Attachment: Capitalism’s Newer Half:
Women Business-Owners In Post-Corporate America
Purpose, Method, Findings
#7 – 3,000 words -- Wed. 9/11/96]
The purpose: Determine to what extent the female entrepreneurs of America are in fact carrying out a big part of the original feminist dream: Economic autonomy and self-fulfillment, along with the diffusion of new management models into commercial life in ways that -- by definition -- end discrimination against women. If this is predominantly the case, Washington policymakers should be bracing for a new coalition for entrepreneurship, preparing to deliver something never before achieved on a grand scale: Equal-Opportunity Capitalism. "The typical female entrepreneur is something of a social and economic pioneer. On the other hand, because of the huge public-policy gaps between women business-owners and the established feminist groups, each side has yet to acknowledge the grand irony of the 1990s: Namely, the feminization of ownership” – project manager Frank Gregorsky.
Mega-Facts, Major Ironies
SUPER GROWTH: In only 15 years, the number of women-owned enterprises in the U.S. has quadrupled -- racing from 2 to 8 million. For most of the past decade, according to the SBFA, women have been starting new businesses at greater rates than men have.
JOBS GALORE: In 1994, for the first time ever, women-owned businesses employed more people than did the Fortune 500 firms. Since half of all Fortune 500 employees are located in other countries, women-owned businesses employ twice as many people within the U.S.
THEIR CORE DEMAND: "The greatest challenge women business-owners face, in their own words, is being taken seriously -- proving their personal capability and the credibility of their businesses. The greatest rewards they derive from entrepreneurship are strongly related to the empowerment they derive from being the mistress of their own fate" -- National Foundation For Women Business-Owners (NFWBO) Research Highlights (1995).
PERSONAL: Women who are business-owners are somewhat more likely to be married: 70% of them are, as compared with 57% of all women 15 or older. An even greater proportion -- 79% -- of this study's participants are currently married.
FINANCIAL SOURCES: A 1995 survey by Duquesne University's Small Business Development Center of 757 women-owned business mainly in Allegheny County (PA) found: "The most common source of start-up funds was personal savings... One-half (50%) used personal savings as the only source of start-up funds... Venture-capital provided funding for less than 0.5% of the women-owned businesses."
WHY SO LOW A PROFILE? Even though engaged in profound and pervasive "cultural change," America's female entrepreneurs have little political presence and absolutely no media profile. Of what other group of 8 million decision-makers can this be said? Still more baffling: Neither side of the political spectrum knows what to do with them or for them, despite the chronic needs of conservatives supposedly worried about gender gaps, and liberals looking for a way to help business without appearing to be economic royalists or corporate shills.
A large part of Newer Half consists of "virtual focus groups," which are simply mergers of the original one-on-one transcripts. Specifically, the 28 individual sessions are reformatted by topic to achieve a "sitting around a table" effect. As compared with an ordinary focus group, this approach encourages more concentration, greater combined expertise, less self-consciousness, and zero risk of "mob-think." Everything each business-owner said, on any of the dozen “group” topics, is represented in the final study -- making for a highly accurate assembly of collective opinion.
Though the roster and flow of questions varied, these are the interviewer's major lines of inquiry: Why and how did you start this company? What were the two or three ways you funded it in the early years? Who are your mentors, and how did you find them? What about role models? Everyone -- from the U.N. to presidential commissions -- concedes a "glass ceiling" facing women in U.S. corporate life. The term has become universal shorthand. What does it mean to you?
How have family concerns affected your ability to start and grow a successful business? Has marital status been affected by your ownership? What does the word "feminism" mean to you? How often are decisions made with an eye on federal agencies or other Washington factors? (Here we focus on: Health insurance, liability and lawsuit factors, employee training and pension-management, assorted tax burdens and reforms, along with virtually any other government-related topic a participant cared to put on the record.) Finally, could you recreate for us a time when the life of this enterprise was on the line, how you faced the crisis, and what you learned from it?
All of these questions are tackled in the report, yet with minimal use of statistics and surveys. Rather, the interviewees are allowed to explain at length their own stories (personal and business, money and motivation, parents and kids, more). Since the participants have a decent representation by industry and region, the reader is able to draw her or his own conclusions about economic trends and sociological forces.
(1) For purposes of Certification, start using a definition of women-owned business more weighted toward "daily control and operation" by a woman or women. At present, the definition of a "WBE" requires both ownership and control in the equation for a woman-owned business. Moving away from the absolute requirement of 51% stock ownership plus daily control would allow women entrepreneurs to seek more actively outside sources of venture capital and equity investments.
When asked whether this change would make the prevention of frauds and fronts even harder for state regulatory bodies, Lindsey Johnson of the non-profit Women Inc. admits that this is "the other side of this argument. However, the issue of capitalization is also very important, and designing an equity mechanism is vital to the long-term growth of all these businesses. It would require lots of due diligence and a specific financial tracking mechanism to prevent fronts, but it can be done."
