Asset Funders Network
First published July 2019
The number of women-owned businesses in the United States has increased significantly in the past two decades. In fact, in January 2017, an estimated 11.6 million privately owned businesses were owned and operated by women— a growth rate of 114% since 1997 (two and a half times the average for all businesses).1 These businesses employ close to 9 million people across the country and generate more than $1.7 trillion in total annual sales revenue– increases of approximately 27% and a remarkable 103% respectively since 1997.2 Despite this impressive rate of growth, women-owned firms have not generated the same levels of wealth for their owners as male-owned firms.
This report explores ways business ownership can serve as a wealth-building tool for women, explains the systemic barriers impeding women’s ability to build wealth through business ownership, and suggests ways grantmakers, policy advocates, and practitioners can intentionally promote wealth-building by entrepreneurial women through business ownership.
Across the nation, households are increasingly reliant on women’s earnings—in 2015, nearly two out of three mothers in the U.S. were their family’s sole, primary, or co-breadwinners, contributing at least 25% of household income.3 The increasing relevance of women to the longterm financial security of American families is both an opportunity and a challenge for grantmakers concerned with household financial security.
Women need increased access to wealth-building opportunities to help them weather short-term financial crises, invest in a home or education, save for retirement, support aging parents, and pass on resources to their children. However, the current prevalence of gender disparities in wealth, often the result of systemic drivers, remains a central challenge facing women across the country.
One key source of the gender wealth gap is the difference in the profitability of businesses owned by women and men. While data shows that women-owned businesses are growing in number, the businesses are typically smaller in size and generate lower revenues and profits for their owners and employees. This relative business underperformance is due to four key obstacles facing women business owners:
- Limited access to capital
- Occupational segregation
- Inadequate access to mentors and networks
- Lower levels of business education and training
This brief describes the gender wealth gap, surveys prior research on the relationship between business ownership and wealth, highlights differences in both the number and performance of women-owned businesses compared to those owned by men, and outlines key challenges preventing more women-owned businesses from producing wealth for their owners. It highlights additional disadvantages faced by women of color related to starting and growing wealth-building enterprises. Finally, the brief explores successful practices and initiatives supported by funders interested in reducing the gender wealth gap by increasing women’s wealth through business ownership and concludes with a series of actionable recommendations for grantmakers, policy advocates, and practitioners.