Fifty years ago, Congress passed the Equal Pay Act, making it illegal to pay women less than men for the same work. Since then, women have made many strides in the workplace, but things are far from equal for many.
This is true even for women starting their own businesses. Despite reports that there have been more women-owned startups than men-owned ones in the past few years, the reality is that Minnesota’s business climate still isn’t great for women, says Elaine Wyatt, the new executive director of WomenVenture.
WomenVenture is a St. Paul organization whose mission is to give women the tools and resources to be successful in business. The nonprofit was formed in a 1989 merger between CHART and WEDCO. CHART was started in 1978 to help women who were entering or re-entering the workforce. WEDCO (Women’s Economic Development Corporation) was created in 1982 to help women start businesses.
CHART and WEDCO’s goals then weren’t too different from WomenVenture’s now: provide training, support and capital to women.
Women: more cautious?
Accessing capital is a major obstacle for women. Traditional loans may be difficult to acquire, Wyatt says, so many choose to use their own savings or assets, leaving them personally vulnerable and giving them less flexibility to grow.
Federal data from 2007, the most recent available, show that women use less outside capital than men when starting businesses (8.6 percent for women-owned firms vs. 15.8 for men) and are less likely to take out bank loans when expanding businesses (8.7 percent for women vs. 18.8 percent for men). Wyatt notes that, on average, for a similar proposal, women visit four banks before securing a loan, whereas men visit one.
The data also show that many women-owned businesses start smaller and stay smaller than men-owned ones. It’s unclear how much of this is from lack of capital (or simply not knowing how to access capital).
But both the report and Wyatt note that differences in how men and women function in business can be factors. For example, men typically are aggressive in growing revenue and size. Women tend to be more cautious and may lack mentors who encourage them to take more risks.
“So when it comes to growing or staying flat, (women are) much more likely to make the decision to do everything themselves,” says Wyatt.
Putting these factors together, one can see why women-owned businesses often are less profitable than those run by men. According to the 2007 federal data, women owned 27 percent of Minnesota’s companies but brought in only 3 percent of total sales.
Yet women have attributes that can lead to success, Wyatt points out. They tend to be community-focused and reach out to their networks for advice. Also, “women bring more of a conservative, long-term view” when dealing with finances, she says, which can temper risk.
Not everyone is cut out to be an entrepreneur, Wyatt (left) notes. And even those with the right characteristics might not have the skills or resources they need to succeed.
While WomenVenture can’t generate an entrepreneurial spirit, it can address the other needs through its three main services: education, business consulting and loans.
Wyatt stresses that getting help creating an accurate business plan is a key factor to success. There are many online sites that allow you to generate a plan that can be a great tool, she says, but they lack one important thing: feedback. A site-generated plan won’t alert you if your numbers are way off. An online tool “doesn’t really get to the practicality of the business, something that is actually viable and realistic,” she explains. So what’s needed is support in developing accurate assumptions, she says.
Acquiring capital is also important. WomenVenture started offering loans in 1992. While the organization can lend up to $50,000, most loans are $25,000 to $30,000, Wyatt says.
But she’d like to go further. “I’d like to look at the model of microlending that’s done in Third World countries and bring that model to very small businesses in Minnesota,” she says. A loan of a few thousand dollars might be just enough to propel their businesses forward, she speculates.
This focus on finances is something near and dear to Wyatt’s heart. She struggled with math as a young girl but eventually mastered the subject, even becoming a certified public accountant. Her desire to help other women succeed came from this triumph.
Since taking the helm at WomenVenture in May, Wyatt’s passion is finding ways to improve the business climate for women. “Theoretically, women have made it, but we haven’t,” Wyatt says. “I just think we have to keep working.”
You have a great idea for a business. Now what?
Here are four steps Elaine Wyatt of WomenVenture suggests you take:?
- Assess your finances. What is your budget? Is your credit score good? Do you have any assets?
- Develop a great business plan. Take a careful look at the math. Are your goals realistic? Is the plan viable? Wyatt suggests seeking outside help or training for this step.
- Compare your plan to your financial needs.
- Develop a financing plan to cover the gap.