According to a recent survey conducted by NEXT Insurance, women were twice as likely to start a business during 2020 than men, often from scratch and by themselves. This is particularly interesting in a year when new business applications reached an all-time high (4.35 million) according to Census.gov. We love to see this sort of small business activity among women. Here’s why.
- Female-owned firms generate higher revenues
- Female-owned firms create more jobs than their male-owned peers
- Women execs significantly improve startup company performance
- Women are more effective in senior leadership roles
- Women have a larger appetite for growth.
And still, research has also shown that there are a number of factors, usually based in bias, that tend to hold back female entrepreneurs. Knowing that women are poised for success in their business ventures, but potentially facing obstacles to their goals, we wanted to lay out some of the fundamental considerations that are within an entrepreneur’s control.
Here are the five things every female entrepreneur needs to know now:
- Success doesn’t have a due date. Being in business for 3 to 5 years does not mean you have a successful business. In fact, approximately 20 percent of new businesses fail during the first two years and 45 percent within the first five, according to Investopedia.com. Beat the statistics by identifying what a successful business means to you up front. Then measure your success with systems and processes for all aspects of your business.
- Cash is queen. We all know customers are unreliable. Some pay on time but many do not. It’s critical for any small business to have cash reserves of no less than six months on hand before you even get started. And if you have to deplete that reserve for any reason, build it back up as quickly as possible. Cash provides an asset to be lent on. And it just makes good sense to give yourself a cushion for the unexpected.
- Have relationships with two or more lending institutions at all times. Solid financials work in tandem with the relationships you make. Banking, credit unions and any other lending institution will be valuable relationships at every stage of your business evolution.
- Diversify your business portfolio. Starting a business is already a risky venture. By diversifying your business portfolio, you are mitigating unwanted risk to your capital. Make sure to take advantage of tax deductible contributions into personal IRAs, 401(k)s or other investment vehicles not related to your business. And be sure to develop multiple business streams of income. This helps to ensure you aren’t relying on any one entity for success.
- Run your business like you will sell it tomorrow. Regardless of when you plan to sell your business, it’s important to keep the end in mind. Business succession is key to a successful ending to any business. Ideally, you build something special that you can eventually sell for a nice profit. By understanding your end goal up front, you set yourself up for a better result.
We know women are ready to build businesses that contribute to the economy, create jobs and help grow communities. If entrepreneurship rates among women were comparable with those among men, it is possible that global GDP would grow by up to 6 percent, which would boost the global economy by an astounding $5 trillion, according to Forbes.com. By seizing control of the fundamental aspects of running a business, entrepreneurs can take the first critical steps toward success.