Right now, it’s an exciting time to be a woman entrepreneur in America. Not only is the country’s startup ecosystem more supportive of ambitious women in technology, the number of women who are starting businesses is growing. Between 1997 and 2011, the number of women-owned companies grew by 1½ times the national average. As of 2011, there are an estimated 8.1 million women-owned businesses in the U.S. These businesses generate nearly $1.3 trillion in revenues and employ 7.7 million people. Although this is all promising news, there is a significant stalling of growth for women-owned businesses when they reach $1 million in revenue.
According to the recently released American Express OPEN State of Women-Owned Businesses Report, revenue from women-owned businesses is outpacing revenue from men-owned businesses. The report concludes that there is still more work that needs to be done at the later enterprise level in the company lifecycle. While the number of women entrepreneurs is growing, the number of women who can lead a company to the $1 million in revenue is still slim.
Over the past 14 years, the number of companies owned by women that have $1 million or more in revenue has remained the same: 1.8 percent. During this same time, the number of companies with 10 or more employees has dropped from 2.5 percent in 1997, to 1.9 percent in 2011.
If the number of women entrepreneurs is growing, and their contribution to the U.S. economy is growing, why are these businesses stalling before breaking through to the next level? Clues emerge far before companies come close to even half a million in revenue. When the growth of women-owned businesses starts to level off when the business reaches either five to nine employees or $250,000 in revenue. This is the stage where a company unofficially graduates from a lifestyle business to a small business. A lifestyle business is a company that provides just enough income for entrepreneurs to pay their bills and live a comfortable life.
While it’s true that scaling a business is not the choice that all entrepreneurs decide to pursue, the startup community must be able to see through the optimistic outlook at the beginning of AMEX’s report. Creating a pipeline of investment and mentorship for women who want to grow their businesses beyond lifestyle businesses is key to ensuring that more women have the opportunity to reach for the $1 million in revenue milestone.
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