American Express OPEN has released its 2016 report on the state of women-owned businesses. For the first time this year, the report includes only information collected during the Great Recession and forward. Focusing on 2007-2016 gives entrepreneurs fascinating insights into the incredible increase of businesses owned by women in the last ten decades.
While the main stream media often reports that small businesses are driving the economic recovery in the United States, they sometimes neglect to report that the expansion of small businesses is, in many ways, being driven by women.
More women creating businesses
While the number of overall firms in the United States has increased just nine percent in the time surveyed, the number of businesses created by women has increased at a dramatically faster rate. Women-owned businesses have increased 45% since 2007, or five times as fast as all businesses.
Businesses owned by women now employ around 9 million employees and are generating over $1.6 trillion in revenues. This is an increase in employees of 18%; overall businesses have seen a 1% decline in employment since 2007. Business revenues have increased 30% more than the national average.
Women own nearly 40% of the businesses in the United States; in 2007, they were majority owners of just 29% of businesses.
Businesses of all sizes are growing
When entrepreneurs look at all businesses, they see struggles. Only the very largest and most valuable businesses are seeing growth. But when American Express looked at businesses owned by women, what they found was that businesses of all sizes were growing. Of particular interest is the growth in companies with 50 to 99 employees.
Since 2007, these companies have been the leaders in terms of employment, demonstrating a 27% increase in employment over this time. The same category of businesses have seen a 6% decrease in employment, when all businesses are considered.
Huge increase in net number of women-owned businesses
When data from before 2007 was included, the net new number of women-owned businesses created each day was only 608. When looking at 2007-2016, there is an incredible increase to 1,072 net new firms owned by women. There was a slightly higher concentration of creation in 2007-2011, and a slightly lower concentration in 2012-2016. But overall, 3.5 million new businesses were created by women during this time period.
Of these businesses, nearly four-fifths, or 2.8 million, were created by women of color. Over the past nine years, 842 new businesses were launched by women of color each day on average. 327 of these were launched by Latina women, 311 by African American women, 122 Asian American women, and smaller numbers of Native American and Native Hawaiian women.
Encouraging increases in diverse business ownership
In 2002, fewer than 1 million businesses were owned by women of color. To see that number increase substantially in just a few years reflects important changes in our society. In 2016, 5 million businesses are owned by women of color, with around 1.9 million businesses each owned by African American and Latina women.
Asian American women own slightly under 1 million businesses, while Native American and Alaska Native women own around 153,000 businesses, and Native Hawaiian and Pacific Islander women own around 31,000 businesses. Collectively, businesses owned by women of color are just under half of the total businesses owned by women.
If the current pace of growth continues, it is likely that women of color will exceed 50% of women business owners in the next few years.
Growth happening in unanticipated regions
Economists often look to the coasts to generate new businesses and entrepreneurs. Defying that trend, the states that have seen the biggest increases in businesses owned by women are Florida, Georgia, Texas, Michigan, and Mississippi.
Whether this is because these regions originally had dramatically fewer businesses owned by women, or something those communities are particularly doing to help women-owned firms develop is unclear.
This most recent study shows that while the breakneck pace of women-owned business creation has slowed slightly, growth is much higher than it was pre-Recession. This could be because women are seeing niches and opportunities more quickly than their male counterparts, or perhaps relate to women exiting the work force and starting careers out of the home in order to achieve a more palatable work-life balance.
To continue to support women in the sphere of business ownership, communities should continue to remove barriers to capital for women-owned businesses. Setting up mentorship programs to support women who are starting their own business may be one way to help women navigate their unique business ownership challenges.
But as it is absolutely clear that women, particularly women of color, are driving the economic recovery through their strong business creation skills.