As business men and women, we often find ourselves involved with subject matter that we have no personal knowledge or experience. To perform the task at hand and successfully reach our goals, we must rely on our ability to properly research the subject matter and tap into the knowledge and success of those people around us. It is through diverse opinions that better decisions are made, problem solving is improved, creativity and innovation are gained, which leads to enhanced product development, and more successful marketing to different types of customers. The topic of this month’s blog, Diversity Through “Set-Asides”, will hopefully inspire our readers to make comment and share their personal insights and opinions with us.

Let me start by saying that a business is in business to make money – the goal is to make sure that the business continues to make money and stays in business.  Let me follow by saying that both a level playing field and survival of the fittest have both been among my core values, especially in the business world.

The federal rules for the Woman Owned Small Business (WOSB) contracting program were published in the Federal Register on Oct. 7, 2010.  The rules are designed to get federal contracts to women-owned businesses in 83 industries.  Specifically, the program allows contracting officers, for the first time, to set aside specific contracts for certified WOSBs and economically disadvantaged WOSBs to help federal agencies achieve the existing statutory goal of five percent of federal contracting dollars being awarded to WOSBs.  The program’s effective date was February 4, 2011.

While barriers to entry exist in many markets and industries in the United States, the gender bias barrier has some interesting facts I would like to share with you.

  • As of 2013, it is estimated that there are over 8.6 million women-owned businesses in the United States, generating over $1.3 trillion in revenues and employing nearly 7.8 million people (“The State Of Women-Owned Businesses, 2013”, American Express Open)
  • Despite the fact that the number of women-owned firms now accounts for 29% of all enterprises, women-owned firms only employ 6% of the country’s workforce and contribute just under 4% of business revenues—roughly the same share they contributed in 1997(“The State Of Women-Owned Businesses, 2013”, American Express Open)
  • Fewer than 3% of women-owned businesses gross one million dollars or more each year (National Women’s Business Council, www.nwbc.gov)
  • 3/4 of women owned businesses are not able to grow their businesses past $50,000 in annual gross revenue (Forbes, May 2012)

We can see from these statistics that the number of women jumping into the entrepreneurial pond isn’t the issue. The issue is their ability to turn these businesses into large, sustainable, business operations. Additionally, research from the Center of Women’s Business Ownership notes nine out of ten women business owners want to expand their businesses and four in ten want their businesses to become as large as possible.

So, we know the number of women-owned firms is exploding, and we also know that many want to grow and expand their business. So, it is dismaying to see that, despite all this progress, on average, women-owned business are still small compared with businesses owned by men.

There are those who will say that these numbers substantiate what they always knew: Women just don’t have what it takes to start and run a substantial, growing business. But I don’t buy that: More than a quarter of a million women in the U.S. own and lead businesses with annual revenue topping $1 million—and many of these businesses are multimillion-dollar enterprises. Clearly, many women have the vision, capacity and perseverance to build thriving companies.

So what’s holding back so many women business owners? Sharon Hadary, Former Executive Director and Founder of the Center for Women’s Business Research, has spent decades conducting research, studying the data and interacting with all the players involved—entrepreneurs, researchers, educators, bankers and others. In the January 2013 issues of the Wall Street Journal she says she is convinced that the problem is twofold. First, you have women’s own self-limiting views of themselves, their businesses and the opportunities available to them. But equally problematic are the stereotypes, perceptions and expectations of business and government leaders.

Understand: she is not arguing that all entrepreneurs, all bankers, and all policy makers are guilty of such limited thinking. But she has talked to enough of them, and studied enough of the research, to know that these problems are pervasive, and they are having a big impact—on both individual entrepreneurs and in turn on the health of the overall economy.

In that spirit, here’s a closer look at how she believe these factors are preventing so many women entrepreneurs from fulfilling their potential.

ACCESS TO CAPITAL: Women often come to entrepreneurship with fewer resources available to them than men. The result is that they are more likely to go into industries such as retail or personal services where the cost of entry is low—but so is the growth potential.

Why the lack of resources? Again, women must accept part of the responsibility. Research shows that women tend to view debt as a “bad thing” to be avoided. Research from focus groups and seminars shows that many women business owners, especially those of color, believe they would not get credit even if they applied. So they don’t even bother to try. And when they do apply for credit, they are often cautious, asking for as little as possible. This only feeds the perception that they are not serious about growth.

Having said that, it’s also true that women business owners’ perception that they are not welcome at banks is not without cause. Despite highly publicized bank initiatives at the headquarters level to attract women business owners, Sharon Hadary’s experience is that many bankers in local communities still operate with the perception that women-owned businesses do not have the capacity to grow and are not good credit risks.

ACCESS TO MARKETS: The greatest potential for growth is in the business-to-business and business-to-government sectors. However, in the lucrative corporate-purchasing programs, many women business owners believe there is an unspoken perception that women-owned businesses do not have the capacity to perform, and that holds back their ability to win those contracts. Data confirm that women-owned businesses do not win a representative share.

What’s more, as corporate purchasing has moved to relying on “bundling”—consolidating purchasing through a limited number of large suppliers—women-owned companies are increasingly left out, according to women business-owner associations that focus on corporate and government contracting.

That’s because these large prime contractors, which are usually men-owned, include women-owned businesses as subcontractors in their bids in response to corporate requirements to have women- and minority-owned businesses on their team. But after winning, women consistently report, the prime contractor never gives them any of the work.

The same thing also happens in government contracting. For more than 15 years, federal agencies have been required by legislation to set a goal of awarding 5% of all procurement dollars to women-owned businesses. However, that goal has never been achieved on a government-wide basis. Similar to the private sector, government contracting has moved to bundling for efficiency, which can close the doors to smaller women-owned businesses.

ACCESS TO NETWORKS: Networks are a vital source of business and industry knowledge, leads on contracts, and access to decision makers in finance, purchasing and the community. Based on focus groups and seminars and Sharon Hadary’s own personal experience, she finds that most women don’t have the connections for credible introductions into industry associations, chambers of commerce, venture-capital groups and other key networks. When women venture into diverse networks, they too often are not taken seriously and frequently are shut out of conversations and deals.

My longtime friend and business partner, Joan Morvay, has experienced many of these struggles throughout her 25 years in the business world. Joan and I recently made the decision to support diversity in the business world by piggybacking on the Total Environmental & Safety brand with Total EH&S, LLC, a certified Woman Business Enterprise by the State of New Jersey.

If your project includes matters involving environmental and/or safety regulatory compliance, please tap into Total Environmental & Safety’s 30 years of experience in this field. If your project or company goals include helping women owned business reach their full potential, contact Joan at Total EH&S, LLC. Total is here to help you navigate through the complex maze of regulatory compliance and will undoubtedly prove to be invaluable to you in successfully reaching your environmental, safety, and diversity goals.