Research Summary

Groundbreaking, Multi-Year Study Underway of Newly Launched Women-Owned Firms

Center for Women’s Business Research  ·  May 21, 2002

The multi-year study is being conducted by Center for Women’s Business Research and funded with support from OPEN: The Small Business Network from American Express, the American Express Foundation, the AT&T Foundation, and the National Women’s Business Council (NWBC). Conducted over a three year period, this study is the first of its kind because it explores the factors affecting business success not just at a discrete point in time, but longitudinally during a business’s start-up phase. The first of four sets of interviews was conducted last fall.

“We are already uncovering some important findings about the information and assistance these women-owned firms need,” said Myra M. Hart, Chair, Center for Women’s Business Research. “Overall, study participants – both start-ups and those with active businesses – agreed that their biggest current challenge is financing. In response to an open-ended question about their most pressing need, 30% mentioned business financing. Their top source for financing at the present time (57%) is private sources – that is, savings or family.”

According to the survey, about half the study participants believe they have the business financing skills needed to acquire capital (49% of current business owners and 37% of prospective owners) and even fewer report having a detailed financial plan (just 41% of current owners and 32% of prospective owners).

“The survey clearly underscores how capital needs and skills are a critical issue for both current and prospective women business owners,” said Kerry Hatch, executive vice president and general manager, OPEN: The Small Business Network from American Express. “It is important for small business owners to look holistically at cash flow. Loans or lines of credit are one option, and using credit and charge cards both for small and large purchases can create payment flexibility that can help small business owners to better manage cash flow.”

The study is being conducted in collaboration with four women’s business centers, among the nearly 80 nationwide that provide women with a range of services to start and grow their businesses. They are: the Center for Women & Enterprise in Boston, MA; the Women’s Business Development Center in Chicago, IL; the Women’s Economic Self-Sufficiency Team in Albuquerque, NM; and the Women’s Initiative for Self-Employment in San Francisco, CA. These four centers were chosen because they reflect diverse program content, client characteristics, geographic regions, and types of communities served.

“Many women business owners are very involved with the women’s business centers,” said Jill Stueck, Corporate Affairs Director, AT&T. "On average, study participants have been a client of their respective center for more than two years, and have made an average of nearly 18 visits to their center – that is, almost eight visits per year. Both current and prospective business owners visit with the same frequency, and most people said they’re satisfied with the assistance they’ve received. The overwhelming majority – 71% – said that they are satisfied with the training provided by their local center."

The study will explore such issues as:

• What kinds of information and assistance are most critical at the various stages of a business’s development;
• The relationship of financial and technical assistance, loans and loan guarantees on the launch and growth of women-owned businesses; and
• The impact of demographic characteristics and other factors on business success.

“Women’s business centers around the country have proven to fill a great demand, providing training, technical assistance and – in some cases – access to capital for business start-up,” said Laura Mann Eyester, Acting Executive Director, National Women’s Business Council. "In spite of their success, though, there has not yet been a systematic nor longitudinal study of the factors most associated with the success of the clients of these centers. The study now being conducted is of critical importance for the continued growth of these centers. As their programs are strengthened and made more effective, the success of the clients they serve will be significantly enhanced."

The study will include four sets of interviews slated to occur in six month intervals. The first of the four rounds of questioning has not only set a baseline for analysis but also investigated the special business needs of study participants and assessed their business skills. The second round of interviewing is presently underway.

The study’s first round of interviewing also uncovered the following information:

• Thirty-five percent (35%) of the women business owners in this study are reinvesting business earnings, 20% are using personal credit cards – but just 10% have a commercial bank loan and just 8% have a line of credit.
• Among new women-owned businesses, approximately half (48%) indicated that their sales had increased in 2001, despite the economic downturn. Both well-established and start-up firms saw their revenues rise over that period of time – 58% percent of the owners of start up firms and 57% of the owners of established firms said that their sales had increased in the past six months.
• Among the 335 participants interviewed in the study’s first round last fall, 69% currently own an active business. The majority of these women work in the firm on a full-time basis. Most firms are small, with just 12% having 5 or more employees and just 28% having $50,000 or more in revenues. Yet among these business owners, 4% have 20 or more employees and 4% have $1 million or more in sales. Among the 27% of participants who have not yet started their business, most are actively planning their start-up. Just over half of these women (52%) plan on starting within the next year – 22% say within the next six months.
• Study participants are more ethnically diverse than are women business owners in general (42% are women of color, compared to 20% of women business owners throughout the U.S.). This may be due to the fact that these centers are in urban areas, but also to the fact that the centers were originally designed to target their services toward under-served populations.
• Study participants are also well-educated (3/4 have post-secondary education), though their household income varies, demonstrating that the centers serve not only lower income clients, but middle income clients as well (30% had a household income of under $20,000, but a similar amount, 28%, had incomes of $40,000 or more).

