With more women embarking on the entrepreneurial journey today than ever before, female business owners no longer fit a single mold. Whether women turn to entrepreneurship to have more flexibility or more control over their future, the growing number of small business owners is playing a positive role in the overall health of the economy by creating jobs, increasing exports and fostering innovation. In fact, women are starting companies at higher rates than ever before, with the number of women-owned businesses increasing by 45 percent from 2007 to 2016.
To better understand the motivations female entrepreneurs have for starting a business and the challenges they face, Northwestern Mutual conducted a survey of entrepreneurs whose companies made at least $50,000 in annual revenue.
Key findings that emerged from the report include the varying attributes and aspirations of female entrepreneurs, their motivations for starting a business and differing investment styles.
The four personas
The research found that entrepreneurial women generally approach their business in one of four ways: Dreamers & Doers, Family Legacy Entrepreneurs, Passionistas and Lemonaders.
- Dreamers & Doers are drawn to the attractiveness of a new idea; they see opportunities in the market they want to expand upon. Mainly consisting of Caucasian women, these entrepreneurs are more likely to be single and unrestricted by family responsibilities.
- Family Legacy Entrepreneurs have inherited their business or want to provide employment to family members. These entrepreneurs are mainly Asian and Hispanic women and more likely to be married and caring for family members. Of all groups analyzed, Family Legacy Entrepreneurs were the most substantial in size.
- Passionistas are focused on doing what they love. They are not necessarily concerned with business growth, but ultimately aim to support the lifestyles they desire. This persona is predominantly Caucasian women, and many are likely to be caring for family members. As a result of feeling conflicted between work and family, these women tend to have created their business as a way to achieve a better work-life balance.
- Lemonaders created their businesses because they were unemployed or under-employed. Entrepreneurship was a viable option for them, and some of their companies grew to a substantial size. These entrepreneurs are primarily African American women and tend to be younger than other female business owners.
While female entrepreneurs cited many reasons for starting their own business, the desire to make a difference often factored into their decision. Research found that women are more likely to start companies that make a social impact than men (43 percent versus 33 percent).
Other top reasons for starting a business included being their own boss (69 percent), flexible working hours (60 percent) and controlling their destiny (58 percent).
Self-perception and behavior
The study also looked at how female business owners think and behave. For instance, women are more likely to lose sleep over business concerns than men (71 percent versus 61 percent). Those concerns include how to maintain and improve profitability, keeping up with the competition and coping with irregular income. Due to their greater family obligations, Family Legacy Entrepreneurs had the highest business concerns.
As a result, women launching businesses are more likely to take preparatory steps than men, which includes determining their business goals and consulting a professional about financing. Women who identified as Dreamers & Doers took more preparatory steps than any other persona, while African American women were the most likely to consult a professional advisor.
Another key survey finding indicated that female business owners put more time into their investments. Because women tend to be more risk averse than men, they are more likely to prioritize business goals, seek opinions and value professional guidance when making investment decisions. For instance, women who identified as Passionistas stated they often seek advice from professionals even if they do not go along with it.
Female entrepreneurs noted that business and financial planning was important to the continued growth of their business. In fact, female business owners were almost 10 percent more likely to revisit their financial plan regularly. Since many female entrepreneurs are supporting family members, ongoing financial planning helps them create the security they need and align their personal goals with their business objectives.
As more and more women make the entrepreneurial leap, staying informed and seeking professional guidance can help female entrepreneurs improve the state of their company and run a more successful, enduring business.
Author: Ashlee Bridge, Financial Advisor