Female Businesses Reach for the $1 Million Mark

Maribel Araujo never planned to open a restaurant. A visual communications graduate from Venezuela, she moved to New York City to pursue a career in film. But after a year of shuffling between assistant jobs on independent movie projects, working long hours for little pay, she was exhausted, broke, and ready for a career change. One evening in 2002, as she was preparing dinner, she looked down at the cornmeal patties she was cooking and a light bulb went on. "I just want to have a little place where we can sell arepas and listen to good music," she told her husband.

Within a year she had raised enough money—about $65,000—through friends and family and a loan from Count Me In, a not-for-profit organization for entrepreneurial women, to open a very little place: a 300-square-foot restaurant in New York's East Village so tiny she could barely squeeze in 20 seats. But as word spread and positive reviews appeared in the New York Times and other publications, the seats were filled almost every night. In its first year the Caracas Arepa Bar brought in nearly half a million dollars in sales. Araujo, now 32, and her husband were able to move the restaurant two doors down to a larger space and turn the original spot into a takeout and delivery stand. By last year the combined operation was bringing in revenues of nearly $1.5 million. Araujo is still a little amazed when she thinks of how her idea for a "little place" turned into such a big business—especially when an estimated 30 percent of new restaurants close within a year (the failure rate in Manhattan is likely even higher).

Those aren't the only odds she's beaten. Women now own at least a 50 percent stake in nearly 10.4 million U.S. firms—about 41 percent of all privately held companies. But less than 3 percent of those women-owned businesses have achieved revenues of $1 million or more, according to the Center for Women's Business Research (CWBR), a nonprofit research institute. That's half the percentage of male-owned businesses that have reached that milestone. For the past two decades the number of majority-women-owned firms has grown at an impressive rate—around two times the rate of all firms, according to the CWBR—yet their revenues continue to lag behind. "There have been barriers in the system and barriers in our heads," says Nell Merlino, co-founder and CEO of Count Me In.

Advocates like Merlino are hoping to change that through efforts like "Make Mine a Million," which is celebrating its third anniversary this month. Merlino helped create the program specifically to provide capital, coaching, and marketing and technology resources to women who want their business revenues to hit that $1 million benchmark. It has already helped 30 women reach the target—including Araujo, who got advice and a loan of more than $20,000 to help expand her restaurant a few years ago. But Merlino's overall goal is even more ambitious: to help or inspire a million women business owners to achieve $1 million in revenues by the end of 2010.

She's got a long way to go. Only 250,000 to 300,000 female business owners have reached that number (compared to an estimated million or more male entrepreneurs). Still, there may be more reason for optimism now than ever before. "Twenty years ago there was a question of whether a woman could even reliably build a business to that level," says M. Thérèse Flaherty, director of the Wharton Small Business Development Center at the University of Pennsylvania. "That's just not a question anymore."

That's because some of the obstacles that female business owners once faced have gradually disappeared, or at least diminished. The Equal Credit Opportunity Act passed in 1974, but it was still difficult for a woman to get a business loan well into the 1980s and early 1990s, says Holly Schick, the Small Business Administration's acting associate administrator for women's business ownership. "There was definitely still an access-to-credit barrier; there were misperceptions, requirements that husbands had to cosign," she says. Women are still more likely to turn to friends and family, or credit cards, to raise money for their businesses. But they also have more access to financing through banks or even organizations like Count Me In that offer microloans to women business owners.

But while it's easier to get the funding to start or expand a business, the types of businesses that many women launch may limit their growth potential. In a report released in 2006, the U.S. Census Bureau found that more than half of all women-owned firms provided health care, social assistance, administrative, technical or other services. Just 15 percent were in the retail business; 8 percent were in real estate. "Some industries have a higher growth potential than others," says Schick. "And women have typically started businesses in fields you'd look at as female-based; they sometimes focus on a very localized, specialized market with finite potential." A woman who opens a hair salon in her neighborhood, for example, may be limited to a local clientele. Unless she plans to franchise the salon, her revenue growth is limited.

Also, unlike their male counterparts, female business owners tend to believe—often mistakenly—that a bigger business translates into spending even more time with it, and less at home with their families. (In reality, experts say, a bigger business means you can hire employees, delegate responsibilities, and actually spend less time in the office.) Or they fear they don't have the financial skills to build their businesses. "Women don't only need access to money but a greater understanding of it, and the confidence to feel more comfortable with the financial aspects of their business," says Merlino. Many women weren't raised to focus on money the way men were. Indeed, many female entrepreneurs start a business not necessarily just to make more money but to have more flexibility in their lives. They may even consider it a temporary sideline occupation, something to bring in a little cash while their kids are young, for example. "Women start a business for a variety of reasons and with a variety of goals. Not all of them want to grow their business that big," says Schick.

But for those who do, there is an expanding list of resources to help them: not just groups like Count Me In, or the more than 100 SBA Women's Business Centers located around the country, but individual women who have already launched successful businesses. At Count Me In, for example, about 50,000 female business owners have already joined the community, where they can serve as resources or seek help themselves from other members. "There has always been the old boys network; now there's a growing women's network too," says member Lynne Lambert, who founded Prak Productions, which has an exclusive license to make and market clothing and accessories with New York City subway logos and maps. (Her company passed the $1 million mark in sales last year.) "Before, when things went wrong, it could easily become a crisis. Now I can make a call and tap into this amazing knowledge base."

And that base of successful women business owners is expected only to grow—in numbers, revenues and range of expertise. Merlino is confident that the number of $1 million women-owned businesses will soon match that of businesses owned by men. "We're still catching up," she says. "But I have no doubt that we will get there." One arepa at a time.