Minding Our Business: Investing in Women Entrepreneurs Gets Us Closer to Economic Justice

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• Jobs & Income
• Racial Wealth Equity

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• Entrepreneurship

Today is the last day of Women's History Month. For almost two centuries, the women's rights movement has secured women's right to vote, brought women to the workforce and paved the way for women's entrepreneurship. Fast forward to 2023 and women, specifically Black women, have been leading the charts in the creation of new businesses and start-ups over the past few years. Despite this, women-owned businesses are often underestimated, underinvested, and women entrepreneurs experience barriers that prevent them from realizing their businesses' full potential. It is time that we properly acknowledge the contributions, achievements and hurdles women entrepreneurs face.

An investment in a woman-owned business is an investment in a community.

In 2019 alone, newly opened women-owned businesses created more than 10 million jobs. With unemployment rates on the rise for all groups in February 2023, it is imperative that we help these businesses keep their doors, and these jobs, open. Black women specifically outpace other demographics in hiring new employees despite their small business size. BIPOC businesses bring value, wealth and tax earnings by hiring within their communities and creating opportunities that might not exist otherwise.

Much of small business growth can be credited to BIPOC women, specifically Black women, accounting for 42% of all women who opened a business from 2014 to 2019. Black women are opening new businesses at rates higher than White women and men 17% compared to 15% and 10% respectively.

BIPOC women, including Black women entrepreneurs, do not receive much startup capital and must depend on support from friends, family, or credit as an alternative funding means to support starting their business. Lacking enough financial support, many Black women stay in the workforce and corporate sector during their startup phase to bridge the gap. In fact, more than 200,000 women in 2019-2020 continued to work a full-time job as their primary source of income while launching their businesses.

Entrepreneurship is a pathway to financial success, but the payout is unequal.

BIPOC women entrepreneurs earn less revenue than their White women-owned peer businesses at $24,000 compared to $142,900 respectively. One factor in a lower payout is the overrepresentation in specific industries.

Specific sectors like retail, social services, and healthcare are overrepresented and have higher competition and lower profit margins due to lower barriers of entry and reduced startup costs. Black entrepreneurs start their businesses with about $35,000 of capital, while white entrepreneurs have $107,000. These same industries, retail and others, are also more susceptible to economic downturns.

Organizations that share trust and create support systems for BIPOC entrepreneurs are extremely needed, but not plentiful.

Community Development Financial Institutions (CDFIs) and community banks are alternative sources of capital for small BIPOC businesses, but current funding levels are unequal when compared to the funding their White peers receive. A massive change would have to happen to meet the lending needs of Black women entrepreneurs. Often, the cost to acquire a business can exceed the largest loans available from CDFIs, which on average are $70,000.

For women, launching a business is seen as more than just a financial investment but also an ethical one. In a survey on women's total early-stage entrepreneurial activity, over half, a total of 70.5%, mentioned wanting to make a difference with their business. What is also impressive is that these investments made with social good in mind have a higher return.

Despite all the evidence supporting investment into Black and BIPOC women-owned businesses, they have the highest failure rate.

Only a small percentage of Black women's businesses survive past five years, disproportionate to the number of startups. Not only do they have less access to capital or more exposure to risk, but they also have the least access to systems of support for sustainability and scalability. Building an entrepreneurial ecosystem where BIPOC women, and specifically Black women, can thrive gets us closer to economic justice and builds an economy that works for everyone.