What Helps Women-Owned Businesses Grow?Rieva Lesonsky
Conventional wisdom has it that women-owned businesses don’t grow as big or as fast as those owned by men. However, that conventional wisdom may not be so wise, according to a new report by Babson College on the Goldman Sachs 10,000 Women initiative.
The 10,000 Women initiative was launched by the Goldman Sachs Foundation in 2008. The five-year, $100 million global initiative, completed last year, aimed to foster greater economic growth by providing 10,000 underserved women entrepreneurs in developing nations with a business and management education, access to mentors and networks, and links to capital. Here’s what the initiative revealed about what helps women-owned businesses grow
Advice and business education help women-owned businesses grow. While many other studies worldwide have shown that women entrepreneurs tend to grow businesses more slowly and at lower rates than do men, women who participated in the 10,000 Women program grew their businesses dramatically, in terms of both revenues and employees.
By 18 months after graduation, the typical participant in the program had more than doubled the size of her work force. In addition, more than two-thirds (68.5 percent) of the women’s companies increased revenues; on average, revenues grew an astounding 480.1 percent.
Mentoring and business networks help women-owned businesses grow. Before joining the program, fewer than half of the women had a mentor or advisor. A whopping 89 percent of women in the program either agreed or strongly agreed that having a mentor helped their companies grow. Women also said networking with other entrepreneurs in the program was beneficial to their growth, especially in-person networking.
The study theorizes that women entrepreneurs typically have smaller, less diverse networks than do male entrepreneurs, so women stand to benefit exponentially when they expand their networks. In fact, 90 percent of the women in the program went on to mentor other women business owners. On average, each women mentored eight other women.
External financing could help women-owned businesses grow even more. Most women-owned businesses in the study financed their growth largely from internal sources such as retained earnings. Even though many of them needed external capital, most didn’t apply for it, citing their perception that they were unlikely to get it, the difficulty of figuring out the application process or the lack of favorable loan terms.
However, the program found that when women did apply for external financing, they were highly likely to get it. The findings suggest that women are hurting themselves and their businesses by assuming they can’t get capital. Considering how big they are able to grow using only internal capital, imagine how much bigger they could grow if they made the leap to seeking external financing.
(Disclosure: The Goldman Sachs 10,000 Small Businesses Program is a client of my company.)
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Rieva Lesonsky is CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at firstname.lastname@example.org, follow her on Google+ and Twitter.com/Rieva, and visit her website, SmallBizDaily.com, to get the scoop on business trends and sign up for Rieva’s free TrendCast reports.