If you’re a female entrepreneur, congratulations you’re doing an incredible job. If you need evidence to remind you, we’ve got that for you, too.
According to the report, “The State of Women-Owned Businesses,” as of 2017, 11.6 million, or 39 percent of total businesses in America, are owned by women. Even more impressively, “between 1997-2017, the number of women-owned businesses increased by 114 percent, compared to a 44 percent increase among all businesses—a growth rate of more than 2.5 times the national average.” Female-owned businesses employ nearly 9 million people and generate approximately $1.7 trillion in revenues.
Despite the above statistics representing remarkable progress, women-owned businesses account for only 4 percent of the national business revenue generated. Despite the rapid increase in the number of businesses opened by women, this statistic has remained unchanged for the last 20 years.
The disproportionate amount of revenue generated by female-owned businesses can be attributed to their smaller sizes and slower growth rates in comparison to male-owned businesses. So, although it might’ve seemed like female-owned businesses were on the right track to take over the world, there is still some work to do.
In order to help female-owned businesses prosper, we’ve identified four of the most common gender-specific obstacles that stop female entrepreneurs from reaching their fullest potential–and most importantly how to overcome them.
Mistake 1: Fearing failure & avoiding risks
If you’re an entrepreneur, you’re likely referred to as a risk-taker by your friends and family. After all, quitting your 9-to-5 job to start your own business isn’t for the faint of heart. It requires you to accept substantial risks associated with your personal reputation, finances, and career trajectory.
However, as a female entrepreneur, you’re often perceived as having a lower risk tolerance and higher fear of failure than your male counterparts. Regardless of how you perceive your own risk tolerance, this point of view may have adverse effects on the success of your business.
According to a study by the Journal of Entrepreneurship & Organization Management, banks and other investors use a scale to assess the risk tolerance of entrepreneurs when considering investment in their venture. The scale takes into account the four facets of risk including financial, physical, social, and ethical. Female entrepreneurs tend to score lower on the risk-taking scale than men, especially with regard to financial risk.
Unfortunately, this contributes to female entrepreneurs receiving funding less often, as well as lower levels of funding, than male entrepreneurs. Female entrepreneurs are significantly less likely than males to receive equity from investors, with only 11 percent of women using equity raised from investors to fund their business ventures.
You might be thinking, isn’t this counter-intuitive—wouldn’t investors and banks prefer to lend funds to low-risk clients? Not quite. In an investor’s eyes, risk aversion often translates to stagnated growth, lack of competitive drive, and lost opportunities in the marketplace.
Throughout your career as an entrepreneur, you’ll have to become comfortable with the possibility of failure and taking risks. Although this may be uncomfortable for some, it’s necessary to obtain funding and grow your business.
However, this doesn’t mean that you should head to the casino and bet the patent design for your latest product on the roulette wheel. Instead, focus on adding calculated risk and a risk management plan to your business model.
Take Calculated Risks
Taking a calculated risk involves estimating the Return on Investment (ROI) and understanding the various possible outcomes before taking the risk. Although a calculated risk still requires a degree of uncertainty, you’ve done your research and can predict and prepare for the outcomes. Conducting extensive market research before launching a new product line is a great example of how to take a calculated risk.
Risk Management Planning
Before taking a new business risk, create a risk management plan to identify, evaluate, and prioritize the risks in your business plan. This will allow you to minimize the level of uncertainty and react quickly to the various circumstance which may arise.
Mistake 2: Being bothered by being the only woman in the room
As a female entrepreneur, you’ll likely end up in a situation where you are the only woman in the room. Whether it’s at a networking event, an investment pitch, or a bank meeting, it’s bound to happen at least once during your career. Lynn Perkins, the founder of UrbanSitter, said that she often found herself pitching her product not only to a room filled only with men, but to men who’d never looked for a babysitter because their wives always took care of child care needs.
Although this isn’t the way it should be, women are unfortunately still underrepresented in just about every level (and most industries) in corporate America.
Regardless of your confidence level, It can be intimidating to be the only woman in the room. It may cause you to doubt the validity of your attendance, your ability to relate to others, or even fear discrimination.
Don’t Let Being the Odd (Wo)man Out Stop You
Although it’s natural to feel uncomfortable, don’t let being the only woman discourage you from representing yourself and your business. Use your presence as an opportunity to advocate for female entrepreneurs and instigate change in the industry.
If your business offering is female-focused, design different versions of your pitch that are tailored to multiple audiences. According to Terri Mead, managing partner at Class Bravo Ventures, “male investors often struggle with relating to what a lot of female founders are pitching and may not make the effort to really understand the problem and the solution to see the opportunity.”
If you’re attending an event, bring the disproportionate guest attendance to the event manager’s attention. Suggest relevant female-focused organizations that they can invite to the next event and/or ask if you can bring friends.
