Earlier this year, the Guardian Life Small Business Research Institute released an insightful report on women and small business. The research said women-owned small businesses will create an estimated 5.5 million jobs in the United States by 2018. This is roughly one-third of the 15.3 million total jobs created in that period as projected by the U.S. Bureau of Labor Statistics. It is welcome news for the economy, and especially encouraging for women who desire to start a small business.
Historically, Los Angeles has been a strong market for women business owners. According to the most recent statistics from the National Association of Women Business Owners-Los Angeles, there are an estimated 543,835 privately held companies in the area in which women own a 50 percent or greater stake. These women-majority-owned businesses account for 40.1 percent of all privately held firms, generate nearly $125 billion in annual revenue and employ more than 692,000 people.
We believe that if Los Angeles can further encourage the launching and growth of women-owned businesses, it would be a major job generator for the area. Encouraging L.A.’s small-business ownership diversifies the economy, supports the tax base, more evenly distributes economic opportunity, spurs innovation and attracts further investment from around the world.
Today and down the road, we see several key drivers that could help encourage women-owned businesses:
• Reward self-funded businesses. As the report from the Small Business Institute shows, businesses owned by women have a greater likelihood to be self-funded and are less reliant on bank financing. Women are putting their skin in the game rather than taking on a bank loan. We applaud women for their courage and believe women who fund their own businesses should be rewarded for it. What’s more, women with a solid business plan who are planning a self-funded business should be incentivized to do so. Why not double or even triple the proposed $1,000 credit in the Obama administration’s jobs bill when self-funded women-owned businesses hire new staff and they stay with the company for a year? Why not offer a self-funded woman-owned startup similar incentives like a tax credit?
• Expand contract opportunities. Already, the federal government has a “goal” of awarding 5 percent of its contracts to businesses owned by women. The goal is likely to become a requirement – the Small Business Administration announced in early March a proposed law that would increase the share of federally awarded contracts to women-owned small businesses. However, we wonder: Why only 5 percent? According to the Center for Women’s Business Research, 28.2 percent of all businesses in the United States are owned by women. If the federal government were to raise the contract goal to more closely align with the percentage of businesses owned by women, it would mean billions of dollars in steady revenue for women-owned business. Naturally, this would further open the door for an increasing number of women business owners while also providing opportunities for women aspiring to own a business.
• Enhance training incentives for small businesses. In early January, Gov. Arnold Schwarzenegger laid out his plan to create 100,000 jobs by training new workers. Training credits such as those suggested by Schwarzenegger are a positive move and will put people to work. However, the proposal is primarily aimed at training unskilled workers for other low-skill jobs. Women small-business owners as well as their employees would benefit from training support for high-skill professional jobs. According to the Bureau of Labor Statistics, in 2008, women amounted to 51 percent of all persons employed in management, professional, and related occupations – more than their share of total employment (47 percent). In several higher-paying professions, women are gaining ground or are the majority. One example: 61percent of accountants in 2008 were women. Why not incentives to train more accountants? Or help women-owned accounting businesses? Better still, why not incentivize training for women in small-business management skills?
• Promote a culture of lifelong learning. According to the Bureau of Labor Statistics, the unemployment rate among those with a bachelor’s degree or an advanced degree was 5 percent in December compared with the overall U.S. unemployment rate of 9.7 percent (California’s is 12.5 percent). Also, according to data released by BusinessWeek magazine in November, those who graduated in 2008 with M.B.A.s had an average salary of $104,000 – an increase of 9 percent compared with 2006 despite a downturn in the economy. We believe a similar phenomenon holds true for women in small business – those who receive more education are more likely to be successful and their businesses will create more economic and social value.
We are not suggesting that it is easy to start a new business. We work with professionals in Los Angeles and across Southern California who already have business experience. It can take them two to three years to get a business up and running. However, for women with the personal desire to start a small business there is a significant upside. At the same time, rewards come to their employees and the overall economy.
Linda A. Livingstone is dean of Pepperdine University’s Graziadio School of Business and Management. Larry Cox is associate professor of entrepreneurship at the school.
