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Women Entrepreneurs

Women Entrepreneurs

Five years ago, Fran Greene was "female and facing 50, which is death in Corporate America," she recalls. So after 25 years with a big electronics-components supplier, Greene struck out on her own and started Sun State Electronics, a Winter Springs (Fla.) distribution company that sells high-tech gear to the aerospace and defense industries. Today, it's a $2.5 million business that employs 10 people. At 52, Greene, a former sales representative, has branched out into a second venture: Cakes Across America, which contracts with bakeries nationwide to deliver cakes for all occasions.

Gianna "Gigi" Dekko Goldman gave in to her entrepreneurial longings in 1990, quitting her marketing job at Minnetonka Inc.'s Claire Burke fragrances to start a business selling picture frames. Today, Gianna International in Rowayton, Conn., has more than $1 million in sales. A big plus to being her own boss is having a flexible lifestyle, reflects Goldman, 34. "I wanted to continue my career in an aggressive way, but I also wanted to be a mom."

Economic necessity drove Nancy Novinc, 42, and Hillary Sterba, 49, to start their tool-engineering company two years ago. They had just been laid off from Cleveland Twist Drill Co., a manufacturer of cutting tools, when they decided to start S&N Engineering Services Corp. "We decided if we were going to put in these long hours and work this hard, we would do it for ourselves," observes Sterba.

Different women, different dreams, and very different businesses. But they're all part of a wave of women entrepreneurs who are reshaping the American small-business landscape. While women have long owned businesses or toiled behind the scenes in family companies, their numbers are reaching giant proportions in the small-business sector--one of the most dynamic parts of the U.S. economy. There are roughly 6.5 million enterprises with fewer than 500 employees that are owned or controlled by women in the U.S. That's almost a third of the total, according to estimates by the National Foundation for Women Business Owners (NFWBO). Already, 1 in 10 American workers is employed by a woman-owned company.

And the ranks of such companies are growing: Women are forming small businesses at nearly twice the rate of their male counterparts. "It's a combination of women being more educated, feeling more entitled, wanting to combine lives and careers, and seeing that [business ownership] is where most growth and opportunities are," says Lynda L. Moore, professor of management at Simmons College in Boston.

TALENT POOL. And the phenomenon isn't limited to services and neighborhood retail shops--the traditional preserves of women who wanted to be their own bosses. True, most women entrepreneurs are drawn to the retail and services trades in part because of low startup costs. But the advances of female executives throughout Corporate America have produced a new pool of talent with experience in many industries. Now, as they leave large companies to strike out on their own, women are often starting businesses in such longtime male bastions as manufacturing and construction (chart, page 107). For example, Novinc, former director of new products at Cleveland Twist Drill, and Sterba, once the manager of national account services, together had 26 years of experience in the industrial-tool business when they began their company.

The impact of women's entrepreneurship is also resonating far beyond the confines of small business. Many experts believe that women business owners often seem to emphasize employee training, teamwork, reduced hierarchy, and quality far more than their male counterparts. As a result, they may offer distinctive lessons in management styles that are now being embraced by Corporate America as it strives to improve its global competitiveness. "Women tend to be more cooperative, informal, consensus-building in their behavior," says Candida G. Brush, assistant professor of management policy at Boston University, who recently reviewed 200 studies on male and female management styles. Men, in contrast, "tend to approach things in a more competitive, formal, or systematic way," adds Brush. Goldman puts it more simply: "Women have been taught all their lives to nurture and support others. As entrepreneurs, we are really able to use our natural abilities to empower others in our own companies."

What's more, women tend to measure success differently. While they care about profits, they believe their ultimate success rests on the development of their employees and on exceeding customer expectations, says Nancy C. Pechloff, director of the Enterprise Group at Arthur Andersen & Co. "Women are likely to spend more money on training and developing their people because they think that's going to give them a competitive advantage," she explains.

Marilyn Burns's business sums up the female style of management. Burns has stressed employee development almost from the day she founded Marilyn Burns Education Associates in 1984 to help teachers teach math better. To share ideas with her 17 employees and 65 independent consultants, Burns installed an electronic bulletin board. Her office staffers in Sausalito, Calif., attend two daylong retreats each year and are encouraged to take seminars and classes to improve everything from writing to computer skills. A "staff development committee" creates in-house training programs, and a "barometer committee" handles gripes and suggestions at the $2.4 million company. "It has to be a learning environment," says Burns.

