October is National Women’s Small Business Month where we take time to recognize the achievements of female entrepreneurs and their positive impact on the economy. Prior to Covid-19, women were the fastest growing segment of small business owners in the United States.
Unfortunately, the pandemic has slowed this progress and compacted long standing inequities. For example, women only receive 4% of all commercial loan dollars and the federal government has only reached its mandated goal of awarding 5% of its contracts to Women-owned small businesses only twice.
As President and CEO of Women Impacting Public Policy (WIPP), Candace Waterman leads a national nonpartisan organization advocating on behalf of women entrepreneurs, strengthening their impact on our nation’s public policy, creating economic opportunities, and forging alliances with other business organizations. She has more than 35 years of experience across the private and public sectors and has owned three successful companies in the medical, real estate, and hospitality industries.
I recently had a conversation with Candace about the state of female entrepreneurs and WIPP’s efforts. I am grateful to her for taking the time to speak with me and below is a summary of our discussion.
Rhett Buttle: Before Covid, women were the fastest growing segment of small business owners in the country. What can we do to support women who want to open businesses and rebuild that momentum?
Candace Waterman: It is true that prior to the pandemic, women were the fastest growing segment of business owners in the county. While growth was strong across the board, I would be remiss if I didn’t point out that the fastest growing sector was businesses owned by Black women. The pandemic has certainly turned back a huge amount of progress, as many women left the workforce or permanently closed their businesses, wiping out savings and losing out on wages and income.
From a business to consumer perspective, the easiest way to support women-owned businesses recovering from the pandemic is to do business with those locally, in your area. By doing so, you are helping them to keep their doors open. You may want to go a step further and recommend their businesses to friends and family. If you want to do more and have the resources to do so, you could also invest in women-owned businesses in the form of venture capital or by becoming an angel investor.
Another, very important way to support women-owned businesses is to incorporate them into supplier diversity pipelines and supplier development programs and give them a seat at the table when discussing matters related to small business. When women don’t have a seat at the table, their voices get lost and they can’t share their pain points and what would be most helpful to them from a solutions perspective.
Buttle: Given WIPP’s advocacy on the issue of access to capital, what are some ways to unlock capital for women going forward?
Waterman: Access to capital is often cited as the number one issue for women business owners across the board. This is concerning given that access to capital is a crucial part of owning or expanding a business. Many women struggle with access to capital due to lack of banking relationships, low business revenue, and personal credit scores, and they are often approved for less funding than they request, and in some cases the terms and conditions are different or more stringent. In a similar vein, women apply for less funding, due to what I call application anxiety. On average, they ask for $35,000 less than men.
There are a few ways to think about addressing the challenges with access to capital for women. One way to think about this is through the policy lens. The Small Business Administration (SBA) has a 5% goal for federal contract procurement, meaning that 5% of all federal contracts go to women-owned businesses. This goal has only been met twice – in 2015 and in 2019. In order to provide more funding to women, the SBA should be more proactive in reaching women business owners as well as breaking down some of the barriers in the application process. Furthermore, contracts are typically awarded to businesses with an existing relationship with the federal government, meaning that many emerging businesses are shut out. Businesses without existing contracts or relationships must be equally considered for contracts.
We must also analyze this issue from the perspective of banks and financial institutions. These institutions have the capacity to foster strong relationships with women’s business organizations and to reach women small business owners who are in need of funding. Banks and financial institutions could also provide guidance to steer women business owners in the direction of loan approval before they are ready to apply to avoid negative impacts on credit.
Becoming certified as a woman-owned small business can also increase access by opening up more opportunities for contracting and working with state and local governments. It also adds an extra layer of credibility to your business. Women can self-certify as women-owned, but keep in mind that contractors can challenge certification upon procurement and request proof. If a business cannot comply, it can result in loss of the contract, thereby going through a certification process will assist in mitigating waste, fraud, and abuse. We must remember that access to capital is a barrier to entry and growth. When access to capital is coupled with access to contracts, it results in long-term sustainability for women-owned businesses.
Buttle: How effective have policymakers been in supporting women-owned businesses before and during the pandemic? What else should they be doing to help?
Waterman: Congress acted swiftly in March 2020, at the start of the Covid pandemic. Because of that swift action, millions of business owners had access to relief through the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL). In addition, Congress has made an effort to collect demographic data on recipients of these programs to gain a sense of who is receiving relief and who isn’t, which is crucial information for us going into the recovery process. Furthermore, in March 2021, the Biden Administration introduced the American Rescue Plan (ARP) which extended the PPP, included PPP forgiveness, and created or expanded tax credits such as the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), all of which have been beneficial to women workers and business owners.
