Women business owners have a rather gloomy outlook on the current economy. However, during the first several months of 2012, twice as many women-owned businesses will be hiring than will be cutting back. The five most important strategic objectives for women business owners are improving their management efficiency, enhancing their product and service quality, increasing product innovations, lowering labor costs, and increasing business-to-business sales. In contrast, getting better access to small-business loans ranks close to the bottom of their strategic business priorities.
This article focuses on the goals, outlook and hiring plans of women-owned businesses. While government policymakers are scrambling to find ways that small businesses and startups can create more jobs, women and minority business owners have been largely overlooked. Of the nation’s 27.1 million small businesses, 29% are owned by women and 21% are owned by members of racial or ethnic minority groups. Furthermore, those groups are most likely to hire the segment of workers who are hardest hit by unemployment. As a result, we must pay more attention to women and minority businesses; otherwise we risk overlooking almost 1/2 of the entire small business sector thereby failing to solve the unemployment problem in the most efficient manner.
To rectify the gap in our knowledge, the Gazelle Index staff will write a series of short articles, which highlight the current outlook, hiring plans and goals of women and minority business owners. The results are based on the Gazelle Index fourth quarter 2011 survey.
As the economy fell into a deep recession, between 2007 and 2009, small businesses became an increasingly important policy priority. Today, the government is struggling to find ways to reduce the large number of unemployed workers – in December 2011, there were 13.1 million unemployed persons and the unemployment rate was 8.5%.
It is well documented that small businesses (typically defined as those having 500 or fewer employees) account for about 50% of the nation’s total output and an equal share of total private sector employment. In fact, between 1992 and the first quarter 2010, firms with 500 or fewer workers contributed 74% of the total increase in jobs and 62% of the net new increase.
Researchers have also found that small businesses are important because start-up enterprises are primarily small and it is from startups that the largest share of new jobs is generated. While young start up firms are primarily responsible for the net addition of jobs in the economy, older/larger firms account for the majority of job cuts and job terminations. Beneath all of these developments, the question remains; what is happening among women-owned small businesses?
The Gazelle Index found that women business owners are rather down about the current state of the economy. In fact, only 11% feel that conditions have improved over the last three months while 31% feel that conditions have worsened. The bad economy has not made their current business activity worse over the last three months, but it has affected their employment. For example, 21% of women business owners indicated they cut workers over the last three months, while only 13% indicated they hired workers during the same time frame.
Women are neutral when it comes to that optimism about the future. This means that for every woman business owner who is optimistic, there is another who is pessimistic. Nevertheless, they plan to increase hiring in the future. Specifically, 26% indicated they will increase hiring during the first quarter of 2012 while only 13% said they would decrease hiring. The remainder, 61% does not expect to hire or cut jobs.
In addition to the outlook and hiring plans of women business owners, the Gazelle Index also asked strategic questions. Specifically, what business practices are most important to women in achieving their key goals? Interestingly, while policymakers are focused on improving small business access to credit as a means of helping small businesses, that issue is far down the list of important factors to women. In fact, it ranked number 11 out of 13 possible categories. Accordingly, based on the percentage of women-owned businesses who selected the objective as being very important, the top five strategic business objectives that are most important to women are as follows: 1. Improving Management Efficiency, 69%; 2. Improving Product and Service Quality, 62%; 3. Improving Product and Service Innovation, 60%; 4. Lowering Labor and Operational Costs, 60%; and 5. Increasing Business-To-Business Sales, 55%.