In a new report on the condition of women-owned businesses, part of an annual ongoing examination of business trends by American Express, researchers first take a big picture view (1972 to the present) and then do a swoop-down into the details of 2018.
The conclusion of the study is that the top-ranked women-owned businesses, those in the million-dollar plus category, are powerful economic engines. Investors who can help smaller such businesses get into that million-plus category, get over that threshold, can help produce “big economic gains,” and can presumably capture some of them as alpha.
Start with the Big Picture
The Big Picture is this: The number of businesses at least 51% owned by women increased dramatically over the period 1972-2018, an increase of 31 times. Only 402,000 firms met that description in 1972. More than 12 million (12.3 M to be precise) meet it now.
The revenues of such businesses were only 0.3% of the revenue of all US firms in 1972. They are 4.3% of total firm revenue now. In absolute terms that’s an increase from $8.1 billion to $1.8 trillion, or a multiple of 217.
Looking at the 11-year period, 2007-2018, one again finds impressive numbers. The total number of businesses in the US over this period increased by just 12%, whereas the total number of women-owned businesses increased 58%. The total revenue of women-owned business increased by 46%, while the total revenue of all firms increased by only 36%.
Forty percent of the businesses now operating in the US are now owned by women.
Now let’s swoop down on the numbers for 2017-18
The granular view is more complicated and less than, shall we say, triumphalist. The vast majority of all women-owned businesses now generate revenues of less than $100,000 per year. This group grew in number at a rate faster than the rate for women-owned larger businesses, or the rate of growth for all businesses. Many of these are entrepreneurs of necessity, not of choice.
Further, these low revenue businesses have few or no employees other than the entrepreneur herself. Over the last 11 years, employment at women-owned businesses shrank by 6%.
In general, the growth in total revenue for women-owned businesses has come about because there are more such firms, not because there is any increase in average revenue per firm.
Women-owned businesses at the next level up, those with revenues between $100,000 and $250,000 per year, grew by 34% over the last 11 years. This was a rate nearly three times as high as the growth rate for all businesses (12%). Over the same period, a period that begins just before the global financial crisis, employment by firms of this group increased by 3%.
Top of the Scale
At the top end of the scale one finds 207,900 women-owned businesses with revenue of $1 million or more per year. This was a very small percentage (1.7%), of all women-owned businesses.
Those top-rank women-owned businesses generated $1.2 trillion in revenue and employed more than 6 million workers, 30 workers on average per company. The Amex report describes these firms as collectively an “economic powerhouse” making an “outsized contribution to the economy.”
The Amex report is based largely on data from the US Census Bureau Survey of Business Owners (SBO), conducted in years that end in a 2 or a 7.
The report compares growth in GDP from 2007 to 2012 with data from 2012 to the fourth quarter of 2017. It established relative annual growth rates in order to estimate the growth in the number of women-owned firms over the period 2012 to 2018. This involved a straight-line extrapolation from the data it had to the data it wanted, a straight line adjusted to account for relative economic growth.
The Census data made it possible to take this approach not only at the national level but locally, in the words of the report, “by applying actual gross state, metro area and industry-level output figures” (which were available up to the fourth quarter 2017.)
With that last methodological point in mind, let us say a word about the geographical conclusion of this survey. The report lists ten states in which women-owned businesses have “most increased their economic clout between 2007 and 2018.” These states, in order, are: South Dakota, Texas, Utah, Delaware, North Dakota, Tennessee, Indiana, Georgia, Iowa, and Virginia.