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Running the gauntlet

Women today have unprecedented opportunities to start businesses, but a wide assortment of hurdles remains.

May 1, 2004

Running the gauntlet

Looking for a challenge? How about climbing Mount Everest? Swimming the English Channel? Biking the Tour de France?

Or, maybe you could a try running your own business. As a woman. Twenty years ago.

That's just what Rebecca Naugler, Kathy Olson and Elizabeth Ranger did two decades ago. In the early 1980s, all three were working for Goli Travel in La Crosse, Wis., "and we didn't think we were being remunerated properly," said Naugler. They resigned, at which point the agency's owners offered to sell the business to them. The three formed a C corporation (called Avenues of Travel) in 1983 and then bought the travel agency in 1984, renaming their corporation Goli's Avenues of Travel. Eleven years later, they became a Carlson Wagonlit Travel agency to maximize their travel buying power and better position themselves in the travel market.

Since becoming owners, they have managed to grow the agency from $4 million in sales to $15 million in 2001, earning a perennial spot among the state's 25 largest women-owned businesses. Along with the entire travel industry, the business hit a rough spot after 9/11, but things are turning around again. "This year, we should be up," Naugler said.

Over time, the business has met its fair share of resistance. For starters, the new bosses had internal conflicts with company staff who had previously worked side-by-side with them as co-workers. "One of our challenges was, 'Who made you God?'" Naugler said. "It was difficult to delegate responsibility."

Women business owners also faced a lot of institutional and cultural barriers back then, and Naugler saw it firsthand. "A lot of people said this would never work," expressly because three women were running the show, Naugler said. Their company ran into early difficulties getting financing to purchase the travel agency in the first place. They approached three local banks and were turned down flat by all three.

"We had a difficult time with bankers taking us seriously," Naugler said. The trio came up with the money themselves from a variety of sources and managed to pay everybody back in just three years. "Many banks afterward tried to cater to us."

Other difficulties arose in areas like buying insurance and trying to set up a 401(k) retirement plan, usually because they were dealing with male agents. "Many were quite paternalistic back then," Naugler said. But times have changed for the better for women business owners, she said. "One of the reasons that's changed is more women are in those [sales] positions and much more understanding" of the business needs of women owners.

Most people would agree that significant social and economic strides have been made in unbottling and encouraging women entrepreneurship. Most would also agree that significant steps remain in leveling the entrepreneurial field for women. But gauging the equality of women entrepreneurs is a difficult task. There are few opportunities not available to women today, particularly given accelerating education levels. Though anecdotes abound about financial and other startup barriers, research nonetheless suggests that many traditional walls have largely come down. Still, many believe that women continue to deal with more amorphous—and troublesome—obstacles like cultural expectations and internal conflicts of balancing work and home life.

Tear down the wall

A 2003 paper by Maria Minniti of Babson College and Pia Arenius of Helsinki University of Technology looked at data on women entrepreneurship across 37 countries and concluded that "women are influenced by many of the same factors that affect men when making entrepreneurial decisions." Nonetheless, they acknowledged that some differences are clearly present for the simple fact that female participation is systematically lower across all countries, including the United States, where about 8 percent of women are entrepreneurs, compared with about 13 percent of men.

From the long view, part of the (shrinking) gap is historical legacy. When women first started entering the workplace in sizable numbers, there were three main options: teacher, nurse and secretary. The walls around those options have been largely obliterated. While overrepresented in service and retail businesses, women are moving—slowly in some cases—into any and all fields, including nontraditional, male-dominated fields. Though just 8 percent of construction firms nationwide were majority-owned by women, their ranks grew by 36 percent from 1997 to 2002, according to the Center for Women's Business Research (CWBR).

Tara Holt, director of the Center for Technology and Business/Women and Technology in Bismarck, N.D., said she sees more women in construction trades in part because construction business models have changed. "For instance, I see women in the sand and gravel, and paving businesses. They aren't necessarily out there shoveling rocks, but they have an ability to manage the men who do that work," Holt wrote via e-mail. "A big part of their day is spent doing paperwork and working with other service providers and vendors, which they do well."

