7 Tips for Women Who Want to Start a Business
A pro's savvy advice on how to raise the money you need
More and more women I know are starting their own businesses these days — often doing so by switching careers in midlife.
It’s a certifiable trend. “Women are becoming more aware of the opportunities for entrepreneurship in their lives,” Susan Duffy, executive director of the Center for Women's Entrepreneurial Leadership at Babson College told AP. “It's becoming more of an option for a career move than it ever has been in the past.”
Women-Run Firms Mushroom
And the data on female entrepreneurship bears this out. The number of new women-owned firms launched each day has doubled over the past three years, according to the 2014 American Express OPEN State of Women-Owned Business report. In fact, the report says, four in 10 new firms are started by women.
(MORE: The Paradox of Women Business Owners)
That’s all well and good, but what I found troubling in the report was that the average size and revenues of women-owned firms has barely budged since 1997. Back then, the average woman-owned firm had one employee and $151,129 in revenues. Seventeen years later, the average woman-owned firm employs one employee and generates $155,267 in revenues.
Not so good.
Why Women-Owned Firms Haven't Expanded
One possible reason for the stall: Female entrepreneurs are more likely to launch their businesses using mostly or solely their own savings, according to a National Women's Business Council report.
(MORE: 8 Great Sources of Financing for Women)
To get savvy financing advice for women who’d like to start or grow their businesses, I turned to Jeanne Sullivan, co-founder of the New York City-based venture capital firm StarVest Partners and “Chief Inspiration Officer” at eProv Studio, a program that helps unleash the potential of entrepreneurs. Forbes called Sullivan one of the women VCs changing the world, grooming the next generation of female entrepreneurs.
7 Tips from a Financing Whiz
Here are seven tips from Sullivan (and one from me) for women who are keen to launch businesses and who need to attract money to their startup:
1. Hone your story. One way to get an investor or lender to open a wallet is to have the chutzpah to sell, sell, sell your vision in a snappy sales pitch. Short and sweet.
“You need one or two lines that sum up your product or service,” says Sullivan. “The key is to be able to get that company story out of your mouth in a clear, succinct, short pitch.” You’ll also want to include a cogent example of how a customer would use your product or service.
2. Know your market. To get a solid grip on the potential size of your customer base, Sullivan says, ask yourself: “How big is it? Is it crowded? What niche are you trying to serve?”
3. Be sure you can reel off your business’s current finances and financial needs. Sullivan says an investor wants you to have “the street savvy on the financial details of your business” that allows you to discuss it easily. “This is where women really screw up,” she adds.
And this may be the underlying reason why women were much less likely to have their loans approved than men, according to the National Women’s Business Council. Moreover, the council said, male founders were more than three times as likely as female founders to get equity financing through angel investors or venture capitalists.
“It’s not hard,” Sullivan says. “You can learn this stuff.” It’s basic math — adding, subtracting and percentages. If you’re uncertain about financials, she adds, learn from someone who gets it before you go into a pitch meeting.
Says Sullivan: “It’s important to be able to answer questions such as ‘What are the capital needs of the business over time? What are the gross margins? What’s your breakeven timeframe?’”
4. Don't hesitate to ask people you know to invest. “Boys and men have been building their networks since kids — shooting basketballs, meeting for a beer and more. This is a critical skill for successful women entrepreneurs,” says Sullivan. She has a point. Men were more likely than women to tap networks of close friends and business acquaintances, according to the National Women's Business Council report. “Women need to understand the importance of such business network building,” says Sullivan.
5. Prepare for show and tell. “If you’re selling a product, get it in the hands of early pilot customers,” says Sullivan. Then you’ll have something real to discuss with an investor. “It is very hard to get funding before you build the product,” Sullivan notes.
6. Have a strategy for hiring your team. “Outline the key people you need over the next 18 months and recruit them — knowing that they may work for you now for equity or part-time until you get some funding,” Sullivan advises.
7. Surround yourself with a useful board of advisers — a brain trust. “A dynamic board early in your company's life adds gravitas,” Sullivan says. “Those advisers can be formidable references for you with an investor. They can guide you and they may lead you to your first customers.”
To find prospective board members, Sullivan says, tap your network of people who have experience with your type of business and invite about three to five of them to join your board. “Then, conduct either virtual or in-person meetings with them on a periodic basis to discuss two to three issues of key importance,” says Sullivan.
A Tip From Me
One more thing I’d add to Sullivan’s advice, based on what I’ve learned from entrepreneurs who’ve switched careers and started businesses in midlife: Prepare to work harder than you ever have (most small business owners work over 60 hours a week, according to a new survey by small business loan provider Kabbage) and prepare for the inevitable setbacks.
But don’t let that get you down. Based on what I’ve heard from the 50+ founders I’ve interviewed, you’ll only wish you’d done it sooner.