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Second Class

For many women business owners, dealing with discrimination is just part of the job description. However, though coping with discrimination from banks and investors may be an expected roadblock to business success, women may not be prepared to deal with prejudice from customers.

Perhaps they should be. In a recent study by the Small Business Administration's Office of Advocacy, there was a 47.9 percent gap between the average earnings of women and men business owners-a gap partially attributed to buyer discrimination.

"We looked at all the 'rational' reasons why there would be a differential in earnings," says Ed Starr, an economist with the Office of Advocacy. "Economists usually characterize any unexplained differential as discrimination."

Statisticians obviously can't track something as evasive as discrimination; in fact, because the study was based on Census information, it did not take into account several significant factors that might have explained the residual disparity, including the size and age of the businesses as well as discrimination in credit markets.

However, Starr believes prejudice at the buyer level was the core reason for the disparity because "in cases where women had more direct contact with their customers, discrimination was more [apparent]." In fact, in industries that required a large amount of interaction with clients, the gap in earnings almost doubled.

Faced with this disturbing finding, Starr predicts women entrepreneurs will take one of two attitudes: "Some will be pessimistic," he says. "Others will say, 'This is another battle we have to fight, and one we have to fight every day. So let's do it.' "

Cheryl Krueger is one entrepreneur who has taken up the battle cry. Despite the picture the SBA numbers portray, the owner of Cheryl & Co., a Westerville, Ohio, gourmet food and gift company, says her experience has been "just the opposite." Though Krueger has a lot of customer contact, theoretically putting her in the danger zone, she says, "From a customer standpoint, we have had absolutely no discrimination."

What's her secret? Krueger wears her status as an entrepreneurial woman proudly. "We have a high profile because of our commitment to the community," she says. "We are involved in [educational] programs, the arts, the American Cancer Society and a lot of women's organizations. Our customers are loyal to the causes we stand for-they almost go overboard to support us."

Meanwhile, Krueger isn't underestimating the customers with the most power to defeat discrimination: other women. "A lot of women customers think [what we're doing] is great," she says. "They want to support women-owned businesses." The lesson learned? Don't let the numbers get you down: Taking a stand can help close the earnings gap.

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This article was originally published in the January 1996 print edition of Entrepreneur with the headline: Second Class.

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