By Dina Segal, Fast Company (TNS)
We’re in the midst of a post-pandemic small business revival: Americans have started more new businesses last year than ever since data collection started.
Female entrepreneurs are a major driver of that growth. New data from my company, Gusto, shows that women started half of all new businesses in 2023. This is compared to a mere 29% in 2019. Women-led businesses have proven uniquely resilient to tough economic conditions like persistently high inflation and interest rates, and they generated $2.7 trillion in revenue last year.
This is a remarkable comeback for women entrepreneurs who suffered disproportionately during the pandemic. Here’s why female entrepreneurs are creating businesses at record rates.
Seeking flexibility in their approach to work
Gusto found that 70% of women who started a new business in 2023 cited flexibility as their number-one reason for starting a business. They cited several other reasons including needing to supplement household income, wanting to build financial assets, and losing a job in their household. They cared more than men about having the freedom to decide how they work.
Given that women take on a disproportionate share of care duties, flexibility is key for any woman who seeks an appropriate work-life balance. Childcare is also now more expensive than rent for the average American family. More than half (57%) of mothers said they’d have to reduce work hours without flexibility. Overall, women were the most likely to consider leaving a job when companies mandated workers return to the office. Along with being able to better manage care duties, women experienced less burnout and fatigue when they had work flexibility.
Increases earning potential
As of 2024, women still earn 71 cents less on the dollar than men on average in the United States. And while women and men are almost equally interested in being promoted, women are 15% less likely than men to receive a promotion.
When women start their own businesses, they’re able to combat some of the systemic gender biases present in the workplace and achieve their greater potential. Multiple studies have shown that women-founded businesses generate significantly higher revenue than men-founded businesses. Not only do they make more money, but women-owned firms also create more jobs than their counterparts, providing further stimulation and growth for the economy.
Strong desire to do meaningful work
Interest in business ownership goes beyond financial gains for women. Close to 71% of female founders in the U.S. said they were motivated by a wish to make a difference. In 2023, one-third of women-owned businesses were in Community Services, compared to 19% of male-owned businesses. These firms help solve pressing challenges in the communities where they operate. And 40% of U.S.-based B Corps, a certification awarded to for-profit companies based on their “social and environmental performance,” are run by women.
Sustaining increases in female entrepreneurship
The reasons women are turning to entrepreneurship have shifted over the years along with the changing economic landscape. With mass layoffs during the pandemic, immediate financial concerns were the primary driver for women-founded businesses in 2020. Since 2022, women have cited flexibility for why they began a business.
This shift in motivation is a positive trend. It indicates the sustainability of this increase. Women-founded businesses are not a onetime surge caused by the pandemic and pressing monetary concerns. But, systemic changes should be made to ensure they keep thriving in the future.
Women continue to face entrenched barriers like inequitable access to private funding and skyrocketing childcare costs. According to recent Gusto data, among entrepreneurs who sought private capital investment, nearly twice as many male entrepreneurs (54%) received it as women (28%). Banks should cultivate relationships with more women entrepreneurs, corporate leaders have to advocate for paid family leave for all, and policymakers need to increase funding for Women’s Business Centers.
Women’s entrepreneurship shows no signs of slowing down. They will continue taking advantage of the benefits that business ownership provides and driving massive economic growth. We need to make sure the right policies and practices are in place to secure their continued success.
ABOUT THE AUTHOR:
Dina Segal is the chief legal officer at Gusto.
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Fast Company © 2024 Mansueto Ventures LLC. Distributed by Tribune Content Agency LLC.