Mistake 3: Trusting too quickly
As an entrepreneur, you never shy away from discussing a new opportunity. It’s easy for you to meet a like-minded individual at a networking event and have a new business partner before you’re finished your first glass of wine.
As a female entrepreneur, you’re often considered to have a higher level of trust and empathy than your male counterparts. According to “Women, Trust and the Business World,” women approach relationships in a “SMARTnership manner” in which they collaborate with their counterparts to gather information, offer insight on the situation, and work cooperatively towards desirable outcomes–both short-term and into the future.
Although this sounds like a healthy way to conduct business, it’s unfortunately not the reality of how commerce is conducted in corporate America. This means that female entrepreneurs bear the brunt of poor business negotiations and partnerships more often than male entrepreneurs.
Prioritize Protecting Yourself
This doesn’t mean that you need to adopt an “every woman for herself” mentality, but it does mean that you should take precautionary measures to protect yourself and your business.
The most effective means of protecting yourself in a business negotiation is legal protection. A legal document allows you to record the terms of your agreement and hold the signing parties legally accountable in the future.
So, before you enter into a partnership with the charismatic individuals from the networking event, ask them to sign a Non-Disclosure Agreement (NDA). Their signature on this document could be the difference between you ending up as Mark Zuckerberg or the Winklevoss twins.
Don’t Take Chances with Your Finances
As a new business owner, you’ll likely find yourself inundated with requests for favors from family, friends, and even some customers. Although you’re probably happy to offer your best friend’s mom a modest discount, make sure to exercise caution when it comes to favors involving payment.
A common favor that might be asked of you is to accept personal credit or pay layaway instead of payment at purchase. Accepting deferred payments places the risk of receiving late payments, or never receiving payment at all, onto your business and personal finances.
Katherine Brown, Founder of Kaphmada Design, lists the biggest mistake of her early career as not requiring payment at purchase. According to Brown, “a handful of my customers wanted to purchase custom-made apparel on credit and asked to pay layaway. They never paid me back. Some just tried to befriend me just to get something made free. I shouldn’t have agreed to those terms. Now all our clients are required to leave a deposit for custom pieces or pay in full. Lesson learned.”
An easy way to protect your business’s finances is to require credit on especially large orders. Doing so will help you mitigate the risks associated with layaway and installment payments by instantly processing the full value of the transaction. Plus, you’ll add an extra layer of protection against fraud with the insurance provided by credit cards and banks.
According to Kelly Yen, Business Operations Analyst at PayMotile, one of the most commonly cited reasons for business owners to adopt credit card and other types of payment processing is lost profits incurred from accepting personal credit payments on past business transactions. Yen states, “almost every business owner has a story about a customer who they knew for years, yet never paid them back for a product or service.”
Mistake 4: Comparing yourself to others
Comparing yourself to others is a natural human phenomenon—everyone does it, I promise.
With social media permeating just about every area of life, it’s easier than ever to compare yourself to others. Unfortunately, as you already know, comparing yourself to others often has a negative impact on your self-image. According to the Social Comparison Theory, women are more likely than men to engage in upward social comparisons which leads to negative feelings about the self.
As a female entrepreneur, comparing yourself to others will have a negative impact on your business in two ways. First, it’ll limit your ability to form and maintain relationships with others. Second, it’ll weaken your self-confidence, self-efficacy, and self-image, which in turn will affect your ability to manage your business operations to the best of your ability.
So, what do you do when you open your email to find your name has been left off of this years “Top 20 Female Entrepreneurs to Watch” list?
Don’t worry, with the right mindset, comparisons can be used to produce positive results in your life and business.
The Power of Positive Comparisons
Instead of focusing on the negative, compare yourself to others with the purpose of fostering self-motivation, self-improvement, and a positive self-image.
To start, learn what media makes you feel negative about yourself (for many of us it’ll likely be scrolling through our social media accounts). Next, stop engaging with it or learn how to spread positivity through social media. For example, if you always feel bad about yourself after scrolling through Instagram, change who you are following. Replace the socialites, negative memes, and high-cost brands with genuine and inspiring individuals, brands, and influencers.
Take it a step further, and make a list of individuals who you admire and aspire to be like. Determine which qualities they possess that you covet such as kindness, generosity, and honesty. Next, actively practice incorporating these qualities into your daily routine and personal character.
In order for female entrepreneurs to continue to prosper, we need to work together.
Rather than feeling jealous of other’s success, try celebrating and empowering them. As much as receiving a “Congratulations!” card will make their day, you’ll also be surprised how much contributing to others will benefit your own mental health.
So, congratulations to all of you female entrepreneurs out there—we can’t wait to see what you accomplish next!
This article first appeared on Career Contessa.