3 Top Challenges Female Entrepreneurs Face When Starting a Small Business

Women have made significant strides in the business world over the last few decades — even more so as the U.S. continues to rebound from the effects of the pandemic. In fact, according to a recent report from Gusto, women started 49% of new businesses in the U.S. in 2021, up from 21% in 2019.

As exciting as it may seem to start a new venture, female entrepreneurs are also up against a host of issues that their male counterparts do not always face. Family commitments, inherent biases and evolving gender roles make opening and running a successful business uniquely challenging for women. The lack of adequate outside support and advice can also create an untenable operating environment. 

Below are some of the typical roadblocks women who own small businesses encounter, as well as guidance on how to navigate them.

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Sustaining wealth and building a network. One of the major keys to growing a business is having the right network of people at your disposal to allow for natural expansion. This might mean a strong employee base, but it also includes outside support, such as business groups or professional counselors.

The 2020 annual report from the National Business Women’s Council states that 90% of women-owned businesses have no employees. This is primarily because most female-led businesses are service-based (event planning, marketing, writing, etc.) and do not lend themselves to having multiple employees. However, this type of organization is difficult to sell as ownership retires or decides to no longer manage the day-to-day.

One of the biggest decisions a business owner will make is when, and if, to hire employees. The decision to hire often comes down to available cash flow and whether an owner desires to actively grow her business.

For this reason, it’s important to determine whether a business will be utilized as a lifestyle business or be viewed as an asset to grow for future sale or legacy wealth. Many women begin their business as a passion-focused endeavor to earn income and live and work on their own terms. Others to grow and scale a business for future generations. Assembling a team of professionals that may include an accountant, attorney, business coach and financial adviser will aid decision-making in growing and investing in your business.  

Effective business credit and funding. Knowing the best ways to finance a business and fund growth can be a confusing, onerous process. Whether it’s through traditional lines of credit, outside investment or cash, deciding on the right approach can be overwhelming. For women, the process is often even more challenging.

Businesses led by women are 63% less likely to obtain venture capital (VC) funding than those led by men, according to researchers from Columbia Business School and London Business School. Women are also less likely to receive loan approvals from financial institutions simply because of biases against female business leaders. Research shows when women pitch venture capital, they are asked prevention-coded questions as opposed to promotion-coded questions received by men. Investors also tend to back individuals who share a similar background, leaving women at a disadvantage in front of a male-dominated financing team.  

Sometimes, working with an outside consultant like a financial adviser can help you decide what option is best for you and your personal goals. They can also help you identify alternative funding options that you might not have thought of initially, such as grants or loan programs, and alert you if you are taking on too much debt.

Family and career balance. While we’ve made considerable progress in combating antiquated gender roles, some old habits are hard to kick. Women typically shoulder most of the household-task burden in families, including being the primary caregiver for children.  

Aspiring female entrepreneurs are more likely to start their businesses once their children are of school age, putting them at risk for additional biases, such as ageism and traditional gender roles associated with being a mother and taking time out of the workforce to raise children.

The best way to combat this issue is to deepen your bench. No one person — woman or man — can run both a successful business and a successful household alone. You need advisers, employees, business groups, family members and others to fill in the gaps you simply cannot fill.

Start by joining small-business groups dedicated to women and partnering with like-minded professionals. National networking organizations such as International Women’s Forum have local chapters. Meetup.com is helpful for finding local, niche-oriented groups.  Set aside time for work vs. home life and use available resources without guilt.

Lastly, remember to take time for yourself. Mental health plays a major role in creating a sustainable business and home life.