Since the implementation of the ARP, the Biden Administration has laid out their long-term plan for childcare and paid leave in the American Families Plan, which ambitiously expands access to paid leave and makes permanent the ARP’s expansions of the CTC and EITC. All of this to say, Congress has stepped up in its efforts to support women business owners and workers and we are encouraged by these efforts to increase equity and even the playing field. Women business owners are decades behind their male counterparts in terms of growth, access to capital, and federal procurement, especially now after the global pandemic, which means there is still a lot of work to be done. At WIPP, we hope to see the House and Senate Small Business Committees continue to hold hearings on increasing access to capital, access to procurement opportunities, and examining the impacts of the pandemic and effectiveness of Covid relief for minority business owners. Learning more about these issues will help policymakers craft effective policies that will address many of the mechanisms that have kept women and minority business owners from reaching their full potential.
Buttle: What are the top things women small business owners need to think about in how they advocate to their lawmakers during these times?
Waterman: The first is to understand that there is a critical intersection between business and policy. A huge part of advocacy, especially for small businesses, is authenticity and being able to share stories with policymakers. Stories from people who are impacted by policies are the most effective way to reach policymakers. I’ve often said that Capitol Hill staffers and Members of Congress are fierce advocates and well rounded people, however many of them do not understand what it’s like to be a small business owner, or the daily challenges they face. Gaining that perspective is vital for them to draft policies that help small businesses.
The pandemic has certainly changed the way that we advocate. We have gone from convening in capacity filled small meeting rooms on Capitol Hill to virtual Zoom meetings and increasing engagement via social media. Authenticity becomes that much more important when we lose the in-person setting. Having said that, I would encourage women to really focus on specific pain points in their industry, how Congressional actions could alleviate them, being a resource to policymakers, and most importantly, understanding the power of their voice in these conversations.
Buttle: How as Covid-19 impacted women’s business operations and what does the increasing digital world mean for women-owned small businesses?
Waterman: No small business has been left untouched by the pandemic. However, women-owned small businesses and women workers felt the impacts of the pandemic more acutely than perhaps any other demographic. Women were more likely to lay off employees, report losses in income and revenue, or close their businesses during the pandemic than their male counterparts. Furthermore, women workers also left the workforce in record numbers over the last 16 months. In fact, women’s participation in the workforce has dropped down to 57%, which is the lowest it has been since 1988, and in December 2020, women accounted for 100% of all net job losses. There have been numerous studies and surveys showing that women are overall less optimistic about recovery and are recovering at a slower rate than businesses owned by men. In terms of what needs to be done, we must ensure that leaders in the public and private sectors understand these challenges and that the recovery effort is as equitable as possible. That means increasing access to capital for women, increasing opportunities for federal procurement and yes, improving digital infrastructure at a pace that meets the needs of all businesses across the country.
Small businesses have become increasingly dependent upon technology as it continues advancing. It goes beyond the use of tablets for payment at the counter or self-service orders via touch screen computers. We use technology to run our books and keep track of expenses, to connect with colleagues and clients, and in the case of the pandemic, to take business online. Many businesses were not prepared to make the leap to online business during the pandemic and it reminds us how access to reliable broadband is necessary for participating in the economy. A recent study by Facebook and the Small Business Roundtable (SBR) found that only 46% of small businesses have an online presence. This tells us that a significant portion of small businesses are not prepared to take certain elements of their businesses online, which is troubling given that there is still high demand for online services. Many business owners still don’t have the tools they need to provide adequate online service. We are optimistic that there are bipartisan efforts in Congress to address the digital divide through the recent bipartisan infrastructure deal reached by Congress and the White House.
Buttle: WIPP recently joined the Small Business Roundtable. What does this mean for WIPP and how does WIPP work in coalition to achieve its goals?
Waterman: WIPP is honored to have joined the SBR alongside several wonderful organizations who do important work every day on behalf of the small business. We are excited about the opportunity to provide additional perspective on women-owned small businesses and to share our expertise in important issue areas for small business including federal contracting, access to capital, and creating parity. WIPP is no stranger to collaboration with groups across the small business spectrum, and we’ve had the pleasure of working with SBR members in other capacities in the past. We look forward to building upon existing relationships, as well as working with new partners. The SBR has been incredibly successful in building coalitions among small business organizations that represent the interests and needs of millions of entrepreneurs and serves as a much-needed voice in the small business space.
Buttle: What do you think is the best advice for a woman business owner looking to scale/grow their business?
Waterman: As the organization who represents the over 12.9 million women-owned businesses in the country, I think it’s safe to say that all Women who start their own businesses do so with the ambition to grow. That said, when women feel like they are ready to scale, or they are in a position where they must, it’s important to take a step back and create a solid strategic plan. Before you begin the process of scaling, you must first determine if you’re ready to scale. Determine if your volume is experiencing a temporary boost, or if you expect the increased volume to be consistent. The last thing you want to do is invest time and money into scaling only to find out a few months down the road that you weren’t ready or your approach should have been more deliberate and strategic.