Growth Of Women-Owned Businesses Outpaces The Market Post-Pandemic

by CINDY BARTH.

Women-owned businesses are having an undeniable impact on the U.S. economy, with women owning more than 14 million businesses, employing nearly 12.2 million people and generating $2.7 trillion in revenue, according to the 2024 Impact of Women-Owned Businesses report.

The Wells Fargo-sponsored report — researched and written by leaders from Women Impacting Public Policy, Ventureneer and CoreWoman — found that despite challenges, there were significant breakthroughs and turning points for businesses with women at the helm, including:

• The growth of women-owned businesses outpaced men’s for number of firms, employment and revenue during the pandemic and post-pandemic in 2023.
• Between 2019-2023, the impact women-owned businesses made on the U.S. economy was palpable, adding 1.7 million firms, $579.6 billion in revenue and 1.4 million jobs to the economy.
• Women-owned businesses with 50 or more employees account for nearly half of women-owned businesses’ employment and revenues.
• Women-owned businesses now represent 39.1% of all U.S. businesses. Their ranks increased by 13.6% from 2019 — the year before the pandemic — to 2023 — the year the pandemic officially ended. In the past year, 2022 to 2023, their ranks increased by 5.9%.

“We were kind of surprised to find that Covid turned out to be a such a positive time for women-owned firms,” said Val Jones, senior vice president and senior lead strategy consultant with Wells Fargo. “Even though women essentially missed out on PPP dollars at first, once the cash flow started, these firms not only found their footing, but they thrived in many cases. Their revenue and employee growth were substantial.”

So what were the factors behind the growth and impact on the economy?

Here’s a closer look at what the new data shows as far as the growing influence of businesses owned by women and other insights about the women’s entrepreneurial ecosystem.

Adaptability in the face of adversity

Nearly all small businesses faced adversity during the onset of the Covid-19 pandemic, but early on Black/African American-owned businesses, as well as Hispanic/Latino-, Asian-, immigrant- and women-owned businesses suffered a disproportionate decline in activity, data shows.

Part of the difficulty was due to these businesses being less likely to receive any funding during the first round of the Paycheck Protection Program. Even so, despite pandemic-related business closures throughout 2019, by midyear 2020, business applications began to spike as women turned to entrepreneurship for greater flexibility, financial stability and the desire to control their own destiny.

As a result, between 2019 and 2023, the number of women-owned businesses increased at nearly double the rate of those owned by men, increased their share of the workforce by 3.5 times that of men — and nearly 5 times as high in 2022-2023 alone — and outpaced the growth rate of men by 82.4%.

“It’s interesting to look at the dynamics in play during that time,” Jones said. “Lots of women were out of the workforce because of children being home due to school lockdowns or job layoffs, but they had more money in their pockets thanks to pandemic checks and lesser costs associated with expenditures like childcare. All of those factors gave women a lot of room to grow.”

That was true for Jessica Lane Alexander, whose plans to launch Atlanta-based Pop’N Creative with partner Lori Hall accelerated during the pandemic after she quit her job when her employer at the time wouldn’t let her work remotely.

“We had been talking about creating our own agency for a while, but the pandemic provided an unexpected opportunity,” Alexander said in a previous interview with Bizwomen. “It certainly accelerated our launch, which did make us have to scramble a bit at first. But because we knew we wanted a virtual office space anyway, it allowed us to work with people from both coasts of the U.S. That also saved on overhead costs and made us more nimble.”

Women-owned firms also exhibited adaptability by employing strategies such as shifting to online sales by adding e-commerce and using social media and live streaming, in addition to adding new services such as virtual consultations, classes and events, and partnering with other businesses.

Women of color make progress

While women overall are underrepresented as entrepreneurs, Black/African American and Hispanic/Latino women are the most underrepresented demographic segments among women-owned employers, the 2024 Impact of Women-Owned Businesses report shows.

That dynamic is partly due to the fact that Black/African American and Hispanic/Latino women are less likely to have access to capital and are more likely to have caregiving responsibilities that make it difficult to commit full time to their businesses.

Despite having the highest average number of employees at 9.4, surpassing the 8.7 of white women-owned employers, Black/African American women-owned employers face challenges in accessing financing. Even though these businesses outpace all women-owned businesses in employment growth, when seeking financing, Black/African American women encounter higher loan denials or increased interest rates, hindering their ability to reach their full revenue potential.

Even so, while Black/African American women-owned employers showed similar growth rates to all women-owned employers, and their employment and revenues escalated at a higher pace than the average for all women-owned employers.

In addition, Hispanic/Latino women-owned employers experienced a notably higher growth rate compared to all women-owned employers. This surge was evident in employment and revenue increments.

Also of note is the fact that between 2019 and 2020, the average revenue for Black/African American and Hispanic/Latino women-owned businesses was down 9.7% and 5%, respectively. But by 2023, average revenues had grown from 2019 levels by 32.7% and 17.1%, respectively, the report notes.

“Enough women are seeing success now, and we expect that to continue to grow,” Jones said.

Challenges and opportunities

In 2023, women-owned businesses averaged $193,000 in revenue compared to $754,000 for men-owned businesses, the report shows. Additionally, from a revenue perspective, women-owned businesses are dramatically smaller than men’s at about one-quarter the size.

So while women have progressed in growing their businesses, getting past the $1 million mark in revenue remains challenging for most. Consider: Companies with revenue between $250,000 and $999,999 grew by more than 30%, while firms generating more than a million dollars declined by 1%.

The challenge women-owned firms face is that even though they represent 39.1% of U.S. firms, they account for only 9.2% of the workforce and 5.8% of revenue. Closing that gap in average revenues between women of color- and white women-owned businesses has the potential to generate $667 billion in additional revenue, the report data shows. And closing the gap in average revenues between women- and men-owned businesses has the potential of generating $7.9 trillion in additional revenue.

To accomplish that, five things need to be addressed: increased access to capital, raised awareness of financing options, improved access to markets, tailored technical assistance and training, and more coordinated efforts from local, state and federal governments, funders, entrepreneurial-supporting organizations and educational institutions to improve outcomes.

“The good news is that the gaps are closing,” Jones said. “The programs tailored to women entrepreneurs are working, so the data clearly shows we’re doing the right things. We just need to do more of what we’re doing.”

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See Original Article at The Business Journals