How to be a million dollar baby

Written by ProfitGuide Staff

How does a women entrepreneur build a multi-million dollar company? Easy, through business savvy and financial sophistication. According to a recent survey by the Washington, D.C.-based Center for Women’s Business Research, women-owned businesses generating revenue of $1 million or more distinguish themselves through their use of multiple funding sources, sophisticated financial management practices and of technology.

“This study confirms that women can and do play in the big leagues,” says Myra M. Hart, Chair, Center for Women’s Business Research and Professor, Harvard Business School. “These businesses contribute significantly to our economy in terms of revenues and employment. Most are on their way to becoming even bigger with more than half (55.3%) reporting sales growth over the past three years, in spite of the economic downturn.”

These leading edge businesses are typically different from other women-owned businesses in that they use a greater number of funding sources (four sources vs. three sources) and vendor credit (59.9% vs. 33.6%). In addition, they are more likely to use a greater array of financial products, including commercial business loans or lines of credit (56.3% vs. 30.9%), and business credit cards (75.3% vs. 53.3%).

Women owners of million-dollar firms are also more likely than owners of smaller women-owned firms to use a variety of “bootstrapping” strategies to reduce the need for outside capital, including negotiating better terms for their accounts payable (49.7% vs. 30.3%), speeding up customer payments (48.7% vs. 26.3%), and leasing equipment (32.7% vs. 17.1%).

Their financial sophistication extends to financial reporting. They are more likely than smaller women-owned businesses to produce more frequently financial reports such as balance sheets, income statements, cash statements, sales forecasts, and break-even analyses.

That savvy is also evident when they address technology issues. They are more likely than the women owners of smaller businesses to say that the Internet and e-commerce play an important role in their growth strategy (57.7% vs. 31.2%). Further, more than half (56.0%) of these firms use their website for e-commerce.

Other factors that distinguish million dollar companies are:

  • They’re more likely to use formal advisors such as accountants (40.7% vs. 28.9%), lawyers (15.7% vs. 6.6%) and boards of directors (13.3% vs. 4.6%).
  • More likely to belong to formal business organizations (81.3% vs. 60.5%).
  • More likely to be in wholesale trade (17.0% vs. 3.8%), construction (13.4% vs. 3.3%), and manufacturing (12.3 vs. 4.8%); and less likely to be in the service sector (26.9% vs. 51.0%).
  • More likely to have a clientele that includes corporations, other businesses and government. About one-third of the women owners of $1-million businesses say that large corporations are their primary market, compared with 11.8% of other women business owners.

©2005 Rogers Media Inc.

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