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Thursday, April 24, 2008

The Girls are Comming

Female-led businesses are on the increase both in South Africa and around the world, but better access to financial networks and enterprise training are key to catching up with their male counterparts.

The gender pay gap may have narrowed over the last 30 years, but it will be another 150 years before women enjoy equal pay with men, say analysts at the London School of Economics. Girls are outperforming boys in the classroom, yet the number of women appointed to boardroom positions in FTSE 100 companies is falling.

So what's a woman to do? Leave the corporate posturing to the men and set up her own business, by the looks of this year's London Annual Business Survey (LABS). Produced by the London Development Agency and Business Link for London, the survey found that female-owned businesses in London accounted for one in six of all businesses last year, compared to less than 10% in 2003.

And the majority of female entrepreneurs love being their own boss, says business support organisation, Everywoman. Its research reveals that 94% of women running their own businesses had 'no regrets' and said it 'exceeded' or 'lived up to' their expectations.

'Application, tenacity and believing you can do it,' are the ingredients of a successful entrepreneur, says Marcia Lazar, founder of clothing software start-up F2IT, who taught herself to programme rather than struggle to impart her 30 years' of fashion industry experience to a programming team.

Having decided to seek investment to further develop her software, Lazar then spent three months writing the 'ultimate business plan', following 'very intense but superb' training through the g2i programme. She's therefore surprised at the LABS's finding that women-owned businesses are far less likely than their male counterparts to have business planning tools in place. 'Women are more organised and better at multi-tasking than men,' Lazar says, 'and more likely to look after the budget at home.'

Connie Sprague, external communications manager at Business Link, agrees that women make good entrepreneurs because they're more efficient, adaptable and better able to juggle work and life demands. But their companies tend to be smaller - averaging 3.8 employees compared to 7.7 for male businesses - and therefore require less management structure. 'Women are playing catch-up,' she says. 'And not having a business plan reduces their chances of getting funding.'

Just 3% of venture capital goes to women-owned businesses, says women's business support network Aurora, with most of their start-up capital coming from personal savings and loans from friends and families.

Women are also more risk-averse and cautious, typically asking for a third less capital than men, according to the Global Entrepreneurship Monitor (GEM). Female-owned businesses start with, on average, capital of �10,000 against �15,000 for men, and, at start-up, expect to have an annual turnover of �20,000 against �50,000 for men. Five years on, they expect their turnover to have reached �40,000 compared to �130,000 for men.

Sarika Patel, director of enterprise and technology at g2i partner Grant Thornton, argues that the problem is not so much that women are less prepared, but that they're less plugged into financial networks. 'I go to lots of corporate finance evenings and they're very male-dominated. Women don't fit investors' typical role model of what they think an entrepreneur is.' One exception is the UK's first investment fund for women-owned businesses. Founded by Gita Patel, StarGate Capital Management's Trapezia fund closed last month after pulling in �5 million of capital for female-led businesses, including a web-based health club and an online villa booking service.

While technology has traditionally been less female-focused, Sarika Patel says the increase in internet-led technology businesses is helping to redress the balance. 'These are often more about networks - such as Mykindaplace [the teenage girls' website sold earlier this year to BSkyB].'

Aurora also reports that women are increasingly starting technology-based businesses in high-income countries. It says women-led firms tend to raise more than 10% of the total investment in several sectors including biotech, healthcare, HR and business software, imaging technologies, and email/messaging software.

While the GEM reports a growing desire to start their own business among 18 to 24-year-olds, the gender gap is greatest in this age group. However, women who had undergone some enterprise training were twice as likely to be engaged in entrepreneurial activity.

In addition, while only 17% of UK computer science degree entrants are currently from women (mostly from overseas), research from the British Computing Society shows that two thirds of girls found their computer lessons interesting, while a quarter would consider a career in computing.

All the same, female enterprise in general still lags some way behind male-led businesses. According to the latest GEM, there's nowhere in the world where women are more likely to set up in business than men. And, across the UK, female-owned businesses comprise just 15% of companies, compared to 30% in the US, where women-owned firms are growing at twice the rate of their male counterparts.

At last week's Women's Enterprise Day, Margaret Hodge, minister of state for the DTI, said she wanted to see the UK emulate the US in terms of the numbers of female business owners. Announcing the appointment of two chairs to lead the DTI's Women's Enterprise Task Force - launched a year ago to encourage more women to set up their own businesses - Hodge said the Task Force's objective is to take the UK closer to US levels of entrepreneurship. She added that if those levels were matched, it's estimated there would be at least 700,000 more businesses in the UK.

By Alison Hjul, Webster Buchanan Research