SENSITIVE. The female management approach is being felt by the employees of women-owned businesses. Economists have long debated the quality of jobs created by small businesses, which often offer lower pay and fewer benefits than big corporations. But a study soon to be released by the NFWBO finds that women-owned companies, while likely to provide the same basic benefits as all small companies, are more likely to offer tuition reimbursement and flex-time. Moreover, women business owners are more likely to offer profit-sharing for employees at an earlier stage in the life of the company (chart, page 108).

Gun Denhart, for one, says she's sensitive to her workers' needs. The CEO of Hanna Andersson in Portland, Ore., a $43 million cataloger that sells children's clothing, pays for half of her employees' child-care costs, up to $3,000 a year. "We definitely have other goals than just the bottom line," says Denhart.

In addition to a more worker-friendly environment, companies run by women entrepreneurs may offer a more secure job than the typical small business. Paradoxically, that may be because women's businesses don't grow as fast as men's do. Some blame outright discrimination or a lack of access to capital for the slower expansion. But small-business consultant David L. Birch, president of Cognetics Inc., speculates that many women are reining in growth because of concerns about quality, customer service, and employees. In a study of women-owned companies that Birch completed in 1992 for the NFWBO, he found that women's companies were twice as likely as all companies to be stable or slow-growing. And that, in turn, may mean that it's safer to work for a woman-owned company: About 15% of the women-owned businesses showed job losses, compared with 23% of all businesses, says Birch.

Consider Sue Carroll, owner of Country Garden Inc., which produces hair accessories and bridal pieces. Her 16-year-old company employs 20 people in Kirkland, Wash., and has about $1 million in sales. Carroll is not against making money. But she believes the demands of a bigger company wouldn't allow her to change her product lines quickly enough to suit her customers. "We would lose some of the freedom we have now if we grow much more," says Carroll.

HURDLES. As their companies multiply, women entrepreneurs are gaining more clout. Often excluded from the old boy networks, women are forming their own groups to swap management ideas and customer leads. Since 1991, the National Association of Women Business Owners has seen its membership rise 38%, to 4,700. And grass-roots efforts are blossoming, too (box).

Despite their gains, women entrepreneurs still face huge obstacles. Although there has been some progress on the financing front, they still have problems raising money. Lacking access to many traditional credit sources, 52% of women business owners used credit cards for short-term financing during 1992, according to a survey by the NFWBO. That compares with only 18% for all small-to-midsize companies. And women have lagged in grabbing their share of business. Data from 1987, the latest available, show women-owned businesses, which then accounted for 27% of all companies, with only 4.5% of all business receipts. Women also get only 1.5% of the $200 billion spent by Washington to purchase goods and services.

Whatever the hurdles, there's plenty of fuel to keep this entrepreneurial fire burning. The downsizing of Corporate America, the so-called glass ceiling that blocks women from top jobs, and a desire to balance work and family are among the driving forces. "Women are finding it's time to own the system and not just ask permission to join it," says Joline Godfrey, founder of An Income of Her Own, a national program that introduces teenage girls to entrepreneurship.

Goldman came to a similar conclusion when she started Gianna International. She had spent three years as a product manager at General Mills Inc. but felt her career prospects were limited. When she saw no women on the executive roster, she says: "I knew that could hurt me." Goldman also wanted to start a family eventually, but she feared kids would land her on the Mommy Track, stunting her career prospects further. Those concerns persisted when she later went to work for Minnetonka. "My feeling is that a boss and a baby don't mix," she says. Today, Goldman sells stylish photograph frames to such powerhouse retailers as Dayton Hudson Corp. and Saks Fifth Avenue. She's hoping that her business will soon have enough momentum to allow her to start planning a family.

Some women are drawn to small business because they believe they can accomplish far more professionally by running their own enterprise. "In the corporate environment, there are so many limitations placed on you," says Deborah L. Hueppeler, a Wharton School MBA who left Merrill Lynch Private Capital in Dallas and bought a chain of 28 brake-repair shops in 1990 with a local investor's aid. She plans to expand the $10 million Just Brakes Corp. to 200 shops within five years.