Still, anecdotes abound regarding the obstacles faced by women, almost regardless of industry. Some of the obstacles—such as cultural and personal expectations—are real as long as they are still perceived to be present by women. But some barriers, while not necessarily imaginary, are not as evident or sinister as anecdotes suggest, at least according to prevailing research.

Startup financing is just such a case study. Surveys of women entrepreneurs repeatedly say that credit access is a major problem. In one survey by the National Women's Business Council, more than half of women surveyed "found it difficult to secure capital to start their business." A 2002 CWBR study reported, "Overall, study participants—both startups and those with active businesses—agreed that their biggest challenge is financing."

Examples of women who are denied financing for their businesses are easy to find, like Naugler in La Crosse. Suzanne David, director of the Montana Small Business Development Center in Great Falls, related the story of one client a half-dozen years ago looking to open a bed and breakfast. Sitting down with a male loan officer, she was told flatly and condescendingly, "if she were a man she wouldn't have any problem getting the loan."

Holt, from North Dakota, concurred. "It's still very difficult for a woman to finance a business, especially in a rural area, where the banks prefer ag lending situations. Women are still expected to have collateral, and if the family farm comes up as a possibility, it is rarely used to support a business loan for the wife."

Exception or rule?

The implication is that credit markets are discriminatory against women and a cursory glance at the data might support that notion.

For example, a 2003 Small Business Administration study on financing patterns of small firms found that women-owned firms (looking at data from 1998 and earlier) were more dependent on nontraditional credit, particularly credit cards, than were male-owned firms. Among sole proprietors, 33 percent of all such firms have some type of loan or credit through some depository institution, compared with only 15 percent of women sole proprietors. Such findings suggest that women "might face barriers in accessing more traditional types of credit," the report stated, but it did not draw any hard conclusions on the matter.

There might be other clues or data that offer some answers as to whether women face systematic, gender-based discrimination. Recent research has begun to look in more detail at the company traits, which appear to offer a more fulsome explanation for why women sometimes face credit difficulty.

Susan Coleman of the University of Hartford and other researchers have concluded that lending discrepancies are likely attributable to nongender characteristics of the firm. Businesses owned by women are usually small and young, their owners having limited industry experience. When looking at firms in this light—as individual credit risks—lenders are encouraged to be choosy. Indeed, the Federal Reserve System and other financial institution regulators require it.

As such, lending patterns to women-owned firms, according to one of Coleman's studies, "make sense when we consider that banks, the major source of small business loans, are risk averse lenders. They are in the business of making loans to companies that have the strong likelihood of paying them back. Hence, a preference of larger, more established and more credit-worthy firms."

In e-mail correspondence, Coleman wrote that her research "indicates that women-owned firms do not suffer a borrowing disadvantage because they are owned by women. Rather, they suffer a disadvantage because they tend to be very small or young firms. When we control for these factors, there is no significant difference in loan approvals between men and women."

In other words, substitute a man into the same lending request, and he'll have the same success rate. In one study, Coleman found that while women applied for loans at a lower rate than men (21 percent to 28 percent), "there were no significant differences between women and men" in terms of loan approvals, with both genders having approval rates of about 75 percent.

A 2002 report by Alicia Robb and John Walken of the Federal Reserve Board of Governors looked at the characteristics of male- and female-owned small firms and came to much the same conclusion as Coleman. Female firms were "smaller, younger, more concentrated in retail sales and services, and more likely to be organized as proprietorships" than male-operated firms.

The pair and found "no significant difference" in loan approval rates, and gender differences in lending patterns "did not appear to result from credit market imperfections." Rather, "systematic" differences in firm and owner characteristics explained many of the gender differences in lending patterns.

But 20 years ago women-owned firms likely faced "real discrimination in lending," Coleman said in her correspondence. That phenomenon, according to subsequent data over the years, "seems to be fading ... which is what we would hope to see given the increased prominence of women in business and training for lending officers."

Coming out party

But even if women are handed barrels full of money, many sources said they still must overcome more pernicious cultural obstacles in becoming successful business owners.

Jane Leonard, president of Minnesota Rural Partners, the state's rural development council, wrote via e-mail that women face cultural obstacles on a variety of levels. Rural women, for example, face "more pressure socially to conform to certain expectations because of the fishbowl that living in a small town can be."

