Sacramento Business Journal
Women business owners are more willing than the general population to take financial risks, according to a survey released Wednesday.
The survey, "Worth the Risk: Women Business Owners and Growth Capital," compares "expanders," women who currently are seeking, preparing to seek or have sought growth capital, with "nonexpanders," women who never have sought growth capital. It found that women who want to substantially expand their businesses are willing to take the risks necessary to obtain financing, and two-thirds of capital-seekers have been 100 percent successful in previous efforts to obtain the growth capital they sought.
"This study demonstrates that women are moving into the economic mainstream," said Myra Hart, chair of the Center for Women's Business Research, which conducted the survey, and a professor at Harvard Business School.
The women business owners surveyed are more risk-tolerant than women and men in general when saving or investing for their households. More than half of the women entrepreneurs (57 percent) indicated they were willing to take above-average or substantial financial risks compared to just 14 percent of all women and 26 percent of all men who participated in the 2001 Survey of Consumer Finances conducted by the Federal Reserve.
The willingness of the women entrepreneurs to take financial risks is even stronger when considering business decisions, the survey found.
Almost two-thirds (72 percent) of those who expanded their businesses achieved or exceeded their expansion goals, the survey found. Most of those currently seeking capital want it to hire staff (82 percent), expand markets (76 percent), add a new product or service (68 percent), and improve the quality of their product or service (58 percent). The most important reason for wanting to expand was "to increase revenues and profits." This reason received an average rank of 1.4 on a scale from 1 to 4, where 1 was the most important and 4 the least important reason.
The survey also assessed business skills. A majority of the women who responded to the center's survey (62 percent) have some kind of training in business finance and nearly one-fifth (19 percent) have an MBA. Half of all expanders have previous entrepreneurial experience.
In addition, although all respondents gave themselves ratings that indicated they are confident of their personal competence in business management in such areas as planning and strategy, sales and marketing, personnel and human resources, and finance, expanders rated themselves higher in each of these categories.
Expanders are more likely to be serial business owners than nonexpanders (50 percent versus 32 percent), the survey found. Expanders also are more likely to own firms in information industries (15 percent versus 8 percent of nonexpanders) and manufacturing (13 percent versus 5 percent).
For survey respondents who had been through the process of seeking capital, the experience was positive. Past expanders indicated that success in expanding their businesses made them set more ambitious goals for growth and profit. Their success affected their view of risk by making them more risk-tolerant and/or changing their perspective on what they consider to be risky.
Expanders use more sources of capital than nonexpanders, the survey found. Nearly half (47 percent) of expanders used commercial loans secured with business assets. Commercial loans secured with personal assets were used by 37 percent of expanders. Equity also is an important source of growth capital, with 19 percent using equity from family or friends, 21 percent from individual angel investors and 17 percent from investment companies.
Expanders said their most preferred sources of capital to fund expansion are: commercial loans secured with business assets (35 percent), followed by equity investment from investment companies (17 percent) and equity investment from individual angel investors (16 percent).
The women surveyed came from groups most likely to be seeking growth capital. Three organizations provided access to the women business owners in their networks: Women President's Organization, a membership organization for women presidents of companies grossing at least $2 million; women who participate in the Women's Leadership Exchange, which produces educational conferences; and clients of Springboard Enterprises, which is dedicated to increasing access for women entrepreneurs to equity markets.
"More than half of the women business owners surveyed were expanders who were either currently seeking, or previously sought, capital to expand their businesses," said Hart. "A question for future inquiry is why nearly half of the women are not seeking and have not sought growth capital for their businesses in the past."
This is not a commitment for a loan or an ad for credit as defined by paragraph 226.24 of regulation Z.