Becoming an entrepreneur is difficult and scary. It often means taking a tremendous personal risk while also signing up for long hours and hard work—and while this road is difficult for anyone, female entrepreneurs also have additional hurdles to clear before our businesses can succeed.
On paper, the prospects look great for women entrepreneurs. In 2017, more than 11 million US businesses were owned by women, generating approximately $1.7 trillion in sales. While these numbers are impressive, they don’t tell the full story. Even the most successful female entrepreneurs report experiencing many challenges.
The challenges these women commonly face are reflected in further data on the topic. Despite making up more than half of the total population in the US, female entrepreneurs represent only 1/3 of the total globally. We also have less access to funding and capital. Fewer than 3% of companies with venture capital funding had female CEOs. This problem represents a tremendous challenge for women since the number one reason new businesses fail is a lack of growth capital. Furthermore, fewer than 6% of female-owned firms generate revenue exceeding $250,000, and only 10% hire employees. The remainder are sole proprietorships.
While the data demonstrates the tremendous challenges women entrepreneurs face, it also tells another story: the importance of persistence. Even though women comprise only 1/3 of all entrepreneurs, this figure has grown by nearly 60% since 2007. Moreover, in the face of a deepening understanding of the challenges female entrepreneurs have to overcome, many new opportunities—including those related to funding—have become available.
Ultimately, if female entrepreneurs can overcome the following three big challenges, we significantly increase our chances for sustainable long-term success.
1.Gaining Access to Capital
Female-owned and female-led companies are woefully underrepresented in the venture capital world. Because recent reports have found that women are in the extreme minority of startup companies, there has been a movement to increase the number of capital opportunities for women entrepreneurs.
Financing a startup and securing funding is difficult under the best conditions, so initiatives that focus on female-led companies are crucial in helping these companies succeed. By focusing on funding opportunities specifically for women, you will have a better chance of actually securing capital for your business. The competition will be closed to the majority of other companies, which will automatically increase your odds of securing much-needed capital.
2.Scaling Beyond Your Control
Scaling a business is also no easy task. For many women, the scaling of their company is limited to what is achievable within their personal control. This is why so many female-owned companies are sole proprietorships. While funding is a primary barrier to achieving a greater business scale, it is not the only one. Increasing business scale requires putting in significant legwork related to planning as well as data and industry analysis. It also involves fostering customer, supplier, and partner relationships and forging new business relationships.
Fortunately, once this process gets started, it can often have a snowball effect. When a business gains growth momentum, it becomes easier to continue to scale it. But this effect is still difficult to achieve in the predominantly masculine world of business. Barriers related to scaling in female-owned businesses can be overcome by putting in the effort to evaluate your business and industry, understand the market, and develop optimal strategies. The more you know about market conditions, the better your position will be for growth. With careful preparation, you can make smart data-driven business decisions that will lead to continued growth.
3.Preparing for and Planning an Exit or Financial Event
Being an entrepreneur means you will have to make a lot of tough decisions that will impact your growth and income potential…and possibly even your retirement prospects. Many business owners view their company as their retirement plan. If you are considering making an exit soon, or if you have another major financial event looming on the horizon, it’s a good idea to begin planning for it. Even though 41% of small business owners report that they plan to leave their businesses within the next five years, the majority of these individuals have never even had their businesses appraised and nearly half lack a formal exit strategy.
Without a formal appraisal or business valuation, you have no idea what your company’s actual value is…and it’s tough to negotiate a favorable deal without data to back up your position. One small misstep in this process can cost you tremendously. It’s worth planning and going through all of the steps of a formal business valuation before an exit. You will want to have all of the necessary information in front of you before deciding on the best way to proceed.
There is no denying that women have a tough path to success as entrepreneurs. Fortunately, the strategies mentioned here can enlighten female business owners and help them gain the tools they need to succeed—especially as more and more women entrepreneurs continue to launch all types of new business ventures.
About Farissa Knox
Farissa Knox is a successful woman of color entrepreneur and speaker. She is the founder and CEO of RLM Media, an integrated marketing and communications advertising agency, and WhatRUWearing (WRUW) Productions. Farissa’s content and on-air appearances span NBC to Amazon Prime. In its second season, her reality show PRGirl showcases the grit and grind behind the lifestyle, fashion, and beauty sectors in the PR industry. From writing to designing, speaking, and creative development, Farissa draws inspiration from real life with a mission to change the social narrative and empower diverse, authentic characters.