic.In fact, according to a recent report by Gusto (opens in new tab)women will start 49 percent of new businesses in the U.S. by 2021, up from 21 percent in 2019.
As exciting as starting a new business may seem, female entrepreneurs also face issues that many of their male counterparts don’t always face. Family commitments, inherent biases and changing gender roles present women with unique challenges in successfully running a business. Lack of adequate external support and advice can also create an unsustainable operating environment.
Here are some of the typical obstacles women owning small businesses encounter, and a guide on how to navigate them.
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Maintain wealth and build networks. One of the main keys to growing a business is to have the right network of people for natural expansion. This can mean a strong employee base, but also external support, such as business groups or professional advisers.
National Council of Women in Business 2020 Annual Report (opens in new tab) Point out that 90% of women-owned businesses have no employees. This is mainly because most women-led businesses are service-based (event planning, marketing, writing, etc.) and are not suitable for having multiple employees. However, this type of organization is difficult to sell as ownership retires or decides to no longer manage day-to-day affairs.
One of the biggest decisions a business owner will make is when and whether to hire employees. The hiring decision usually boils down to available cash flow and whether the owner wants to actively grow her business.
For this reason, it is important to determine whether a business is being used as a lifestyle business or is viewed as an asset for future sales or estate wealth growth. Many women embrace entrepreneurship as a passion-focused endeavor to earn an income and live and work their way. Others develop and expand businesses for future generations. Assemble a team of professionals, which may include accountants, lawyers, business coaches and financial advisors, who will help make decisions about your business development and investments.
Valid business credit and funding. Understanding the best ways to finance your business and fund growth can be a confusing, onerous process. Whether through a traditional line of credit, outside investment or cash, deciding on the right approach can be overwhelming. For women, the process is often more challenging.
Women-led businesses are 63% less likely to receive venture capital (VC) funding than male-led businesses, researchers say (opens in new tab) From Columbia Business School and London Business School.Women are also less likely to get loan approval from financial institutions simply because of prejudice against women business leaders (opens in new tab). Research shows that when women pitch VCs, they are asked questions about preventative coding, not the promotional coding questions men receive.Investors also tend to support individuals with similar backgrounds, putting women at a disadvantage (opens in new tab) in front of a male-dominated financing team.
Sometimes, working with an outside advisor, such as a financial advisor, can help you decide which option is best for you and your personal goals. They can also help you identify alternative financing options you may not have thought of at first, such as grants or loan programs, and alert you if you take on too much debt.
Family and career balance. While we’ve come a long way in combating outdated gender roles, some old habits are hard to break. Women typically carry the bulk of the household burden, including being the primary caregivers for children.
Aspiring women entrepreneurs are more likely to start businesses after their children reach school age, which puts them at risk of more biases such as ageism and traditional gender roles associated with being a mother and taking time out of the workforce to raise children.
The best way to fix this is to deepen your bench. No one person – woman or man – can run a successful business and a successful family alone. You need consultants, employees, business groups, family members and others to fill in the gaps that you simply cannot fill.
Start by joining small business groups dedicated to women and partnering with like-minded professionals.National network organizations such as the International Women’s Forum (opens in new tab) There are local chapters. meetup.com (opens in new tab) Helpful for finding local, niche-oriented groups. Set aside time for work vs. home life and use available resources without feeling guilty.
Finally, remember to take some time for yourself. Mental health plays an important role in creating sustainable business and family life.
This article was written and expresses the views of our staff consultants rather than Kiplinger editors.You can check with the SEC for advisor records (opens in new tab) or with FINRA (opens in new tab).