(2) Encourage the SBA to use "cash-flow financing" for loans under $100,000, rather than requiring a 30% injection, standard collateral and life-insurance to cover everything. Johnson again: "Our current financial system was created out of the industrial revolution and reflects an economic era where most businesses seeking financing had machines, buildings, inventory -- hard assets -- that were part of the results of production. The hard-asset lending model is still the norm today, despite dramatic shifts in the sources of economic growth." In other words, service businesses are now a lot bigger than the smokestacks, yet the financial system tends to treat the former under the latter's rules. "Cash-flow financing -- called ability-to-repay in the SBA's authorizing legislation -- is much more realistic for service businesses."
(3) Change the Fair Labor Standards Act (FLSA) to allow employees to choose compensatory time in lieu of overtime.
More so than most, women entrepreneurs accommodate employee needs for flexible schedules. (Balancing families, education, neighborhood and volunteer work is more difficult when set within the strictures of rigid work schedules.) But service businesses often face seasonal activity-swings that require more time at certain points in the year and less than full-time at others -- and of course women are in service businesses in higher numbers. Compensatory time will allow them to make a job full-time rather than manipulate multiple short-term jobs; they can spread out the overhead expenses throughout the year while the work gets done when it needs to be done. (There should continue to be overtime-pay options, particularly if the flow of work does not vary noticeably.)
NOTE: Additional changes in the FLSA are proposed by Gregorsky interviewee Terry McCaffrey, co-founder of Pittsburgh-based TECHWRITE. In fact, her critique of that law, which begins virtual focus-group #9, is one the most devastating on record.
(4) Improve and make permanent federal support for the formation of business-assistance centers (BACs) for women.
The Women's Business Development Act of 1991 reauthorized an earlier demonstration program and, by 1996, 54 BACs nationwide were serving, collectively, approximately 2,000 women per month. Supporters say these sites average one new business and four new jobs for every $10,000 in federal money." Those federal dollars are used as seed money to start a service center in a given area, and they have a limited life -- three years, during which each center must create a funding mechanism that does not rely on federal dollars. "Therefore," adds Johnson, "when a community feels the service provided is important, private and municipal resources are dedicated to its existence and the women's BAC is an integral part of that area's economic development strategy. This is unlike other programs that allow federal funds to be allocated to the same center in perpetuity."
Johnson recommends (a) making the program permanent; (b) extending the seed money's length to five years; (c) defining "matching dollars" to mean non-federal, which then allows the use of state and municipal funds and not just private sources; and (d) overriding Administration plans to put BACs into the SBA's Small Business Development Center (SBDC) program, the effect of which would be to terminate SBA's Office Of Women Business-Owners (OWBO), which has tended to BAC needs and growth since '91.
(5) Several proposals to promote "microenterprise," after a call from interviewee Catherine Novak for "more help for micro-business [because] there's a ton of us out here. They -- SBA, federal government, state government -- define a 'small business' as under 500 people. Now give me a break! How many small businesses do you know that consider themselves 'small' with 489 people?"
According to the Duquesne University study of 757 Allegheny County (PA) women-owned firms, 84% were started all or mostly with personal savings. Interviewee Lois Haber adds: "From the involvement I have with NAWBO, I know that people max out their credit cards; they'll do anything they have to do [to get off the ground]." So, rather than centering the whole agenda on government breaks for women after their enterprises are safely off the ground, we also need changes that greatly enhance the openings for all entrepreneurs in the first place. Strategically, that means thinking big, about what really creates jobs, even though, on a human scale, our perspective needs to get smaller.
Amy Millman of the National Women's Business Council exclaims: "If I had a dime for every woman who called us and said she wanted to start a business and only needed less than $5,000 to make her dreams come true, I'd be rich today -- and then I would open up a micro-lending intermediary and make those dreams -- along with [those of] countless others who benefit when women start businesses -- come true." What changes would encourage commercial banks and S&Ls to make small loans to start-ups, in ways that share the institution's expertise? One advisor to this project proposes a Jack Kemp-style reform of all federal rules to exclude their application to "microenterprises" and new small businesses less than one year old.
Millman adds: "Congress is stuck in a time-warp which recognizes only large corporations or 'growth businesses' as viable concerns. They are missing a unique opportunity to foster a strong entrepreneurially-based economy from the grassroots up instead of the top down... Congress needs to wake up to the fact that one of the best ways to put people back to work is through self employment -- people creating their own jobs -- and that with some ingenuity and partnerships with lending institutions we can jump-start local economies, one person at a time."
