Ian Portsmouth: Welcome to the Business Coach Podcast, an advice-oriented series that tackles the top issues and opportunities facing Canada’s small businesses. I’m your host, Ian Portsmouth, the Editor of PROFIT Magazine. We’ve developed this Podcast in cooperation with BMO Bank of Montreal.
Female entrepreneurs are a large and growing market in Canada, but you might not know just how large. According to Statistics Canada, there are about 1.1 million employer businesses in Canada. Fully 46 percent of them have some degree of female ownership; 19 percent of all SMEs have equal partnerships between male and female owners; and 16 percent are majority own by women. Do the math and you’ll see that hundreds of thousands of Canadian companies are owned and run by women. Their economic contributions are huge. Despite the hefty vibrancy of this segment of the business world, female entrepreneurs continue to face some barriers to their success.
Joining me to discuss these hurdles and how entrepreneurial women are overcoming them, is Professor Barbara Orser, Deloitte Chair in the Management of Growth Enterprises at the Telfer School of Management, University of Ottawa. She is also a student of Women-Owned businesses. Barbara, thank you for joining the Business Coach Podcast.
Barbara Orser: You’re most welcome.
Ian: First Barbara, maybe you can give me a bit of an update. One of my greatest frustrations as a journalist specializing in Canadian entrepreneurship is the patchwork of usually out-dated facts and figures concerning female entrepreneurs in Canada. Would you like to augment or correct anything I stated a minute ago?
Barbara: Well, I think your numbers are consistent with what we are seeing. Women own in part approximately half, and my number would say about 47 percent of all SMEs in Canada, majority female ownership. Those are firms that are owned solely by women, account for 16 percent of Canadian firms. And in addition, there are another 900,000 self-employed female workers. So, it’s a huge part of our Canadian economy.
Ian: Now, I’d like to continue our conversation by bouncing a few statements off of you, and each one represents a common perception of women owned businesses, or the challenges faced by female entrepreneurs in Canada. So, let’s start by getting your immediate response to this question. Are the following statements fact or fiction?
Relative to their male counterparts, women-owned businesses are smaller and slower growing. Fact or fiction?
Ian: Relative to their male counterparts, female entrepreneurs have more trouble obtaining start-up and growth capital. Fact or fiction?
Ian: Relative to their male counterparts, female entrepreneurs have less developed social and business networks that would otherwise help them get ahead in business. Fact or fiction?
Ian: Relative to their male counterparts, women run more sustainable, profitable businesses?
Ian: Finally, women bring a different management style and set of values to their businesses than men do?
Ian: Terrific. So, let’s go through each of those. Relative to their male counterparts, women-owned enterprises are smaller and slower growing. You said that that is a fact. What is the reason behind that?
Barbara: Well, the numbers would suggest that women-owned firms are, and this is on average, smaller and less profitable than a comparative cohort of majority male-owned firms. For example: in 2007, Industry Canada reports that the average revenue from a majority female-owned firm was about a half a million dollars $563,000 versus or in comparison to a majority male-owned business with revenues of $1.1 million. So, on average, they’re about half the size.
Ian: And what is driving that? Is that due to the desire among women to have a more balanced approach to business and family life?
Is it because of the motherhood factor? What is it?
Barbara: Well, I think it’s important to remember that, in fact there are more similarities than differences; when we look at male- and female-owned enterprises. One of the things that we’re seeing that is a change in the market, is that women are just as likely to indicate the intention to grow. So, this is changed overtime. Women are seeking growth, but I think some of the factors that play into the revenue or size of these firms is the sector choice. We know that women come into business ownership with less management experience; we know their firms are younger; and all of these dynamics in terms of being able to access resources, being, you know, linked to growth oriented business, owners and pipelines factor into the revenue of the firm.
Ian: Now, our next fact or fiction statement was that female entrepreneurs have more trouble obtaining start up and growth capital than their male counterparts. What’s the explanation there?
Barbara: Well, it’s a bit of a complex story. We’ve done quite a bit of work at the University of Ottawa on this question. We know that majority female- and male-owned firms are just as likely to seek debt capital in a given year; about 17 percent of all business will look for debt capital in a given year. We know that women receive smaller amounts of debt financing and in part, that reflects the size and scope of their firm. But we also know, and this is reported by Stats Canada and Industry Canada that women majority female-owned firms are less likely to be approved for short-term debt; and by that I mean lines of credit and credit cards. And we know that male-owned firms are more aggressive in financing their firms. So their debt-to-equity ratios tend to be higher.
