The woman entrepreneur: an underserved market?

RMA Journal, The, April, 2003 by Garry Barnes

Some banks need to learn how to better serve women business owners--a vast and growing market. Banks with strong programs already in place are encouraged to share their strategies.

Perhaps one of Timothy Leary's more mind-altering quotations is, "Women who seek to be equal with men lack ambition." We now have data to prove it. Unfortunately, this reputedly humble aspiration is often thwarted by none other than many of us in the financial services industry. It's time to wake up and smell the opportunity.

The Force Is with Them

According to the National Foundation for Women Business Owners and the U.S. Small Business Administration, women own more than 40% of all businesses--that's 9.1 million. In "The Female CEO," Margaret Heffernan writes, "One out of every four [married] women earns more than her husband. Women control about 80% of household spending and, using their own resources, make up 47% of investors. Women buy 81% of all products and services and sign 80% of all checks written in the U.S. Women influence 85% of all automobile purchases. They also head 40% of all U.S. households with incomes over $600,000 and own roughly 66% of all home-based businesses." (1)

USA Today has commented, "In recent years, more women have become CEOs at big public companies, including Hewlett-Packard, Lucent Technologies, and Xerox. Nearly 16% of Fortune 500 corporation officers are women, up from 12.5% in 2000 and 8.7% in 1995." (2)

Little wonder that consumer products companies, car manufacturers, electronics firms, and others have identified women as a valuable and profitable market and are designing products and services to meet their specific needs and desires. But guess who has yet to join the party? Women entrepreneurs remain a fuzzy image on many banks' radar screens, and many of us lack a real understanding of this vast market. Further, few of us have taken steps to learn what the market thinks of our products, services, and efforts.

An Uphill Battle

A three-year study under way by the Center for Women's Business Research, said to be the first of its kind, explores the factors affecting business success during the start-up phase. The first of four sets of interviews was conducted in the fall of 2001. Overall results from the first interviews are that study participants--both start-ups and those with active businesses--agreed that their biggest current challenge is financing. In response to an open-ended question about their most pressing need, 30% mentioned business financing. At the present time, their top source for financing (57%) is private sources--that is, savings or family. Women may, then, be an under-served market of the banking industry.

Count-Me-In.org, an Internet-based nonprofit micro-lender, says that access to credit and capital remains the top issue for most self-employed and entrepreneurial women, regardless of their economic circumstances. Many women fall within gray areas of the criteria for eligibility of micro-lending programs and the credit-scoring systems used by conventional financial institutions. In addition, lenders aren't as interested in the smaller sums of money that women often seek. Their needs may include "...small loans and funds for training and technical assistance--in addition to inspiration and practical information. ...Women tend to start smaller, service-related businesses, do not have traditional forms of collateral, have no credit or messy credit histories due to divorce or other life circumstances, and want smaller amounts of money to start a business." (3)

Count-Me-In's answer has been to create the Invest in Women Notes program, which seeks investments through the purchase of Invest in Women Notes, a security with a value of $2,000 or greater for one-, three-, or five-year terms. The assets go directly to women entrepreneurs in the form of small business loans ranging from $500 to $10,000." (4)

The Rest of Us

If the financial services industry were adequately serving the market, would there be a need for an organization such as Count-Me-In?

Bank sales and marketing experts state that proper service to any market entails a thorough understanding of both the financial needs and expectations of the market and the subtle nuances that may be key to a successful and continuing banking relationship.

Many of these differences are being written about and discussed frequently. An example is offered in points raised by business consultants in USA Today:

* Women are often better at communications and team building.

* Women tend to be a little more collaborative and less hierarchical.

* Women can seem more approachable.

* There is evidence that having more women in leadership roles boosts worker productivity.

* More women are getting business educations. Half of all bachelor's degrees in business now go to women--this is up from 43% in 1980.

Concerns and Beliefs

During the preparation of this article, the author interviewed a number of women entrepreneurs, bankers, and business executives. The following statements are only interpretations of what appears to be common concerns and beliefs of women business owners: