Being a woman in the business world is challenging. But this isn’t stopping women from beating the odds and opening up their own companies.

In fact, more women are seeking entrepreneurship than ever. Between 1997 and 2017, we saw women-owned businesses increase by over 114%. Then as of 2019, there were nearly 13 million businesses owned by women in America alone. That’s roughly 42% of all companies in the US.

Not even a pandemic slowed down the growth. One report shows more women opened a small business in 2020 than men. Some call it a “pandemic pause” that’s allowing people to rethink their career paths and push towards entrepreneurship.

This is true across ethnicities — women of color own half of women-owned businesses and generate $422 billion in revenue.

And experiences— Veteran women are taking a piece of the entrepreneurial pie, with nearly two million female veterans owning 15.2% of all veteran-owned businesses.

The average annual revenue of women-owned companies is $330,226 as of 2020.

It’s a promising path for women of all shades and backgrounds. But how do you become a female entrepreneur in 2021?

This guide will cover the benefits, steps, and resources needed to open a successful women-owned business.

Benefits and competitive advantages of being a women-owned business

female business owner

Becoming a female business owner is easier today. And by taking the leap into business ownership, you can witness various benefits. Here’s a look at several:

  • Increased visibility: There’s a spotlight on economic and gender disparities, which means it’s easier to get attention. When you claim to be a woman-owned business, it positions your company as a beacon of hope. It can lead to better PR if you’re interviewed by journalists and podcasters covering such topics.
  • Financial benefits: In the past, getting approved for a loan was a challenge for women. Today, there are numerous grant and loan options designed specifically for female entrepreneurs. Becoming a certified women-owned business opens doors to corporate and federal contracts explicitly given to women.
  • Lead generation: Aside from having access to large contracts, women-owned companies may generate more prospective customers. That’s because more people are actively looking to support companies owned by women.
  • Attracting talent: There’s also an increase in people wanting to support women-owned businesses by applying for jobs there. This is true for both men and women, who want to provide the talent needed for these businesses to prevail. So you may find it easier to win over top talent for your startup.
  • More roles for women: One of the reasons for gender disparities is a lack of women in leadership roles. When you have a company owned by women, there’s a higher chance of more women being hired. This opens doors for more opportunities for females.
  • Support from other female entrepreneurs: Networking and partnerships are key to business growth. As a woman business owner, you can join groups and communities to network with fellow female entrepreneurs. This can lead to partnerships, collaborations, and referrals to clients.
  • Access to education and mentoring: When you’re a certified women-owned business, you have access to resources to help you grow. This includes education and business training from government and private institutions. These provide mentorship, recognition, and certification in various areas of business.

How to Qualify as a Women-Owned Small Business

female talking to a phone

There are specific requirements you must meet if you want to be considered a women-owned business. The most obvious is a majority of women must run it. Now, this doesn’t mean there can’t be any men in leadership roles. It means at least 51% of the owners must be women (i.e., two women and one man or seven women with no more than six men) who directly own and control the company.

There are three ways you can qualify as a woman business owner. You can become certified as a:

  • Minority or women-owned business
  • Women-owned small business
  • Economically disadvantaged women-owned small business

Let’s take a closer look at each option.

Qualifying as a Woman-owned Business

To qualify as a woman-owned business, you must have the following:

  • 51% women US citizens owning or controlling the company
  • Women managing the daily operations
  • A woman sitting in the highest officer role in the company

Qualifying as a Woman-owned Small Business (WOSB)

If you want to qualify as a small business owned by a woman, then you must:

According to the NAICS code, most businesses with under 500 employees earning less than $7.5 million annually will qualify as small businesses.

If this sounds like you, then you’ll also have to meet WBE standards. Here are the criteria:

  • Be a for-profit organization in the US
  • Be 51% owned by a woman or group of women who contributed a large portion of the capital to acquire ownership
  • Be owned by a woman or women who are US citizens or legal residents
  • Have a governing board (if applicable) that’s controlled by one or more women
  • Have a female top executive officer who’s responsible for daily operations and who has technical expertise/experience in the company’s primary business activities

Qualifying as an Economically Disadvantaged Women-owned Small Business

Last, you can qualify as an 8(a) economically disadvantaged small business owned by a woman if you meet these requirements:

  • Meet all WOSB requirements:
    • Revenue reinvested into your business or to pay business taxes
    • The fair market value of all assets is no more than $6 million (not including income reinvested into the business or to pay business taxes)
    • Ownership of your primary personal residence and business
    • Revenue reinvested in your business or used to pay business taxes
    • Funds reinvested into retirement accounts

To be certified as an economically disadvantaged WOSB, you have to meet the following criteria:

  • Be a for-profit business unconditionally owned by one or more socially and economically disadvantaged women, are of good character, and are citizens living in the US. The company must also demonstrate potential for success.
    • Black American (or any Black racial group originating in Africa)
    • Hispanic (Mexican, Puerto Rican, Cuban, Central or South American, or other Portuguese or Spanish cultures)
    • Subcontinent Asian (Indian, Pakistani, Bangladeshi, Bhutanese, Nepalese, Sri Lankan, or from the Maldives Islands
    • Asian Pacific (Chinese, Taiwanese, Korean, Japanese, Thai, Burmese, Cambodian, Malaysian, Indonesian, Philippino, Singaporean, or from the Pacific Islands)
    • Native American (Alaskan, Hawaiian, or certified member of a state or federally recognized tribe)
  • Be an individual whose personal net worth doesn’t exceed SBA’s standard (excluding primary residence and ownership of the business you’re applying for)
  • Have a three-year average annual gross receipts under the Small Business Size Standard under SBA regulations 13 CFR 121.40.

