In 2018, the #MeToo movement made it clear that women continue to face unequal treatment and challenges in the workplace. Although there’s still considerable progress to be made, the history of women in business proves that change is more than possible—it’s also profitable.
Today, there are over 12.3 million women-owned business enterprises (WBEs) in the United States—a staggering 2,960 percent increase from 1972. WBEs employ around 9.2 million people and conduct over $1.8 trillion in annual sales. Out of those 12.3 million businesses, 47 percent are owned by women of color (a much higher percentage than the national average).
Equally impressive is the fact that women-owned and women-led businesses continue to grow at record rates. In 2017, women started around 1,821 businesses a day. That upsurge comes in spite of the fact that WBEs receive less private funding than companies run by men. Lingering reluctance to invest in WBEs may be due to the fact that venture capital (VC) groups tend to rely on contact networks and have been slow to recognize the value of diversifying.
In today’s economy, resistance to diversification has proven to be an economic and social disadvantage. A study conducted by the U.S. Small Business Administration (SBA) revealed that VC firms who decided to invest in women-led businesses (WLBs) saw an improved return on their investments and their firms’ overall performance. In short, WBEs and WLBs represent an untapped investment opportunity and a chance to gain a competitive advantage.
The Impact of Women-Owned Businesses on Local Communities
Investing in WBEs creates jobs, injects revenue into the economy, and boosts the financial stability of families and communities. Out of the WBEs that exist today, 62 percent rely on their company as their primary source of income. That said, the impact of WBEs extends beyond individual households.
One of the biggest reasons why WBEs are having such a profound impact on communities is due to the nature of their work. Women are statistically more likely than men to start a business that benefits the greater community. In fact, two of the most popular WBE industries are healthcare and education. In addition, WBEs employ more people in the social sector (areas such as healthcare, social assistance, accommodations and food services, community support, and waste management) than male-owned businesses.
The cultural impact of WBEs is also noteworthy. In a Bossy Chicago article, Latecia Patton (Director of the Economic Empowerment Institute at YWCA) points out that WBEs “help shape the way other young girls see themselves as they grow and develop into leaders.” In this regard, investing in WBEs is integral to improving the social landscape of tomorrow and promoting innovation.
Key Growth Opportunities
According to the Women’s Business Enterprise National Council (WBENC), WBEs earn the highest revenue in wholesale trade, retail trade, and professional, scientific, and tech services. In all three industries mentioned, the gender pay gap is currently higher than the national average. In wholesale trade, women earn 76 percent of what men in the same field make. In retail trade, that number is 66 percent. And for professional, scientific, and tech services, they earn a mere 62 percent of what their male counterparts make. By partnering with more WBEs in these sectors, companies have the unique opportunity to both grow their business and help bridge the gender inequality gap.
Out of all the WBEs that exist today, only 1.7 percent of them generate more than $1 million in annual revenue. That small but mighty population is responsible for more than half of the employment and revenue accredited to WBEs. The overwhelming contribution of such a small handful of companies reveals the impact that WBEs can have on the economy if they’re given access to growth opportunities. According to the American Express 2017 State of Women-Owned Business Report, once WBEs achieve $250,000 in annual revenue, their economic and employment growth accelerates. Actively investing in WBEs who are approaching this benchmark could be a smart investment strategy (not just in terms of dollars, but also in supplier development)—and multiply the socioeconomic impact they have on the American economy.
The same report reveals that there is a revenue gap between WBEs owned by ethnic minorities and those owned by caucasians. If the total revenue of minority-owned WBEs was increased to match that of WBEs as a whole, it would add an estimated $1.2 trillion to the U.S. economy and create roughly four million new jobs. In that regard, this specific subgroup of WBEs represents another powerful growth opportunity for the American economy.
WBEs and Supplier Diversity
By creating a supplier diversity program, you can empower the growth of WBEs and improve your company’s socioeconomic impact. To learn more about supplier diversity and the benefits of partnering with women- and minority-owned businesses, download our latest State of Supplier Diversity Report below.