Two articles on the growth gap between women- and men-owned businesses caught my attention yesterday. Interestingly, many of the same reasons that cause the infamous wage gap between men and women, the Paycheck Fairness Act (which failed in the Senate this Wednesday) sought to address, come into play when comparing male and female business owners. I am almost hesitant to discuss these issues with the concern that some well-intentioned, but misguided, feminist groups and politicians will soon suggest a Business Growth Fairness Act. But maybe, just maybe, we can deflate that balloon before it starts floating.

An article in Bloomberg Businessweek compares the Commerce Department’s recent findings on “Women-Owned Businesses in the 21st Century,” with the Obama administration’s attachment to the report, detailing all the wonderful programs that they wish to put in place to help women-owned businesses grow and prosper. The author, Scott Shane, finds that there is a divide between the administration’s policy suggestions and the causes of the growth gap between businesses owned by men and women.

  • In 2007, the sales of the average women-owned business were only $153,000, a quarter of the $612,000 of the average business owned by men.  
  • Jobs in businesses run by women pay less than those led by men, with women-owned businesses paying an average of 78 percent of men-owned businesses, a figure that has shifted little in the past decade. [Oh, Oh! Are female business owners perpetuating the wage gap by paying only 78 cents to the dollar to their employees than men do? What would the Paycheck Fairness Act (PFA) have meant for women-owned businesses? Actually, women tend to run different kinds of businesses than men do which explains part of the paycheck wage gap among them. (See below.) Passage of the PFA, however, could have had devastating impacts on women-owned businesses.]
  • Women start businesses in less desirable industries, favoring those in which the average company has lower sales and employment.
  • Female business owners work less, with the average self-employed woman working 40 hours per week vs. 46 hours for the average self-employed man.
  • Female business owners hold different attitudes and behave differently than male business owners. [They] expect lower levels of business growth in terms of sales and employment, [which] influence[s] everything from the way that women design their businesses to how they finance them.

So what does the administration propose to address these issues? Scott Shane finds no relevant proposals. The boasting about provisions to benefit small-business owners in the Recovery Act and the Small Business Jobs Act, and the promise of new Women’s Business Centers are neither warming his heart, nor mine.

Sharon G. Hadary, in the Wall Street Journal, explains the business growth gap in a more convincing fashion, laying out more promising, private proposals on how to help women overcome barriers to business growth.

  • Women self-limit the growth of their businesses. Women start businesses to be personally challenged and to integrate work and family, and they want to stay at a size where they personally can oversee all aspects of the business.  
  • Women Business Centers perpetuate women’s self-limiting tendencies by ignoring future planning for growth and emphasizing conservative budget planning.  
  • Lack of growth aspirations and planning discourages bankers and investors from lending to women.  

Hadary suggests numerous, private ways in which women can receive the guidance and encouragement to go beyond current growth aspirations and to take their businesses to the next level. There are many things the government can do, however, to facilitate business growth. As Nicole Kurokawa put it in her Stiletto Nation piece on Government’s Not Helping Female Entrepreneurs:  

Permanent, low tax rates and credits for small businesses will provide fiscal certainty, while lighter regulatory burdens will allow entrepreneurs to concentrate on the thing they do best – running their businesses and making money – and reduce the time they spend on compliance and paperwork.  

Many of the reasons for the business growth gap between men and women result from personal preferences. Women tend to start smaller, less demanding businesses in order to express their work-life balance preferences and to be with their families. There is no shame in women preferring a balanced lifestyle and to spend more time at home with their families. These choices come at the cost of lower business growth, though.

There are, however, some women that are discouraged from expanding their businesses for lack of confidence and encouragement. Private initiatives of successful women reaching out to aspiring entrepreneurs, and initiatives, by enlightened bankers and investors who understand the great value women entrepreneurs can deliver, to help with future business growth plans, could go a long way.