The Gender Gap in Small Business
The pay gap for women employees is no secret: for every dollar earned by fulltime male employees, their female counterparts earn 80 cents. Discouragingly, we found that the gap also exists between women and men who own businesses.
The women we surveyed were three times more likely than the men to earn less than $25,000 per year: while only three percent of men reported earnings in this category, nine percent of women did. And men were twice as likely as women to report revenue in the highest bracket ($150,000+): 14 percent of men-owned businesses fell into this range, compared with just seven percent women-owned firms.
Expanding the view a bit, we see an inverse distribution by gender in the top two and bottom two revenue quintiles. While 32 percent of women-owned businesses and 19 percent of men-owned businesses earn less than $50,000 annually, 34 percent of men-owned businesses and 20 percent of women-owned businesses earn more than $100,000 annually.
Income Breakdown: Women-Owned vs. Men-Owned Businesses
Could this income disparity be one reason 25 percent of women business owners are planning not to expand in 2017? We talked with some experts to get their take.
Why Do Women Earn Less as Business Owners?
We discovered several variables that could explain the revenue disparity in small business, including…
- The types of businesses women tend to own.
- The business goals women tend to set.
- The ways women tend to approach risk.
According to a 2015 study by Experian, women are more likely to own businesses like beauty shops and personal services, while men are more likely to own businesses such as general contracting and real estate. The former have naturally lower revenue ceilings. In addition, 48.3 percent of small businesses run by women are home-based, compared with 44.8 percent for men.
"There are businesses that don't want to grow too quickly, particularly solopreneurships, where they need to be able to support growth with a little bit more purpose and timing," said one woman business owner we spoke to, who preferred to remain anonymous. "I've only ever planned to be a company of one."
Women's willingness to embrace risk may be another factor at play. An article in the Harvard Business Review by Doug Sundheim (@DougSundheim), president of business consulting firm The Sundheim Group, mentioned that studies show men are more likely to take risks than women, particularly when under stress. However, when we spoke to Sundheim, he said this could be because we are only thinking about risk in one way.
"We often define 'risk taking' as something that is a financial or physical risk," says Sundheim. "But I think in this day and age there are other risks that we have to think about, like reputational risk or relational risk. My gut sense tells me that if we broaden the framework that we're thinking about with regards to risk, that women are very well suited to managing some of these other risks that we don't think so much about."
Angelique Pivoine (@2BeAngelique) owns the marketing and PR consulting firm Good Thinking Agency (@itsgoodthinking) and says she has found that a lot of her women clients are more reluctant than their male counterparts to plan for business growth. She attributes this partly to the desire for work / life balance, as well as reluctance to cede control by hiring an employee.
"You can keep your work / life balance and still grow your business, provided that you're willing to delegate!" says Pivoine. "However, most female business owners tend to insist on doing everything themselves."
A report from the National Women's Business Council supports this claim, noting that many women business owners view hiring new staff as "highly risky." So while the women we surveyed are less likely to have growth planned for 2017, those plans could be a conscious choice rather than an indicator that the business is struggling.
Why Are New Services Less Popular among Rural Businesses?
The other data point that stood out was the divide between urban and rural business owners who plan to offer a new service next year. While urban businesses accounted for 25 percent of our total respondents, they made up 30 percent of the group that planned to offer a new service. Rural businesses, on the other hand, were 16 percent of our overall respondents but just 11 percent of those who planned to expand their service offerings.
That means urban business owners are 1.7 times more likely than rural business owners to have plans for launching new services in 2017.