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Why It’s Not ‘Business As Usual’ for Women Entrepreneurs

They overcome financial hurdles to start businesses at twice the rate of men. How women do it offers lessons for all aspiring entrepreneurs.

THE LIST OF SUCCESSFUL COMPANIES STARTED BY WOMEN includes many iconic brands—from Learning Express to Zipcar. And that list is bound to grow. Women’s entrepreneurial activity increased by 10% between 2015 and 2016, according to the Global Entrepreneurship Monitor survey, and it continues to climb. Women own more than a third of privately held companies, and one in five firms with revenues of $1 million or more was started by a woman, according to the National Women’s Business Council (NWBC).

What’s the appeal of entrepreneurship for women? It may be the ability it gives them to circumvent the corporate glass ceiling. Globally, women hold fewer than 4% of all CEO jobs and less than 10% of CFO positions, according to the recent Bank of America report Women: The X-Factor. By founding and owning their own businesses, women place themselves in charge. For mothers juggling work and family, entrepreneurship can also offer more flexibility, allowing them to set their own hours. All of which may help to explain why women now make up 40% of new entrepreneurs in the United States—the highest percentage since 1996, according to the 2017 Kauffman Index of Startup Activity.

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For all its appeal, however, starting a business poses unique financial challenges for women. Women have fewer mentors and role models to coach and guide them. More important, they can have a more difficult time securing funding—and they are less apt than men to ask for seed capital. In fact, according to the Bank of America 2018 Women Business Owner Spotlight, 68% percent of women entrepreneurs say they face greater challenges than men when it comes to accessing capital, though 84% believe that access to capital has gotten easier in the last 10 years.

“Women need a supporting human and financial capital network behind them—something men have enjoyed for a long time,” says Kay Koplovitz, chief executive of Koplovitz & Co., a media advisory and investment firm specializing in marketing and growth strategies for young companies. Here, Koplovitz and others who have built successful companies offer advice for women thinking of taking the plunge.


Look to Other Women for Funding
Helping today’s women entrepreneurs overcome the challenges they so often face are the many women who came before them. As an increasing number of successful businesswomen become investors, they’re taking other women entrepreneurs under their wing. “Women are very good at building sustainable businesses if they have access to financing and get to compete on a level playing field,” says Koplovitz.

Several venture capital firms run by women specialize in providing funding for women who have good business ideas and solid business plans. They include Plum Alley Investments, Golden Seeds and Springboard Growth Capital, another of Koplovitz’s companies. Bank of America partners with the Tory Burch Foundation to offer access to capital for women entrepreneurs as well.

Delegate to Keep Your Balance
Amanda Steinberg, founder of the financial media platform DailyWorth, believes that women’s experience with balancing their work and personal lives gives them a distinct edge in business. “I know countless women who have launched businesses while holding down full-time jobs and raising kids,” Steinberg says. That juggling act requires women “to be exceptional at delegating and team-building,” she adds. “If you try to do everything yourself, your business will never grow.” Steinberg herself raised close to $1 million in venture and angel capital for DailyWorth “with a newborn in my arms.” She parlayed her own $25,000 investment in DailyWorth into the multimillion-dollar financial media company it is today.

Limit Your Financial Risk
“Entrepreneurs frequently are somewhat optimistic about financial projections,” notes Jonathan Dowst, small business Northeast regional executive at Bank of America. You need to be prepared to operate at a loss for a while, and it’s important to verify every assumption. Can you actually rent an adequate space for $1,000 a month? Have you double-checked your product cost estimates? “Only when you get clear answers to such questions can you begin to consider your funding options,” he says.

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It’s common to rely on personal or family savings as the primary initial source of funding for business startups. However, women tend to rely slightly more heavily on personal or business credit card use, according to the National Women’s Business Council. And that can be risky, because it automatically commits the owner to inflexible monthly payments that can limit the amount that can be invested in building the business.

Working with a financial advisor to consider your options and minimize those risks can help. That’s what Lisa Young, 42, a transportation planner based in Fullerton, California, did. Sammie Kothari Peng, her advisor at Merrill Lynch Wealth Management, helped guide her financially and provided encouragement as she made the leap to being her own boss in 2015.

Manage Your Cash Flow
One major ongoing challenge for small businesses is managing cash flow. While 58% of female business owners expect to see increased revenue in the year ahead, according to the Bank of America 2018 Women Business Owner Spotlight, nearly half of female business owners cite not being paid on time as their biggest impediment to cash flow. “Women bankers, many of whom have run their own small businesses, understand the unique needs of women entrepreneurs and their daily financial demands,” says Anna Colton, national sales executive for small business bankers at Bank of America. “Helping a small business owner with a cash management strategy specific to her needs enables her to do more with the resources she has,” she adds. Colton notes that a small business banker can help accelerate collections with online invoicing, for example, and establish flexible electronic payments to vendors.

Believe in Yourself—and Pay It Forward
Every woman starting her own business is bound to find the partnerships she forges with her mentors and advisors invaluable in helping her overcome the hurdles she’ll face along the way. Don’t forget to commit to doing the same for tomorrow’s entrepreneurs when you’ve succeeded in your business goals.

3 Questions to Ask Your Advisor

  1. Am I in a financial position to self-fund a startup? If not, what other resources might be available?
  2. What steps can I take to protect my family’s financial future while I launch my business?
  3. How can Merrill Lynch help me provide benefits for my employees?

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1 2013 Bank of America Small Business Owner Report

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