And yet when women and men receive debt capital in Canada, they are no differences in interest rates or collateral requirements. So, at the end of the day, it looks like the differences appear to be related to the size and scope of the firm, the sector influence, and also poor credit histories. So that might link to the track record of women business owners at start-up.
Ian: Next one: Female entrepreneurs have less developed social and business networks that can help them get ahead in business. I believe you said fact and fiction to that. What’s the explanation there?
Barbara: Well again, you know, we in academia can make a story complex. We know that there is a perception amongst women business owners, that they do not feel that they’re linked into networks that can provide them with the resources they need to grow the firm. And the degree of this depends on the sector. For instance, in the advanced technology sectors, we hear that often from women business owners. We also know that women tend to have different types of relationships in those networks. And so, they tend to have mentors and colleagues that tend to emphasize sort of social aspects of business management, as opposed to tactical, practical and resource-based aspects of those working relationships. So the very nature of the relationship is different as well.
Ian: Women run more sustainable, profitable businesses than their male counterparts. Earlier on, you said that the research shows that they run less profitable businesses. What about the idea that they run businesses that are better built to last?
Barbara: Well, I think that might be unfortunately a bit of urban mythology. The numbers don’t support that. Our survivorship studies are fairly limited and there is, you know, the argument that women manage businesses with moderated risk. But the numbers don’t spell out more profitability and there is limited information to suggest they’re more sustainable. And we know that growth, innovation, export, management experience are all linked to survivorship. So, I think that might still be a bit of urban mythology.
Ian: And finally, you agreed with the statement that women bring a different management style and set of values to business than men. What are the differences?
Barbara: Well, here the research is fairly consistent in terms of differences in the values that business owners bring to their firm and differences in management style, at least the perceived management style. When we look at media, and we look at the literature, it tends to be fairly masculine in the description of what that entrepreneur should look like, self-reliant, logical, risk taking. And yet when we speak with women business owners, they’re much more likely to talk about relational leadership and focus on nurturing employees, safeguarding concepts, mutually empowering, creating teams. And the research of Telfer is consistent with this sort of perception that the values differ. As well we know that amongst Canadian women business owners, they will tend to emphasize relational values when they describe their businesses.
Ian: Now based on your extensive knowledge of growth companies, is there any advice or encouragement you would give to women who might be running a small enterprise; or thinking about starting one, who want to grow that business; and as you said earlier, more and more women do enter business with growth aspirations in mind. So what advise would you give them?
Barbara: Well, I think they can look at three areas: one is, and you’ve touched on that Ian, is the social capital. That, in order to get a better sense of how they benchmark in the market; how they access resources in the market place; accessing networks, be at women focus networks for the various Canadian training agencies in Canada, they’re women focussed in the East and the West, Chambers of Commerce; to make sure that they have a robust portfolio of networks that they’re tapping into; because social capital, at the end of the day, is driving relationships.
Financial capital as well; having a very realistic sense or understanding of what the performance of their firm looks like; and that when they’re going after financing, they clearly understand the performance of their firm, including their cash flow. And then third, I think just having a very honest look at their management skill sets and their experience at start-up. And to consider if they need to bring in talent. One of the things I have observed in my research is that often women business owners will talk about the need to maintain control, and make sure it’s done well. And they may be less likely to delegate to others. When I speak with male business owners, they talk about delegating to others in order to maintain control of their operation and their time. And so I think, questioning your assumptions, looking at the performance of the business, benchmarking against others, and feeding into multiple networks, would be my suggestions.
Ian: Barbara thanks for that advice and also for busting some of the myths about female business owners.
Barbara: You’re welcome.
Ian: Professor Barbara Orser, is the Deloitte Chair in the Management of Growth Enterprises at the University of Ottawa’s Telfer School of Management.
That’s it for this episode of the Business Coach Podcast. Be sure to check out other episodes which you can download from BMO.com/coach, profitguide.com and iTunes. For other tools to help you build your business, visit the BMO Smart Steps for Business Community at BMO.com/smartbusinessowners. Until next time, I am Ian Portsmouth, the Editor of PROFIT Magazine, wishing you continued success.