28 February 2024

Women Make Strides in Business Ownership

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The growth rate of new businesses remains stalled, but the share of women-owned firms has climbed. While the growth rate of new businesses remains stalled, fresh government data show the share of women-owned firms has climbed. The total number of U.S. firms edged up 2% to 27.6 million between 2007 and 2012, according to preliminary U.S. Census Bureau data released this week. But the number of women-owned firms grew much faster, rising 27% during that time.

The overall figures provide the latest evidence of a worrisome decline in business formation. The number of firms with paid employees fell by 5% to 5.4 million between 2007 and 2012 and is 2% below 2002 levels, according to the new census data.

U.S. gross domestic product, adjusted for inflation, declined at an average annual rate of 1.5% from 2007 to 2009 as the economy contracted during the recession, then increased by an average rate of 2.1% during the next three years, according to the Bureau of Economic Analysis.

Women showed big gains in business ownership in the census data, with the share of female-owned firms rising to 36% of all firms in 2012 from 29% in 2007. The number of self-employed women and the number of women running businesses with employees both increased, pushing the total number of women-owned firms to 9.9 million in 2012.

“Women’s entrepreneurial appetites are at an all-time high,” said Carla Harris, chair of the National Women’s Business Council, a nonpartisan federal advisory council, adding that the rate of growth of female-owned businesses is almost four times the rate of businesses owned by men. But women continue to face challenges accessing capital and other obstacles to growth, she said.

April Cleek, 36 years old, opted to set up shop as an independent consultant in 2008 after three years working for large companies. Two years later, Ms. Cleek used her savings to launch EHR Concepts, a consulting and staffing company that helps hospitals set up electronic medical records systems. The Villa Rica, Ga., firm now has 12 full-time employees and a pool of 100 independent consultants who work on specific projects.

It is possible that at least a portion of the increase in the women’s share could be explained by a change in Census Bureau methodology that changed how some firms with more than one owner were classified, the agency’s statisticians say, noting that figures released this week are preliminary.

While the number of women-owned firms with employees rose by 16% between 2007 and 2012, women-owned firms tend to be smaller than those owned by men, with an average of roughly 8.5 employees compared with 13.5 employees for firms with male owners. Some 11% of women-owned businesses have employees other than the owner, compared with 23% of firms owned by men. Women-owned firms accounted for just 4.8% of receipts in 2012.

The number of businesses owned by Hispanic women rose 87% to 1.48 million between 2007 and 2012, according to an analysis of the new data by the National Women’s Business Council, while the number of businesses owned by African-American women increased 68% to 1.53 million. But average receipts and the number of firms with employees declined for both groups, according to the analysis.

The broader figures reflect a longer-term decline in new business creation that has troubled many economists. The number of firms dying has exceeded the number of startups each year between 2008 and 2012, according to a recent research paper by economist John Haltiwanger of the University of Maryland and co-authors at the Federal Reserve Board and the U.S. Census Bureau that focused on firms with employees.

Slower population growth, increased business concentration and greater regulation likely account for some of the decline in new business formation, says Robert Litan, a nonresident senior fellow at the Brookings Institution. But the extent of the decline remains puzzling, he adds, given that the Internet revolution has made it a lot easier for firms to get started and to grow than they could 10 years ago.

Click here to access the full article on The Wall Street Journal.

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