Whither Women-Owned Firms in the US? New Census Data Shed Some Light

It’s the news we womenablers have been waiting for anxiously for some time now – the release of the most recent statistics (albeit from 2007) on the number, economic clout, and growth of women-owned enterprises. The latest facts were released today by the US Census Bureau, and this is what they show:

  • As of 2007, there were 7.8 million majority-owned, privately held women-owned firms in the US, a 20.1% increase over the previous census (in 2002);
  • These firms generated $1.2 trillion in revenues, a 27.5% increase from 2002 levels; and
  • Women-owned firms employed 7.6 million workers, up 7% from 2002.

So, overall, the trends we’ve witnessed over the past decade or more remain the same: increasing numbers, and increased economic clout. These numbers also indicate a slowing in employment growth – among women-owned firms and overall, as the economy slowed down in advance of our most recent recession.

OK, it’s great to have these new numbers, but how about a little context? First of all, let’s take a look at the relative growth of women-owned firms compared to their male-owned counterparts. During the 2002 to 2007 Census period, the number of women-owned firms grew by 20.1%, compared to a 5.5% increase among majority-owned, privately held men-owned firms. As a result, the share of women-owned firms in the business population has been steadily increasing, from 26% in 1997 to 28% in 2002 to 29% as of 2007.

Secondly, the economic contributions of women-owned firms has been increasing as well, at a rate greater than that of their increase in numbers – at least in terms of revenues generated. While the growth in the number of women-owned firms is up 20% over the past five years, revenues generated by those firms is up 28% over the same time period.

There’s a downside, though, and that is that women-owned firms, on average, continue to employ fewer people and generate lower revenues compared to their male counterparts. To wit:

  • The vast majority (88%) of women-owned firms do not employ anyone other than the owner of the firm. While the same is the case for men-owned firms, a lower share of them (77%) are non-employer firms. The average revenues of non-employer women-owned firms are $26,490 – half that of the $53,329 seen among non-employer men-owned firms;
  • Among employer firms (12% of women-owned firms and 23% of men-owned firms), the story is much the same: average revenues of women-owned employer firms are half those generated by their male counterparts – $1.1 million compared to $2.5 million.

There’s more to be learned by perusing these latest statistics, even though the more detailed publication will not be released until December of this year. womenable will be taking a deeper dive and will be reporting out additional insights. In the meantime, our advice is to use these “most recent” statistics in place of whatever other estimates you may currently be using. While the data date is 2007 (as opposed to more recent estimates as of 2008), these are rock solid and actually higher than the 2008 estimates:

  • Number of Firms: 2007 actual 7.8 million; 2008 estimate, 7.2 million
  • Sales: 2007 actual, $1.2 trillion; 2008 estimate, $1.1 trillion
  • Employment: 2007 actual, 7.6 million; 2008 estimate, 7.3 million

To learn more about this impactful new womenabling information, click on the following links for the Census Bureau’s news release, links to all of the newly-released data, or the page with a summary of the women-owned firm findings.

Measuring Impact … The Devil’s In The Details

Last week, some new numbers were announced regarding the impact that women-owned firms have on the U.S. economy. The Center for Women’s Business Research, with support from Walmart and the National Women’s Business Council, reported that women-owned businesses “contribute nearly $3 trillion to our national economy and create or maintain 23 million jobs.” While there is no disputing that looking solely at business revenues goes only part way toward measuring the full impact of a business in a community, exactly how to more fully account for the impact of women-owned businesses is a difficult question.
Bunny surprise
While the Center for Women’s Business Research has opened up an important discussion, they have not, in my view, added to the fabric of knowledge about women business owners and their enterprises in a wholly positive manner. The devil, as they say, is in the details.

Upon closer examination of the study, we observe that:

  • The estimates of economic impact are made using a purposive, non-random sample of only 417 businesses, conducted last year. A more complete set of usable data might have been better obtained from a larger, random-sample survey, or even from using Dun & Bradstreet data. One might also want to question the types of outputs computed in the model, and whether they are pre-recessionary or recessionary in their nature.
  • The model used was one developed to measure “the projection of secondary or multiplier effects from changes in direct sales in one industry within a study region. Multipliers can be estimated for a county, a state or for the entire nation (emphasis ours).” This appears to mean that a model developed for use in a single industry in a single region is being extrapolated to all industries over the entire country. This gives Womenable the heebie-jeebies.
  • While it is sexy to make comparisons between the revenues and expenditures of a company or group of companies with those of a nation, the inputs of the IMPLAN model used by the Center here and the components of Gross Domestic Product are likely very different. While the IMPLAN model is proprietary and not fully disclosed, it is most assuredly a case of “apples and oranges” to try to equate the impact of women-owned businesses with the GDP of nations.

In the spirit of full disclosure, I’m speaking here not only as the President and CEO of Womenable and a member of the women’s business community, but as the former Managing Director and Director of Research of the Center for Women’s Business Research and former Executive Director of the National Women’s Business Council. So, while it pains me to call out my colleagues, I do so in the spirit of making sure that the users of this new information are more fully aware of from whence it came, and with the hope that future efforts along these lines are more methodologically rigorous.

Some may feel that imperfect information is better than none at all, but Womenable believes that unassailable information – provided with more apt comparisons and fuller disclosure – does the women’s business community a much better service than does information that overreaches; that goes too far out on a limb without the underpinning of a more solid methodological framework.

As we all know, once information is out there it can take on a life of its own. While Womenable applauds this study’s goals and supports the overall message that accounting for the impact of women-owned firms should go beyond counting firm revenues (and, indeed, beyond counting currency spent by firms and their employees), we do not back this study’s execution nor its numerical conclusions.

We welcome a dialogue on this issue, and are willing to be proven too cautious. What say you all?