The close of Women’s Small Business Month is a good time to take stock of the state of women-owned firms in the U.S.
As we know from a previous report from National Women’s Business Council, there were 9.9 million women-owned businesses, or 36% of all nonfarm businesses, according to the most recent U.S. Census data count in 2012. That represents a 27.5% increase from five years prior.
Although these businesses generated $1.6 trillion in profits, which exceeded the rate of revenue growth businesses helmed by men, it’s still challenging for women to start their own firms. A 2014 Senate Committee report on small business and entrepreneurship found that there are significant barriers to women’s entrepreneurship. Chief among them: Women don’t have fair access to capital. Only 4% of the total dollar value of all small business loans goes to women entrepreneurs. Other hurdles include getting equal access to federal contracts and getting relevant business training and counseling.
There are some bright spots. Nerdwallet, a financial advice and tools site, took on the task to find the 10 best places for women to launch a business.
To do this, Nerdwallet analyzed the U.S. Census Bureau’s survey of business owners and its American Community survey, as well as data from the Small Business Administration. Then they scored cities based on three criteria:
Business climate -45% of the overall score
This includes average revenue per business, percentage of firms with paid employees, and the number of women-owned businesses per 100 residents.
Local economic health -25% of the overall score
This includes median annual income for women, that median compared with men, and unemployment rates.
Financing opportunities -30% of the overall score
Looked at SBA-guaranteed loans per 100,000 residents as well as the average size of SBA-guaranteed loans.
All of the top 10 metro areas received more SBA loans per 100,000 residents than the national average. However, Nerdwallet’s small business analyst Kamran Rosen tells Fast Company, “As the methodology is pretty comprehensive, it’s difficult to pinpoint one reason why all places in the top 10 scored so high.” Rosen says that the most heavily weighted factors to determine which cities ranked highest included the number of women-owned businesses, the unemployment rate, the percentage of women-owned businesses that have employees, and SBA loans per 100,000 residents.
“I’d say the women-owned businesses per 100 is actually a strong factor in our top 10,” he says, noting that the average number is 3.49 in the top 10, compared to 2.48 for the whole list.
Rosen notes that while Boulder has a high gender pay gap, it also had the highest number of women-owned business per 100 residents out of the whole list. “SBA loans per 100,000 was also substantially higher in our top 10 compared to all cities–24.36 compared to 14.56,” Rosen adds.
Could it be that the gender pay gap is forcing women out of corporate ranks and into entrepreneurship? Rosen says, “It’s an interesting theory, but it would be out of our scope to presume causation in any of these figures.” Rosen does admit that Boulder has offset its gender pay gap by having lots of women owned business, “but again we can’t really make any normative statements on causation.”
None of the businesses in the top 10 brought in more than $175,000 in annual revenue. The majority of the firms across the 175 metro areas analyzed averaged revenues between $100,00 and $199,000. Notable exceptions were Spartanburg, South Carolina ($489,206), and Lancaster, Pennsylvania ($597,554). Spartanburg’s location near BMW’s U.S. manufacturing headquarters makes it prime territory for women-owned original equipment manufacturers (OEMs) to set up shop and supply the German automaker with parts for the vehicles it produces at the facility.
The overall low revenues represent an opportunity loss for women-owned businesses across America. According to analysis by the U.S. Women’s Chamber of Commerce, if women’s businesses secured 35.95% of all U.S. business revenues, annual revenues would be $12 trillion. But as women-owned firms only generate $1.6 trillion in revenues annually, the shortfall is over $10 trillion each year.
As Margot Dorfman, CEO of the U.S. Women’s Chamber of Commerce, notes in a statement:
It’s time for federal, state, and local governments to realize how much opportunity we are all losing by not addressing the needs of women business owners. Failure to provide equitable access to capital, access to quality, mainstream business education, access to government and large corporate supplier markets, access to mentors, and access to affordable health care and benefits are holding women back. This opportunity loss impacts every American as our economy is failing to realize the full potential of American women entrepreneurs.