Study Methodology This study combines client data from each of four women’s business centers: Center for Women & Enterprise (CWE) in Boston, MA; Women’s Business Development Center (WBDC) in Chicago, IL; Women’s Economic Self-Sufficiency Team (WESST Corp) in Albuquerque, NM; and Women’s Initiative for Self-Employment (WI) in San Francisco, CA. Between January and March 2001, these business centers submitted data from at least 150 clients in their databases, who had recently received services from the center and were considered active clients. These clients could be either new – having at least five hours of contact with the business center within the past year – or established clients who had recently been in contact with the center. The business centers drew data from December of 2000 backwards until the quota was met or exceeded.

A list of 775 clients was produced. Two hundred and thirty-seven (237) of the clients came from CWE, 202 came from WBDC, 177 came from WESST Corp, and 159 came from WI. Thus, the data was submitted from various regions of the country, with clients from Boston comprising 31% of the total sample, clients from Chicago comprising 26%, clients from Albuquerque comprising 23%, and clients from San Francisco comprising 20%.

This report summarizes the information gathered from the first of four rounds of interviewing of these study participants. Out of the 775 total participants, 335 were interviewed over the phone, by mail, or via e-mail from July through October 2001. This yields a response rate of 43%. One hundred and one (101) of the study participants in this round came from WBDC, 95 came from WESST Corp, 77 came from WI, and 62 came from CWE. Thus, for this first round of interviewing, the clients from Chicago comprise 30% of the sample, clients from Albuquerque comprise 28%, clients from San Francisco comprise 23%, and clients from Boston comprise 19%. The sampling error for a sample of 335 is ±5.4% at the 95% level of confidence. This means that 95 times out of 100, survey results will be within 5.4% of population values.

The Center provides original, groundbreaking research to document the economic and social contributions of women-owned firms. To maximize the benefits of this knowledge, the Center has a comprehensive strategy to distribute its research through the media, publications, seminars and consulting. Corporations, government policy makers, educators, organizations, the media, and individuals rely on the Center’s leading-edge knowledge to strengthen their support of women business owners.

AT&T AT&T (www.att.com) is among the world’s premier voice, video and data communications companies, serving consumers, businesses and government. Backed by the research and development capabilities of AT&T Labs, the company runs the largest, most sophisticated communications network and is the largest cable operator in the U.S. The company is a leading supplier of data, Internet and managed services for the public and private sectors, and offers outsourcing, consulting and networking-integration to large businesses and government. Serving nearly 60 million consumers, AT&T is a market leader in consumer communications services and operates AT&T WorldNet® Service, a leading Internet access service that has garnered several awards for outstanding performance and customer service.

National Women’s Business Council (NWBC) The National Women’s Business Council is a bi-partisan Federal government council created to serve as an independent source of advice and counsel to the President, Congress, U.S. Small Business Administration, and the Interagency Committee on Women’s Business Enterprise on issues relating to women-owned businesses. The NWBC is committed to improving the scope and quality of information on women’s entrepreneurship in order to promote changes in policy, legislation, and public and private sector initiatives that will support women entrepreneurs as they start and grow their businesses.

OPEN: The Small Business Network from American Express OPEN: The Small Business Network from American Express is a unit of American Express that offers small business owners a wide range of tools, services and savings designed to meet their evolving needs, including convenient access to working capital and credit information, instant decisioning on all card products and savings on business services from an enhanced lineup of OPEN Network partners. The OPEN Network serves nearly three million customers and is dedicated to those companies with fewer than 100 employees. To obtain more information about the OPEN Network, visit www.OPEN.americanexpress.com or call 1-800-Now-OPEN to apply for a card or loan.

