5 Top Risks Women Entrepreneurs Face

There are 11.3 million women-owned businesses in the U.S. – that’s about 38 percent of the business population, according to American Express’s 2016 State of Women-Owned Businesses Report. Based on that stat alone, you might think women entrepreneurs have it made in the shade.

But women hustle hard to get their piece of the pie, even though they may make it look easy (remember Ginger Rogers dancing with Fred Astaire, doing everything he did, only backwards and in high heels? Yeah, it’s like that).

But don’t take my word for it. Here’s some research on the five big challenges that impede growth for women-owned businesses – and some tips on how to overcome them.

1. Funding

Money makes the world go round, and that’s especially true in business. Yet study after study proves women entrepreneurs have a harder time securing business funding than their male counterparts.

According to a report from the National Women’s Business Council (NWBC)…

• Men start their businesses with nearly double the capital women have ($135,000 vs. $75,000, on average).
• Women-owned businesses were more likely to have their loan applications denied than men-owned firms in 2008.
• Women received only two percent of total funding from outside equity, while men received 18 percent.

There’s a lot going on behind the report’s findings (including cultural factors), but the key takeaway is that accessing capital is simply harder for women-owned businesses. They are less likely to receive loans and VC funding, and when they are funded, they still usually receive less than their male counterparts – and pay higher interest rates.

As a result, women are funding their businesses through their personal credit, and that high utilization can negatively impact their credit scores.

And here’s the catch-22: bad credit scores make it even harder to get that sweet outside funding.

The fix: Crowdfunding can help level the financial playing field for women entrepreneurs, according to a study from the US Senate Committee on Small Business and Entrepreneurship. Women founders perform equal to or better than male counterparts when raising money online. Plus, raising funds from a group lets you bypass the pesky interest rates of conventional loans.

Looking to venture capitalists for funds? Pay attention to who a firm’s partners are. Firms with women as partners are more likely to invest in companies with women CEOs and are better equipped to help them succeed, according to Harvard Business Review.

2. Employees

Hiring employees means taking on a lot of additional responsibilities, including compliance with overtime pay, taxes, and workers’ comp regulations. Ignore those rules, and your business could be in hot water.

Maybe that’s why, according to a study by the NWBC, women business owners are a little gun-shy about employees. When they do hire, the report notes, they seem reluctant to trust staff with daily management responsibilities.

As a result, only 10.6 percent of women-owned businesses have employees.

The problem is obvious: without staff to help carry the workload, women-owned businesses have a much harder time expanding.

The fix: Take the leap and hire someone to help out once your work picks up. It can be hard to make the transition from solopreneur to employer, but if you vet your candidates carefully, you can build a team that helps grow your business.

3. Insurance

Let’s put the gender gap aside for just a minute, because this risk affects entrepreneurs of all stripes: 75 percent of businesses are underinsured by 40 percent or more.

In other words, most businesses are in serious jeopardy of paying a lot out of pocket when disaster strikes. That financial drain may make it difficult to stay open for business.

But when you have adequate coverage, you can make sure an unexpected loss doesn’t eat through already scarce funds.

The fix: Getting insured doesn’t have to break the bank. Work with an agent or agency that can send you small business insurance quotes from multiple carriers. That way you can compare rates and offerings and get the best deal.

4. Networking

You hear the adage “It’s not what you know; it’s who you know” all the time, and for good reason. The right people can open up a world of opportunities for your business.

The Kaufmann Foundation found that women entrepreneurs often bemoan a lack of available advisers and mentors. This may keep them from pursuing the entrepreneurial path altogether, but even if they do, the lack of direction and connections can limit occasions for professional growth.

The fix: You can find a mentor through SCORE, and your state’s women’s business center may offer resources and business development workshops. You can also seek out women-focused networking events, such as She Leads and Women in Technology Summit.

5. Perception

It should be no surprise to any woman entrepreneur that cultural biases consistently overrate men and underrate women. We’ve seen proof of that in how funding is parsed out and how few women currently hold CEO positions at Fortune 500 companies (only 23, or 4.6 percent).

Unfortunately, there’s no easy fix.

The workaround: While we can’t change perception on our own, we can take a page out of the men’s playbook in the meantime.

According to Harvard Business Review, confidence is often mistaken for leadership potential and competence, especially in men. While the report notes humble leaders are actually better leaders, it seems confidence can help you win people over in the first place, and that can serve you well whether you’re shoring up funding or wooing clients – even if you have to do it backwards and in high heels.

Ruth Awad is a content strategist and editor at Insureon, the nation’s leading online small business insurance agency. She regularly writes and thinks about risk management.