Still, entrepreneurship can be an especially risky and daunting effort for women. Women entrepreneurs typically start out with far less capital than their male counterparts. A recent Marquette University study of Wisconsin entrepreneurs found that women had a median startup amount of $15,000 for a one-woman company, compared with $36,000 for male entrepreneurs. That may be because women often start service businesses that need less capital or because they have fewer assets for collateral. And their personal networks may fall short. "Men still tend to belong to organizations where a handshake and a referral will get them the money they need to get started," says Wendy Reid-Crisp, national director of the National Association for Female Executives.

CUSTOMER CHASE. Some experts also believe that many women are simply more cautious in their borrowing, more easily intimidated by lenders, and less informed about financing sources. Cynthia L. Iannarelli, director of the National Education Center for Women in Business at Seton Hill College in Greensburg, Pa., also says that it doesn't help that most bankers and accountants are men, many of whom "still have these stereotypical ideas about what women can do."

Rochelle Zabarkes certainly wishes she had started out with more capital when she opened a specialty food store on Manhattan's trendy Upper West Side in 1991 after 20 years as a video producer. At first, she scraped together funds from friends, family, and business contacts. With $50,000 in hand, she then turned to the Manhattan Borough Development Corp. and the National Association for Female Executives, raising an additional $210,000. Still, the financial cushion proved too thin when customer traffic fell off during the recent recession. "If I had to do it over again, I would ask for $1 million," says Zabarkes, who has kept Adriana's Bazaar afloat only after losing her home, filing for personal bankruptcy, and placing her company in Chapter 11. She expects she will finally break even this year--just as the landlord is threatening to evict her over $50,000 in unpaid rent.

Even women who own thriving businesses often have a hard time obtaining capital to grow. When she needed $3 million for expansion last year, Paula George Tompkins didn't go to any bank. Instead, she sought funding from a half-dozen venture-capital firms so her company, SoftAd Group, could introduce new interactive-marketing software and services. Even with a nine-year record and sales of about $5 million for her Mill Valley (Calif.) company, Tompkins was turned down.

It didn't help that her business was a labor-intensive service company, she admits. But she also believes the refusals had a lot to do with her gender. "I'm young. I'm a woman. I just don't think they took me very seriously," she says. So Tompkins, 41, "bootstrapped" the expansion with internal funds and overtime from her employees. Still, she says she lost a year in the marketplace with her new products.

Drumming up customers can be just as challenging as chasing capital. Many women still find themselves on the outs when it comes to male-dominated business networks, a convenient method of scoping out prospective clients. Novinc and Sterba, for instance, say they were denied membership in a local Cleveland trade association because they supposedly didn't fit the criteria in the bylaws. "No one ever showed us the bylaws," says Sterba. That hasn't stopped the pair. They have called on customers and colleagues they had dealt with at their previous jobs, who offered advice on everything from products to leads on customers. "We're both very aggressive individuals," says Sterba.

Minority women can feel even more frozen out. Just ask Ella D. Williams, an African-American and owner of Aegir Systems Inc. in Oxnard, Calif., an engineering and consulting company. Despite 13 years with Hughes Electronics as a systems analyst, Williams had a tough time landing her first contract when she struck out on her own in 1981. "There's a general negativity about doing business with minorities, as if we didn't know anything," she says. "Prejudice is part of business. You have to deal with it and can't dwell on it, or it overwhelms you." To reach potential clients, she says, she followed her mother's advice about getting to a man's heart. "I started making cheesecakes, breads, and muffins and took them on sales calls. I still do that today," says Williams, 53.

Perhaps the one dream women entrepreneurs relinquish is the notion that they'll have more time for themselves and their families. Wendy Wilson left her job as head of investor relations at AMR Corp., parent of American Airlines Inc., after five years of working 14-hour days and weekends because "I wanted to have a life." Now, she's working even longer hours at her own investor-relations company. And she often has trouble sleeping. But, she says, "I'm much happier because I'm in control of it."

As more women take control of their economic destinies, Wilson isn't the only one staying awake nights. And with their growing visibility and clout, Wilson and other women entrepreneurs may soon feel comfortable ignoring their mothers when they ask: "Have you thought about getting a real job?"