American Express Company is a diversified worldwide travel, financial and network services company founded in 1850. It is a world leader in charge and credit cards, Travelers Cheques, travel, financial planning, business services, insurance and international banking.

Women’s Business Center Partners Center for Women & Enterprise (CWE) – Boston, MA CWE was founded in 1995 and has experienced exponential growth. The center now has three locations - in Boston and Worcester, MA, and Providence, RI - and serves up to 1,600 clients annually. Organization wide, CWE offers education, training, technical assistance, women’s business enterprise certification and access to both debt and equity capital to entrepreneurs at every stage of business development. It serves a diverse client base, from women transitioning off welfare to women seeking venture capital. CWE offers extensive training, including the Community Entrepreneurs Program, a comprehensive 5-module program for low-income women that offers childcare and transportation. CWE also houses a Women’s Venture Center for high growth, high tech businesses, and since 2000 has hosted the Springboard: New England Venture Capital Forum at Harvard Business School. For more information, please visit: www.cweonline.org.

Women’s Business Development Center (WBDC) – Chicago, IL The WBDC offers a comprehensive approach to providing women with a range of services to grow their businesses. The WBDC offers expertise in financing, marketing, business management, certification and procurement, and technology and can also link clients to professional resources. Through entrepreneurial training, one-to-one counseling and conferences, the WBDC has helped over 20,000 women gain economic self-sufficiency through business ownership and expansion over the past 16 years. The Center serves a wide range of businesses through a variety of targeted programs. Through their Childcare program, the Center partners with licensing agencies throughout Cook County to provide business training and microloans to childcare businesses. Another program of note is the Center’s Women’s Tech & Venture Program, that hosted a Springboard 2000 venture capital forum in May 2001.

Women’s Economic Self-Sufficiency Team (WESST corp) – Albuquerque, NM WESST corp is headquartered in Albuquerque and primarily serves low-income clients, including outreach to rural clients through its five regional offices. It is a participating organization in the Aspen Institute’s MICROTEST program, and has had SBA funding since 1989. WESST corp serves approximately 350 clients annually and an additional 1,500 individuals attend some type of training. In 1990, the center established a revolving loan fund and has made about 230 loans totaling over $700,000, with an average loan size of $3,043. WESST corp’s core programs are business consulting, training and financial assistance.

In 1998, the organization developed a statewide program called MARKETLINK which provides intensive marketing and sales training as a means to increased revenues and business profitability. MARKETLINK training also includes an innovative component focused on psychological barriers to success. The program has been so successful that the Taos regional office has produced a training video, “Fear of Success.” MARKETLINK has a web site, WesstArtisans.com, supported by American Express, that features twenty low-income entrepreneurs and their handcrafted goods. WESST Corp’s organizational web site is http://www.wesst.org.

Women’s Initiative for Self-Employment (WI) – San Francisco, CA The mission of Women’s Initiative for Self Employment is to assist low-income women of diverse ethnic and social backgrounds in becoming economically self-sufficient through entrepreneurial activities. Founded in 1988, WI has served more than 9,000 women as a leader in the microenterprise field. A training-led organization, WI provides business assessment and entrepreneurial readiness workshops, comprehensive business management training, personal development training, one-on-one technical assistance, business plan writing workshops, peer support networking groups, and ongoing business support services. Services are provided in Spanish through our Alternativas para Latinas en Autosuficiencia (ALAS) program, the first program of its kind in Northern California. More than 30% of clients speak Spanish as their first or only language. WI takes an integrated, comprehensive approach to service provision by helping clients in all areas of their lives, emphasizing personal growth and empowerment as well as core business skills training. Scholarships and stipends for childcare and transportation are available for very low-income women to ensure that no one is turned away for lack of financial resources, and additional case management services are provided to welfare recipients. WI also administers a revolving loan fund, disbursing loans up to $25,000 and links women with asset building opportunities, including Individual Development Accounts. Women’s Initiative has been recognized for excellence in enhancing entrepreneurial skills, receiving the Presidential Award for Excellence in Microenterprise Development in 2001, and as a best practice organization for the client tracking database and program evaluation system by the Washington DC-based Aspen Institute.

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