Men and women use different growth strategies

2004

Research carried out in the United States has uncovered some intriguing differences between the goals and strategies of businesses owned by men and those owned by women.

A study by the Center for Women's Business Research found that women are less likely than their men counterparts to use credit and equity financing and are more likely to rely on the Internet and e-commerce to grow their businesses.

Looking at businesses with revenues at or exceeding one million dollars, the study also found that women are more likely to have started their businesses themselves (73 per cent) than the men (60 per cent), rather than having purchased, inherited, or acquired them in some other way.

One in seven of the female-owned businesses had reached the million-dollar revenue figure within five years of being founded.

"Clearly women are demonstrating their business savvy by starting and building such successful firms," said Myra M. Hart of the Center for Women's Business Research and a Harvard Business School Professor. "And it is clear that continued growth is a priority.

"When asked about their goals, women leading one million-dollar plus businesses are just as likely as their men counterparts to state that they want to expand their business and retain ownership (approximately 76 per cent for both)."

While in most respects the financial structure and practices of male- and female-owned businesses are similar, the female owned firms do differ from their male-owned counterparts in their use of two critical sources of financing - commercial credit and equity.

Women are less likely to use commercial loans or business lines of credit than their men counterparts (56 per cent compared to 70 per cent). Equity financing is an unusual source of funding for both groups; a mere four per cent of women have raised private equity, compared to 11 per cent of men.

However, female-owned one million-dollar-plus firms are just as likely as their male-owned counterparts to use business earnings as their primary source of financing and both groups use an average of four funding sources.

Another difference between the genders seems to be that women have a much greater understanding of the power of the Internet. Almost six out of ten women (58 per cent) said that the Internet and e-commerce would play a moderately or extremely important role in their businesses' growth strategy compared to only just over a third (35 per cent) of men.

Where at first sight this might imply that female-owned businesses are more likely to be in retail or other transactional-based activities, the survey data shows that the industry profile of the male and female samples is very similar.

Moreover, women are much more likely than the men to gain a competitive advantage by having a web site that is capable of fulfilling online transactions (56 per cent compared to 38 per cent). The firms owned by women were also ten per cent more likely than their men counterparts to sell in the national market (25 per cent compared to 15 per cent).

On the home front, the female business owners are as likely as the men to have a partner, but are more likely to credit their partners for business contributions than their men counterparts. The women report a higher average number of contributions (4.8) made by their partners than the men (3.6).

"This study confirms that women can and do play in the big leagues," Myra Hart said. "The vast majority of these $1 million firms are owned and operated by the founder and many achieved that level of success in five years or less."