Women’s History Month draws nationwide attention to reflect on the numerous and notable contributions of women in our society. With women-owned businesses now accounting for approximately 40% of US businesses, this moment offers an opportunity to celebrate how women contribute to our nation’s economy as entrepreneurs and highlight their struggles, often against inequities, in business ownership.
In a new survey commissioned by Intuit QuickBooks, insights show that women-owned businesses are more likely to experience cash flow and funding challenges despite effective management and high growth aspirations. This may explain why more women are forced to use their own money to fund their businesses.
An equal appetite for growth
Women business owners are chasing entrepreneurial success and expansion at the same rate as their male counterparts. More than three in five women and men (62%) indicate steady or fast growth is a primary goal for their businesses. Despite an equal appetite for growth, financial inequities pose a challenge in attaining the success women owners envision for their businesses.
Financial disparities persist
As survey results show, women are more likely to dip into personal funds to cover business expenses, highlighting a significant pain point in their experience with business ownership. More than three in five (62%) women have had to use their own money to fund part of their business since startup—among men, this number drops to 56%.
While a higher percentage of women are tapping into personal funds for their businesses, a significantly smaller number are using private business loans from commercial lenders as part of their financing. Only 16% of women have used a bank loan since startup—compared to 25% of men. Data shows that women-owned businesses are approved for the full amount sought with bank loans at a lower rate than men, a disparity that could partially explain why women are less likely to pursue this funding option.
Of those who used their own money as business funds, only 21% of women pulled this money from an investment portfolio—well below the 38% of men who did the same. With funding being a key hurdle for women-owned businesses, equity in access to all means of financing and resources, including investments, is a prime opportunity to level the playing field in entrepreneurship.
Financial health lagging behind non women-owned businesses
As survey results show above, women are equally hungry for success in business. Yet women-owned businesses are struggling with profitability and financial health—the biggest survival-critical aspects of business. One in two (52%) women report that their businesses are in bad financial health. For men, this drops to 46%. Similarly, only 35% of women expect an increase in revenue over the next three months while 48% of men expect the same.
Cash flow conundrum
Poorer financial health among women-owned businesses could be attributed to a number of reasons. One potential culprit is strained cash flow. Women (54%) are more likely than men (46%) to indicate cash flow as a problem in their businesses. And while a majority of women-owned businesses (87%) know how to measure cash flow, they still trail behind their male-owned counterparts (92%).
What business challenges are women facing?
With cash flow as a critical challenge, it’s no surprise that rising costs of inflation is a major concern for more than six out of ten women-owned businesses (64%). For businesses already cash-strapped, the financial pressure of increasing prices for goods and services can pose a serious threat to their success. It follows that women-owned businesses (35%) are more likely than their male peers (28%) to have used emergency funding to cover immediate costs due to cash flow problems.
Another contributing factor that could be fueling low profitability and revenue is customer demand. Survey results suggest more robust customer demand for non-women-owned businesses. This in combination with results revealing that only 70% of women-owned businesses know which marketing strategies provide the best return on investment suggest customer growth is a difficulty for these businesses.
Taking the lead with internal challenges
Across the board, women-owned businesses report less internal challenges with matters such as lack of management expertise, low workforce productivity, and inefficiency than their peers. While women face significant financial disparities, survey results suggest that their businesses are well-managed and prospering in how they operate. Compared to 14% of businesses owned by men, only 9% of women-owned businesses report internal challenges stemming from a lack of management expertise—despite reporting having no formal management training at a higher rate (49%) than men (36%). Women are also nearly just as likely to rarely or never feel out of depth at work compared to men (73% vs. 75%).
With many businesses still feeling the impact of the Great Resignation and ongoing hiring challenges, employee retention continues to be a priority in operations for a number of small businesses. The good news is that women-owned businesses (44%) are less likely than their peers (52%) to indicate that employee retention is getting harder—another signal that while these businesses may struggle with financials, with more support, they could achieve the success they dream of.
Sample and methodology
Intuit QuickBooks Women’s History Month 2023
Online survey commissioned by Intuit QuickBooks in September 2022 of 1,500 US business owners (618 women and 828 men). Respondents’ median business revenue from the previous year was $785,157 for women and $1,511,838 for men. Over one in four (27%) women respondents are sole proprietors. Almost one in five (18%) men are sole proprietors. Nearly half (47%) of women respondents have up to 20 employees. Four out of ten (42%) men respondents have up to 20 employees. Personal care services (6%), accounting (5%), and education support services (5%) are the top industries among women respondents. Agriculture (5%), accounting (5%), and business/professional organizations (4%) are the top industries among male respondents. More than one out of three (38%) women respondents have been in business for up to five years. A quarter (25%) of male respondents have been in business for up to five years.
