According to a recent report published by the Federal Reserve Banks of New York and Kansas City, about one in five small businesses are female-owned. The number of these women-owned businesses grew 22% from 2007 to 2015.
The New York and Kansas City Fed surveyed almost 16,000 firms and employers nationwide. They define a small business as a company with 500 or fewer employees.
While more than 970,000 small business are now under female ownership, there are currently 3 million male-run businesses.
Dell Gines, the senior community affairs advisor at the Kansas City Fed, said that compared to male-owned businesses, women-run startups “face different sets of challenges in terms of operating and growing.”
This can be shown by the fact that companies run by women found it more difficult to make a profit, generate revenue above $1 million, and boost employment compared to businesses owned by males.
Seeing as how 89% of companies find leadership to be “an important or very important issue,” according to the Global Human Capital Trends 2016 report, more and more organizations are looking into the gap between male and female leaders in businesses.
The report also focuses on the topic of female participation in the economy, a subject that is especially important to Fed Chair Janet Yellen. Yellen argues that if more women were in the job market, overall economic growth would be stronger.
“Evidence suggests that barriers to women’s continued progress remain,” noted Yellen in a speech this past May.
This can be seen especially in the small business sector. Even though about the same number of male and female-owned companies have outstanding debt, women tend to take out much less. In fact, about 65% of women-owned businesses had $100,000 or less in debt, while about half of male-owned businesses had more than $100,000 in debt. Additionally, women business owners were turned down for loans more often than males.
In order to make up for their lack of access to loans, women tend to rely on credit cards and small business grants more heavily.
Companies throughout the nation are slowly realizing the lack of women in leadership roles. The Honest Company, founded by Jessica Alba, is one company that is making changes to the demographics of its organization. Alba hired a new CEO to restructure the company’s management team. Additionally, she is figuring out ways to help women within the company to continue to build their career paths.
Numerous reports show that organizations that focus on gender diversity are more likely to have financial returns above their industry averages.