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The Rise of Female Business Owners

It is no secret that there have been several positive movements regarding women in the workplace over the past few decades. In the year 1960, only one in five women held paid jobs, and those that did were paid 60% of the male rate.

As history moved forward, so did opportunities for entrepreneurial women. Did you know that women were not able to obtain business loans as recently as 30 years ago? It wasn’t until 1988 that women business owners were recognized as a major contributor to the overall economic growth of the United States via business ownership. In 1988, John LaFalce, former New York congressman, passed the Women's Business Ownership Act, which allowed women to take out business loans under their own name. 
While these historic events grant us a greater perspective of how business women’s rights have evolved through time, what does the current landscape look like for female business owners today?

Sharp Increase in Women-Owned Firms

Today, women own four out of every ten businesses in the U.S. While still not equitable to male-owned businesses, this number represents a steep incline of progress. Over 20 years, women-owned firms in the US have increased their representation by 114%.

These days, things have never looked better for women entrepreneurs. 11 million U.S. businesses are owned by women, which employs nearly 9 million people and generates $1.7 trillion in sales, according to 2017 data from the National Association of Women Business Owners.

Morra Aarons-Mele has found that the primary reason why so many women are transitioning into ownership roles has to do with an increase in the desire for autonomy. Another survey suggests that in France and Mexico, 61% and 66% of women said they wanted to be entrepreneurs to have pride in themselves; while in the United States, 55% said they wanted better work-life balance.

Where are the Female Business Buyers?

The representation of women owners via acquisition, however,  is still significantly lower than men. Entrepreneur magazine discovered that women are involved in 7.5% of business transactions, and women represent just 3% of business buyers.

One possible reason to explain this large gap may be that it is more difficult for women to obtain SBA loans. A survey reported that when female business owners do secure SBA funding, the amount is roughly 50 percent less than that of male entrepreneurs.
Related: SBA Loans: The Basics

In addition, the Kauffman Foundation conducted a study that showed that female entrepreneurs are far more likely than men to seek out guidance from mentors. However, a lack of accessibility to mentors that can advise women in their acquisition goals creates a barrier for those interested.

Ultimately, this disproportionate gender representation in business buyers is a complicated issue. However, it is worth noting that more and more women continue to contribute to the acquisition market every year.

Why Should Women Entrepreneurs Consider Purchasing a Business?

A balanced proportion of female business buyers would mark a new milestone for female entrepreneurs. While autonomy and a positive work-life balance are certainly perks to becoming a business owner, what are the perks associated with purchasing an existing business?

1. Reach profitability quicker. Startup businesses will seldom see profits in their first few years of operation. Purchasing an existing business maximizes your potential for profitability from day one.

2. Earn goodwill. “Goodwill” refers to all of the non-tangible assets that a business owns. This can include a business’ reputation, its branding, etc.

3. Access to historical data. When you buy an existing business you will have access to years’ worth of historical data that can assist you in growing and developing the business further.

Resources for Aspiring Female Business Buyers

More funding options for female entrepreneurs and business owners are emerging. Financing opportunities include, but are not limited to:
1. Fundera - Fundera provides various financing options for women-owned businesses.  
2. Stearns Bank - Stearns Bank is a private bank focused around small business lending.

Of course, there are many options on the market. It is important to educate yourself on the subject prior to making a decision. Read more about SBA loans here.

In Summary

Over the last century, womankind has come a long way in the world of entrepreneurship. With the introduction of legislation for women’s business ownership rights, along with an increasingly positive shift in public perception of working women, it is clear that progress is being made. That being said, women still represent a surprisingly low number of business buyers currently in the market. As more financing, educational platforms, and mentorship resources become available for current and aspiring female business owners, it's likely that the number of female buyers will continue to rise, narrowing the gap between male and female business buyers.