Data Show Rise in Female Entrepreneurs

By MARLA DICKERSON

April 4, 2001 12 AM PT

TIMES STAFF WRITER

The number of U.S. businesses owned by women increased by 16% between 1992 and 1997, triple the growth rate of all firms, according to census figures released today. California once again led the nation with more than 700,000 women-owned firms.

But a change in the way the Census Bureau defines women-owned firms means there are far fewer of them than previously believed. That has some women’s groups questioning whether the data accurately reflect the activity of female entrepreneurs.

The latest economic census results show that there were 5.4 million women-owned firms in the United States in 1997. In its 1992 survey, the Census Bureau counted 6.4 million women-owned businesses, while subsequent projections by women’s groups had pushed the numbers above 9 million.

The dramatic difference stems from a shift in the way the Census Bureau defines and counts women-owned firms. This time, the census excluded businesses that were 50% women-owned, raising the ownership bar to 51% to conform with guidelines set down by other government agencies. Publicly held firms also were dropped from the 1997 count.

The change complicates comparisons with previous years. Still, the Census Bureau adjusted the data to get an “apples-to-apples” comparison that showed women-owned businesses multiplying at a brisk pace. But some women’s groups say the new data don’t reflect the full range of women’s business activity, and they’re already mobilizing to expand the scope of the next economic survey. The National Women’s Business Council, for example, has put together a task force to examine the issue.

“Women-owned businesses continue to be a potent force in the economy,” said Lynn King, deputy director of the federally funded advisory panel. But the new census figures “don’t reflect the much larger universe of women-owned businesses that we know is out there.”

Updated every five years, the economic census is conducted separately from the better-known population survey whose 2000 figures are starting to be released.

Although the most recent economic survey took a narrower view of what constitutes a women-owned business, the results nevertheless reflect the solid growth that has become the hallmark of female entrepreneurship.

Revenue for the nation’s 5.4 million women-owned firms reached $818.7 billion in 1997. That’s up 33% on an adjusted basis compared with 1992. Those companies employed 7.1 million workers, up 28% on an adjusted basis from five years before.

But despite the increases in numbers, revenue and employees, women-owned businesses remain disproportionately small. As of 1997, privately held, women-owned firms made up 26% of the nation’s businesses, but accounted for only 4.4% of total receipts.

Nearly 70% of women-owned businesses had less than $25,000 in annual revenue, compared with about half of businesses overall. Only 16% of women-owned businesses had employees, compared with one-quarter of all firms. The vast majority were sole proprietorships.

But the new census data aren’t capturing the activity of the largest women-owned firms, according to Bruce Rosenthal, spokesman for the National Foundation for Women Business Owners. Publicly held firms controlled by women no longer qualify under the new census guidelines. Ditto for fast-growing private firms whose female owners take on venture partners, diluting their controlling stake to less than 51%.

“The irony is that as the business gets larger and more sophisticated, it’s dropped from the count,” he said.

But the biggest change in the women-owned numbers came from the reclassification of jointly owned husband-and-wife firms. The 1997 data show that there were 3.6 million of these “50-50s,” 2 million of which would have been counted as women-owned under the 1992 methodology.

Census figures often are key to public policy decisions, thus the concern that the revised figures could diminish women’s clout. But Alberto Alvarado, director of the Los Angeles district office of the Small Business Administration, doubts that lenders, marketers or politicians will be swayed by a definition.

“Whether the number is 6.4 million or 5.4 million might be interesting for armchair theoreticians,” he said. “The reality is that women continue to form new businesses at a rapid rate.”

Not surprisingly, California, the nation’s most populous state, boasted the most women-owned businesses, with 700,500 in 1997.

The New York area, with 201,016 women-owned firms, edged out the Los Angeles-Long Beach region as the metropolitan area with the most businesses owned by women. However, Los Angeles County ranked tops among all counties in the country with 200,793.

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Ownership Boom

The number of U.S. companies owned by women grew 16% to 5.4 million between 1992 and 1997--almost triple the growth rate for all firms, according to just-released statistics from the 1997 economic census. California led the nation in the number of women-owned firms, which represented 27.3% of the state’s businesses. Nationwide, women-owned businesses accounted for 26% of all U.S. firms but represented only 4% of receipts.

Where They Are

Top five states by number of women-owned firms

California: 700,500

New York: 394,000

Texas: 381,500

Florida: 337,800

Illinois: 239,700

What They Do

Services: 55%

Retail: 17%

Finance, insurance and real estate: 9%

Construction: 3%