Disclaimer
This content, report and materials are for informational purposes only and should not be considered legal, accounting, financial, investment, or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc., or its affiliates do not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc., or its affiliates do not warrant that the material contained herein will continue to be accurate nor that it is completely free of errors when published. Readers should verify statements before relying on them.
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This article originally appeared on the Quickbooks Resource Center and was syndicated by MediaFeed.org.
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5 tips for organic business growth
It’s no secret that startups have a prodigious failure rate. In fact, according to a recent Entrepreneur.com study, the four-year survival rate for a startup is just 49%.
With demoralizing stats like this in mind, entrepreneurs may be tempted to grow their profits through any means necessary, including inorganic strategies like acquisitions or mergers. However, the truth is that business owners can achieve impressive growth through organic strategies as well, allowing them to retain control of the companies they built from the ground up.
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Also known as “true growth,” organic growth refers to the process of growing a business by reducing costs and increasing sales, either by finding more customers or enhancing output to current clients. On the other hand, inorganic growth occurs when a company merges with or is acquired by a second business. Entrepreneurs should take the time to familiarize themselves with the advantages of organic and inorganic growth, as well as some of the top strategies for execution, so they can decide which is the best choice for their business.
As a new business owner, you’ll likely want to increase profits as quickly as possible. By employing inorganic strategies like mergers and acquisitions, startups can grow their businesses more quickly while taking advantage of resources such as stronger credit lines and expanded market resources. Additionally, joining with another company lets you take advantage of its expertise and experience in the industry to develop your own brand.
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By merging with another business, you agree to hand over some of your control and equity to another company. Not only can your initial vision become diluted, but you may also be forced to take on new business and managerial challenges before you’re truly ready. In some cases, you may have to rush to grow your staff and production capabilities to keep up with demand.
On the other hand, organic growth techniques allow you to grow your business on your own timeline. Because you aren’t sharing control with another company, you can hire employees and expand sales at your own pace. Additionally, entrepreneurs who maintain their autonomy now can sell for a larger profit later when the company is fully developed.
While retaining control of your company offers many advantages over the long haul, it can make business growth challenging in the short term. Some entrepreneurs struggle to grow beyond their current marketplace, while others find themselves cut down by the competition. Additionally, new businesses must often fight to make ends meet from month to month. Fortunately, strategies exist to help startups grow their profits without handing over control to partners or investors.
Here are just a few of those strategies to help you grow your business organically:
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Want to grow a business that will feed your family and employees for years to come? The first step on the road to entrepreneurial success is starting the right kind of company.
With home-based and e-commerce businesses, you can avoid expenses like rent and commuting during the early, lean years of your company. As an added bonus, working out of the home lets you write off parts of your mortgage and electric bill. You can then invest these savings back into the business to help you grow in the long term.
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A common conundrum for new business owners is whether to take your full cut of the profits or invest the money back into your company. While you may be tempted to keep some of those hard-earned dollars for yourself, you should aim to reinvest gross profits whenever possible to help your business grow. Investing your own money shows prospective clients and lenders that you are confident in your company’s long-term potential.
Not sure where to put profits? When in doubt, invest in marketing, SEO and other tactics likely to generate more business for your startup. If your income permits it, you may also want to invest in employee training and technological improvements, as these can yield large profits down the line for your company.
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No matter how happy your current clients are with your offerings, you will have trouble growing your business organically if you don’t put effort into finding new sales channels. If you don’t currently sell your goods online, you should definitely consider starting a website to expand your reach to other regions. Additionally, you can introduce new products, cross-market services to your existing clients and expand to different markets. For example, a company that specializes in SEO may want to expand its services to include social media and search engine marketing.
Finally, business owners should employ market segmentation to customize their strategies according to the specific channels they are leveraging and the specific markets they are trying to reach. This way, you can create unique campaigns based on customer location and demographics and watch your sales rates skyrocket.
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As a new business owner, you may feel the urge to micromanage everything that happens at your company. However, the truth is that macro-management is a far more effective way of enabling organic growth for your startup.
To keep your company moving forward, you should train top employees to take over some of your daily responsibilities. While you may be tempted to keep costs down by hiring employees who will work for less, in the long run these staff members could end up costing you more if their efforts aren’t up to par. Find people you can trust to get the job done—even when you’re not around—so you can focus on growing and developing your business in the years to come.
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From minimizing spending, to reinvesting profits back into the business, organic growth strategies help ensure that you will retain control of the company you worked so hard to build. Do your research, and consider all the growth strategies available in order to give your business the best shot at success.
Do you know how sales taxes are impacting your bottom line? Check out our sales tax calculator.
This article originally appeared in the QuickBooks Resource Center and was syndicated by MediaFeed.org.
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