Another outspoken project advisor noted, "Right now it's easier to buy a gun than it is to start a business." He advocates an IRA-style "Capital Savings Account." Capital accumulation would be sheltered only for start-up or expansion purposes. Withdrawals would require "some sort of certification," and the withdrawal "can't be for stock purchases." Or this from Millman: "The government should guarantee a small-business credit-card instrument similar to the guarantees it provides to banks who lend to small businesses. For many small/micro businesses, the type of credit offered by a credit card would be preferable, except for the high rates and the high cost to the banks of providing this type of credit to businesses. But large banks, such as Bank Of America, are experimenting with new small-business credit cards which have lower rates because they have found a way to lower the risk and therefore the cost of providing this type of financing."
(6) Thoroughgoing legal reform, especially on the tort front. A big surprise of this project is the vehemence shown against irresponsible legal action. Even a lifelong Democrat like Ellen Wessel (whose company, MOVING COMFORT, safeguards "sexual orientation" in hiring and furthers "gender equity" in society) declares: "These juries forget that all these companies are made up of people. I'm not saying the companies are always right, by any means -- the courts should always offer a remedy. But if someone is playing sports in a playground, and they fall down and break something, does everybody have to be sued because the concrete was too hard?"
MOTHER's WORK founder Rebecca Matthias adds: "You have lawyer-shops set up, where they have 100 documents and they just send them out as soon as any stock comes way down. Why can't they be stopped?" Like Wessel, Matthias favors a "loser pays" formula. "So much money is spent in this country on frivolous lawsuits -- because people can." In terms of the burden on companies, "It's not the kind of thing you can put your finger on, and maybe it's harder to stop -- but it's as big of a problem as high taxes... It's a drain of money and energy. And it is so random -- it's anytime, against anybody." Both Wessel and Matthias are in the apparel business (which would not seem a high-risk sector for product-liability). They happen to be opposites when it comes to political outlook. But to hear them talk is to suddenly see litigation reform as a "women's economic issue."
(7) It's time to lighten up on the home office, which means encouraging the regulators to stop approaching it like a toxic-waste dump. NFWBO stats say women own 3.5 million home-based businesses. Several of the companies in Newer Half began in the owner’s home (although only one remains there). And yet, as Diane Floyd Sutton of the National Association for the Self-Employed put it, the tax code "stands like King Canute, commanding the waves of [technological] modernization to recede." Specifically, to take the home-office deduction, you must be ready to prove you use that space exclusively, as in 100%, for business, and that it's also your principal place of business.
In her book with Deborah Shaw Lewis, Chairmaine Yoest contends that “our generation has a historic opportunity to change the wage-labor system," itself the legacy of an industrial revolution that "brought us the modern separation of home and work." Before 1880, "when work, home and child-rearing were more integrated, children were also more integrated into the society [and] all of life was more seamless... Perhaps technology can bring us back full-circle. It's time to start a real revolution." School’s Out author Lewis J. Perelman backs up Yoest: "As more work comes back to the home, we will, in a way, go back to an earlier age -- before the Industrial Age, where the home was the center of worklife, and the children were naturally involved. Think of Lassie: Working on the farm, the kids have chores -- they gotta go feed the chickens -- as part of the family economic unit. It's coming home again. Kids and parents will start sharing work-tools, and thereby be empowered" (Perelman in American Civilization, November 1994, page 9).
(8) Finally, Gregorsky encourages "women's business advocates to avoid thinking of their part of the economy as a fragile subculture petitioning government for tactical support. Instead, their more visionary spokespeople need to be emphatically on the side of small and new business, period -- a leap which will include using the popular culture and media to fire the imagination of the whole nation." The final section offers ways to make that leap beyond the normal policy route.
this landmark analysis, Frank Gregorsky wraps
up 16 years in Washington as a congressional researcher, newsletter editor, and
all-purpose interviewer. His essays have appeared in the New York Times, Wall Street
Journal, Washington Post and Christian
Science Monitor. After October 31, Gregorsky will be based at The Discovery
Institute, 1201 Third Avenue Suite 3950, Seattle WA. Anyone who is interested in
being interviewed for, or otherwise helping shape, the 1997 follow-up project to
this congressional report is
encouraged to contact him there -- www.discovery.org.
A Closing Excerpt From Capitalism’s Newer Half
The governing leadership that finally takes the American entrepreneurial woman seriously will facilitate a trio of outcomes that might, on the face of it, appear Utopian:
(1) It will transcend the Glass Ceiling and "fairness" controversies by demonstrating how "equality" is not a matter of macro-materialism and economic averages, but rather the type of market-tested individualism that fuses authority with responsibility.
(2) It will emerge "pro-family" because -- as many of the women in this report make clear -- owning your own company requires a solid family foundation. Plus, the related household innovation keeps the child's world more connected to parental vocations, resulting in daily lessons on the theme of, "Responsibility is normal, work has a hundred places and faces, and service is the safest route to the good life."
(3) Finally, the new coalition for entrepreneurship will keep the United States on top, in terms of invention and innovation, while showing the world something never before achieved on a grand scale: Equal-Opportunity Capitalism.
Return to "The Quiet Revolution"