Will You Join the Phenomenal Growth of Women-Owned Businesses?
The number of female-led firms has surged to new heights. Here's what you need to know to get started.
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If you've noticed that the economy is getting a little stronger month by month, you might want to thank a female entrepreneur.
When it comes to new business formation, women are outpacing their male counterparts at a formidable rate. Recent U.S. Census Bureau figures show women are starting 1,288 new businesses a day, double the number a year ago.
Over the past 17 years, women-created businesses have sprung into existence at 1.5 times the overall national rate. Those businesses are growing at roughly twice the rate of businesses started by men, according to the U.S. Department of Commerce.
Data from the annual "State of Women-Owned Businesses Report" found 9.1 million women-owned businesses this year in the United States, a 6 percent jump from 8.6 million in 2013. These businesses generated more than $1.4 trillion in revenue, employed 7.9 million people and accounted for 30 percent of all enterprises nationally.
While the basics for launching a new business broadly apply to both male and female entrepreneurs, there are some considerations unique to women. The checklist below, while by no means exhaustive, addresses issues relevant to both women and startups generally:
1. Write a business plan defining the market opportunity and the customer base.
2. Be ruthless in mapping out expenses. There are always unexpected costs. Make sure you have sufficent capital so the business becomes cash-flow positive.
3. Determine the best legal structure for the business, such as partnership, limited liability corporation or a sole proprietorship. Each option has its own strengths and weaknesses from both a tax and an operating point of view, so make sure you have tax and legal advisors who can help you make the best choice.
4. Continuity planning is critical. Women typically own smaller businesses, according to a 2010 report from the U.S. Department of Commerce's Economics and Statistics Administration for the White House Council on Women and Girls. Under these circumstances, even a temporary disability might be enough to put the company out of business. Disability insurance may be one way to protect against this.
5. Secure the appropriate licenses from city and state agencies. Make sure your professional license is up-to-date if you're providing services subject to regulation.
6. Find a financial advisor or banker who can serve as a mentor, someone committed to helping you succeed, offering access to capital and other business owners.
While it may seem premature, consider how you'll ultimately manage your exit from the business as this will be determined in part by the structure and operating philosophy you have in place on Day 1 and the financial resources you're able to assemble over the course of your career.
Having a company-sponsored savings plan is an attractive benefit for you, the owner, and prospective employees. This is especially important for female entrepreneurs, as women live on average five years longer than men and can have many more years in retirement to fund. By starting early, you'll have that much more time to put the power of compounding to work for you and your savings.
The choices are many, including defined contribution plans like the 401(k), simplified employee pension (or SEP) IRAs and money purchase plans. There are often substantial differences between these vehicles from a funding and a tax point of view, so getting professional tax and legal advice is important.
Business succession planning can be complicated, too, and should be considered early on, whether or not there's not an obvious successor to take over the enterprise.
As you get ready to launch the business, make sure you've done all you can to cultivate your network in advance. Consider joining the local chamber of commerce and other affinity groups that can provide counsel or access to your end market. Reach out to other women business owners who can act as a sounding board through the various stages of developing a company.
Starting a new business is a bit of a high-wire act, both thrilling and terrifying at the same time. But entrepreneurs have always been at the heart of the American growth story. Now, more than ever before, that entrepreneur is likely to be a woman.
U.S. Bank and its representatives do not provide tax or legal advice. Each individual's tax and financial situation is unique. Individuals should consult their tax and/or legal advisor for advice and information concerning their particular situation.
The factual information provided has been obtained from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. U.S. Bank is not affiliated with any of the organizations mentioned.