The Rise of Women-owned Businesses and the Untapped Market for Financial Institutions

Women-owned businesses are growing at a staggering rate in the U.S., contributing the lion's share of family income and driving the economy. In 2022, 47% of entrepreneurs were women. Yet female-owned businesses continue to be undercapitalized — and likely under-considered by financial institutions trying to determine how they can best serve their customers.

Women entrepreneurs are no longer a niche demographic. Between 2012 and 2019, the number of women-owned businesses increased by nearly 52%, while men-owned businesses rose by only 34%, according to the National Women's Business Council (NWBC). And the numbers continue to be strong.

A recent survey by ADP and NAWBO found a key data point: 92% of women-owned businesses are micro-businesses, and 63% of those businesses provide the majority of the family income. Women are taking advantage of technologies that facilitate launching a business so they can provide for their families.

That information is significant and should be considered by all organizations that serve small and micro-businesses.

Fintechs are out-hustling banks

In general, fintechs have done a pretty good job of serving small and micro-businesses, recognizing the unique needs of these entrepreneurs and business owners. Fintechs have expanded financing options to raise capital, automated accounting tasks, and simplified payments. Fintechs have out-hustled traditional banks, which have been slow to change how they serve a rapidly evolving business landscape.

Not only have traditional banks been slow to join the digital revolution, but they haven't done an excellent job of understanding the evolution of their customers. While there has been enormous growth in women-owned businesses, many traditional banks are not addressing this change. It's obvious in their marketing that they are not speaking to this demographic.

Female entrepreneurs face unique challenges

Women business owners are an important demographic with unique needs that their banks aren't acknowledging — a missed opportunity for banks.

• Women-owned businesses are undercapitalized. And it doesn't make fiscal sense. Top female founders are able to raise much less money ($50 million) than male founders ($226 million) and receive lower valuations for their companies.
• Women-owned businesses are having trouble hiring. According to 41% of NAWBO members, it's more difficult than ever before to bring on talent. Nearly half (43%) of the members surveyed were micro-businesses with no staff. And for them, losing out on an applicant can significantly impact their ability to scale or fulfill orders.
• Women-owned businesses tend to be a great investment. All the challenges aside, women entrepreneurs still tend to be more successful than male entrepreneurs.

What businesses targeting entrepreneurs need to consider

Organizations and platforms serving small businesses need to consider the impact of this data on women entrepreneurs and women-owned businesses. Building tools and services that cater to their needs and appropriately marketing to this demographic is not about serving a niche audience. This is a large percentage of the market, and we all must consider how to better serve this segment.

As business owners and technology creators serving small businesses, we must understand our customers and their evolving needs. If we don't understand who we're serving, our businesses will suffer.

Like their male counterparts, women entrepreneurs are strapped for time, and anything that simplifies business tasks and processes is welcome. When it comes to managing finances, think everything-in-one-place. No one became an entrepreneur because they dreamed of doing the books or paying taxes.

Small business owners need to be able to focus on their core business — everything else should be made as simple as possible. It's a win-win situation. When business owners win, so do the companies that serve them.

Business owners have enough to do in building and growing their organization without having to use multiple platforms to manage their finances. The difference to consider is what other challenges these customers might face in building their business.

Tight's API is a white-labeled solution that can be used to better address the needs and concerns of this significant demographic. At the end of the day, whether an entrepreneur is male or female, they want what we at Tight are told again and again: everything in one place.