The role of women entrepreneurs can no longer be underestimated. Multiple research studies have found that female entrepreneurs are critical to the economic growth of countries and the world. A study by McKinsey Global Institute found that empowering women and closing gender gaps could help add $12 trillion to the global economy by 2025.
However, the global COVID-19 pandemic has left a significant dent in women-owned businesses. In the Global Gender Gap Report for 2022, it was noted that women have been working far fewer hours than men since the peak of the pandemic in 2020. Another report from Global Entrepreneurship Monitor found that business exit rates for women increased from 2.9% to 3.6% over the two-year pandemic period.
In this article, to celebrate National Women’s Day, we’ll look at the state of women’s entrepreneurship worldwide and the future of female-owned businesses.
The State of Women Entrepreneurship
Women are bringing innovations and gaining power in the business world but are still trailing behind. As the world recovers from the devastating effects of COVID-19, businesses are still having it rough. This is mostly due to inflation and a looming recession.
Despite all this, women are showing fierce determination to grow their businesses. On average, women’s businesses grow at a higher rate (84%) than men’s (78%). Additionally, 59% of women report their businesses are profitable.
Let’s explore the state of women’s entrepreneurship further.
Women Are Starting More Businesses
According to research compiled by the World Economic Forum (WEF), the number of female entrepreneurs is on the rise around the globe. The number of new women-owned businesses in the US rose from 28% in 2019 to 49% in 2021. The same growth has been seen worldwide. The number of women-run micro-businesses in the UK increased from 32% in 2020 to 40% in 2022.
In the developing world, female entrepreneurship is also on the rise. The World Bank estimates that there are about 8 to 10 million small and medium enterprises with at least one female owner.
Some factors driving women’s entrepreneurship are the need to be independent and manage their time. The inappropriate share of housework and childcare responsibilities has also limited the industry women entrepreneurs can venture into.
Despite the gains, the scales are not balanced. Worldwide, only 1 in 3 businesses are owned by women. At 1 in 4, the ratio is even worse in low-income countries. One of the reasons slowing down women’s entrepreneurship is a lack of confidence. Only 39% of women trust their capability to start a business compared to 55% of men.
Female Entrepreneurs Are Still Facing the Same Old Challenges
While women have made great strides in the business world over the last few years, they are still facing the same old challenges that have previously held them back. Let’s revisit three of the main hurdles preventing women enterprises from reaching their full potential:
Limited Access to Funding
Women entrepreneurs receive less funding than their male counterparts. According to a report by Bank of America, 29% of responders think women business owners will never have equal access to capital.
The situation is even direr in developing countries where lack of finance is the biggest constraint to the growth of female-led businesses.
Despite the leaps made, women are still trapped within the norms and conventions of society. In most households, women are still the homemakers who are supposed to clean, cook, and ensure everyone is comfortable. This is true even in developed countries like the US, where 40% of breadwinners are women.
Managing all these responsibilities with work can be hectic. For this reason, almost 60% of women business owners say they have to work harder to achieve the same level of success as men.
Overall Gender Bias
A 2022 report revealed that a third of women experience sexism as business owners. The most significant bias comes from investors, colleagues, and customers underestimating or not taking them seriously. This hinders women’s ability to access funds and grow their businesses.
In developing countries, women entrepreneurs also face legal constraints that restrict their ability to own properties or use their assets as collateral to access funding.
Women-Owned Businesses Are Employing More People
Female entrepreneurs are making significant contributions to the growth of economies globally. In the US, women’s businesses contribute $3 trillion to the economy and are responsible for over 23 million jobs.
According to a US Census Bureau data report, women entrepreneurs are hiring more people. The report found that over the last five years, total employment by women-owned businesses increased by 8%, while for all businesses, the rise was far lower at 1.8%.
Additionally, in response to the Great Resignation, 63.53% of small women-owned businesses increased compensation and improved their retention rates.
The role of women entrepreneurs in creating new jobs is even more significant in developing countries. This is usually because of necessity-driven entrepreneurship, which happens when women start a business due to a lack of employment. As their business grows, they create jobs for vulnerable members of society.
The Majority of Women Work as Small-Scale Business Owners
According to a recent report published by Guidant, 22.32% of women small business owners in the US worked in the retail industry. The other preferred sectors include health, beauty, fitness, business services, food and restaurant, and education and training.
|Health, Beauty, And Fitness Services||16.1|
|Food And Restaurant||11.6|
|Education And Training||4.5|
|14 Remaining Categories were less than 5%||33|
For the rest of the world, the World Bank estimates that at least 30% of women who work in the non-agriculture industry work in the informal sector. In Africa, the number rises to 63%. The data also shows that the retail and service industry makes up most female-owned businesses globally.
Additionally, less than 3% of women are starting businesses in Information, Computers, and Technology (ICT) compared to men (4.7%). ICT is the industry that draws the majority of venture capital funding worldwide.
Female Business Owners Wish They Were More Financially Knowledgeable
According to the 2022 Women & Minority Business Owner Spotlight, more than three-quarters of female business owners wish they had more knowledge about small business finances. The three main areas are cash flow management, accounting, and securing grants.
To improve cash flow, women entrepreneurs should consider offering their customers incentives, sending invoices early, outsourcing some services, leasing equipment instead of buying, improving their payment processing, and accepting credit cards from all major providers.
Small businesses can also take their accounting to the next level by using powerful credit card and payment processing software. These tools can help them keep track of sales by managing and recording online, mobile, POS, and card transactions. High-quality payment processing solutions can also help eliminate repetitive tasks, reduce expenses and recurring fees, and give business owners peace of mind and more time to focus on growing their brands.
The Future of Female-Owned Businesses
The future remains bright for business owners, and more women are expected to start their entrepreneurship journey. Some of the trends that will shape the growth include:
- Successful women entrepreneurs supporting and mentoring new women business owners
- Increase in grants and funding made explicitly for women businesses from governments and other players
- The rise of women “sidentrepreneurs” (part-time business owners)
- Increase in minority-women-owned businesses