Leonard believes the biggest challenge for women entrepreneurs in general was "being taken seriously by what is still a very white-male corporate, financing, political arena. Men tend to look right through even the most talented, competent women. That is changing as women CEOs become more visible, but it is still a challenge and one that is very frustrating for women who have worked so long and hard for just a fair chance at success."

A Montana source, asking not to be identified, said, "There's still a good old boys network here, and it's a strong one." Though Montana is probably not appreciably different in this respect from elsewhere, she said, "it's moving slowly, and in the right direction. But it's going to take time."

Many sources also pointed to women's many internal demons as a major cultural obstacle. For women to reach the next level in entrepreneurship—in size, industry diversity, whatever—they have to overcome their own perceived shortcomings.

Despite the additional demands required by ownership, women struggle to let go of their own cultural expectations of what it means to be a woman. "We're still inculturated to be June Cleaver. ... I still should have a perfectly clean house and great children," said Sue Lindgren, owner of a business training firm in the Twin Cities. "Everything opened up to women, and they didn't give anything up."

For women, "the main things that need to be overcome are personal and internal," Lindgren said. "Can I make peace with the fact that I have to miss a school play? Women struggle far more with that."

A number of sources also noted that women will have to increase their tolerance for risk—the gamble that separates successful businesses from hobbies—and its black-sheep cousin, failure. "If a woman messes up, she hangs on to it," said Diane Kurtz, an insurance specialist with the Wisconsin Insurance Center of Onalaska, Wis. "Men don't see failure. They see opportunity."

Diann Albers, owner of UpNorth Consulting in the Twin Cities, agreed. "I think women are incredibly fearful of going belly up. It's a personality [trait]. We think, 'How would I face my friends if I go bankrupt?'" said Albers. Men don't have that fear, she added. "Unfortunately, that's what creates intense competition in the corporate world. Men kill everyone in their path, and women may not do so."

That's not to say women necessarily need to be more like men, but women need to build new strengths to compete as business owners. Naugler, for example, believes that many women sole proprietors stay small to purposefully avoid having employees. Many women "have a difficult time with conflict, and the more people around you the more potential there is for conflict. ... They want to be the boss and don't want to have to contend with issues you have with employees," Naugler said.

"I think women want to be peacemakers more than men in business. Women do not really speak their mind," Naugler added. Rather than attack a problem immediately, Naugler said women can move into a passive-aggressive mode. "They hate conflict, and I have a real problem with that."

Several sources pointed out that the learning curve for women owners has been a steep one, and they will continue to figure out how to be successful business owners through a lot of on-the-job training, particularly in male-dominated industries.

"In nontraditional businesses, the biggest obstacle [for women owners] is what sort of relationships they have," said Mary Riebe, director of the women entrepreneurship program at Metro State University in St. Paul. "That's the key to those businesses," and women lag behind men in building those relationships. Too often, "women are waiting in the pew for someone to call on them," Riebe said. Men, on the other hand, "are great promoters. ... [Women] need to know how important it is."

While cultural factors still play a role, many sources noted that a woman's opportunities and chances for success are more limited by her own level of confidence. Even in construction trades, Holt wrote, "the biggest obstacle for women is that they don't see themselves in that arena, and they aren't driven to get out there and compete."

Some of those cultural doors likely will be opened wider as more women gain managerial and ownership experience, providing something of a gender-familiarity effect for women wanting to follow the entrepreneurial footsteps of others.

Lonna Weidemann is the owner of an Internet-based training and training-supplies company for the gift industry in Helena, Mont. "I believe the common misconception that has held women in business back is the fact that the man has always brought home the bacon, so to speak. Today we are closer and closer to equality, and there are a lot more available resources for women, which are helping to give that added confidence to go forward."

In the end, the biggest remedy for boosting women entrepreneurship might be time, as both women and society around them adjust to a trend that appears to be finding its legs for the long run, but brings with it change that maybe neither quite anticipated.

"I believe we're just getting started," said Albers, of UpNorth. "There is an evolution to sensitivity" in all spheres of life, including women in business. "A lot of [the growth] is happening because the culture is demanding it. But you don't do it overnight."