How to Start a Women-Owned Business

working female

Building a business from the ground up takes a lot of work. But with the proper steps, you can make the process seamless. Here’s an overview of what’s required to build a solid foundation for your woman-owned company.

Perform Market Research

The first step to starting a successful business is to ensure there’s a market. This means having a sizeable group of potential customers to sell your products or services to. And it ensures your business can continue running for many years.

The key is finding a need (aka demand) and supplying the solution (product or service). There are several ways to perform market research.

Find Your Niche

Before you can start market research, you first need to establish a niche. This is a sub-group of an industry—for example, if you’re targeting the clothes industry, you can niche down to baby clothes or even baby dresses. The more niche your business, the easier it is to find your core customers. But don’t niche too much, or you’ll shrink your customer base (and your profit potential).

Discover Your Audience

Once you know your niche, it’s time to identify your customers. If you’re going with the baby clothes niche, then the obvious customers are parents. Other groups to consider branching out to include grandparents, aunts and uncles, and folks looking for a baby shower or birthday gifts for babies.

Identify Your Competitors

You’re not the first person to come up with your business idea. And if you are, then odds are there’s isn’t a market for the product or service. This would make it challenging to succeed unless you have a budget to advertise heavily and generate demand.

When you have a fair number of competitors, it shows there’s a market. And it allows you to study their approach to differentiate your brand. It’s also a chance to see what’s working for them so you can potentially duplicate their success.

Talk to Your Customers

There are several options to find and connect with your prospective customers:

Use social media and audience research tools to locate where they hang out. And then either perform one-on-one or group interviews. Or conduct a poll or survey.

If we continue with the baby clothes example, you can begin your search on Facebook Groups catering to moms, dads, or new parents. The goal is to learn more about them and their needs. Then you can participate in discussions, ask questions, review the posts to see if there are recurring themes around finding quality baby clothes.

You can use these platforms to conduct polls to learn more about their desires and pain points (i.e., are baby clothes too expensive, poorly designed, or boring). See if you can get a few people to agree to a phone interview so you can ask more questions about their experiences with baby brands and buying experiences.

All of this can help make your business a better place to shop. For example, maybe product searches are difficult on most websites. You can use this to improve your web store design.

Use Research Tools

Thankfully, you don’t have to do everything from scratch. There are several tools on the market designed specifically for customer research. For instance, Sparktoro is a platform that empowers you with insights about:

  • Social media channels your audience frequents
  • Common themes/discussions they have on these channels
  • What podcasts do they listen to (great for finding places to make a guest appearance)
  • Influencers they follow on social networks (opportunities for promoting your products)
  • Demographic information (age, gender, geographical location, etc.)

And you can take all of this information and proceed to the last step.

Analyze Your Results

By this point, you should have a ton of data to go through. This is the time to look for patterns and trends that’ll set your business apart from competitors.

Analyze the results to see how you can make your products better quality, higher value, and more appealing to your target customers.

Build a Business Plan

With your market research complete, it’s time to build your business’s foundation. With a business plan, you’ll have a direction to become profitable. And just as important, you’ll have the tool needed to obtain funding to jumpstart your company.

Here’s an overview of what to include in your business plan:

  • A mission statement describing why you exist, what makes you unique, and your business model
  • An executive summary highlighting key features of your business
  • Your marketing strategy, including your business goals, objectives, strategies, tactics, metrics, KPIs, and ROI targets
  • Financial projections showing revenue growth over three years
  • Business model analysis explaining how you will achieve profitability
  • Competitive landscape outlining other businesses similar to yours
  • Market segmentation identifying potential markets and business opportunities
  • Product development roadmap detailing when each phase of production begins and ends Marketing budget breakdowns by channel and type of advertising
  • Legal structure and ownership details

You have two options for writing up your business plan:

Do all the research and writing yourself. Or you can hire someone to do it for you. Either way, make sure the information is accurate and thorough, so there’s no room for error or miscalculations.

Apply for Funding

female with a laptop

You have a complete understanding of your business and how it’ll operate. Now, you need funding to afford a property, inventory, staff, equipment, and other necessities to run your company.

Banks are one way to acquire funding. So the first step is to go to the financial institution you bank with and apply for a small business loan. If approved, you’ll receive financing based on your credit score, income level, assets, and collateral. You may also be able to get a line of credit instead of a loan if you’re not looking to borrow money right away.

Another option is crowdfunding. Crowdfunding platforms allow people to donate funds toward projects they believe in. The project owner then has access to those donations once they reach their goal. It’s a great way to raise capital without having to pay interest rates.

Angel investors and venture capitalists are other solutions to funding a startup. They invest their own money into companies they feel passionate about. Angel investors typically provide between $5k-$50k per round. But some angel investors offer larger amounts depending on the size of the investment.

If you don’t qualify for any of these sources, consider applying for grants. Grants are usually awarded to small businesses that meet specific criteria. For example, government agencies often give out loans and grant money to startups. Other organizations such as non-profit foundations and universities might fund new ventures too.

If all else fails, don’t forget about friends and family. Many small businesses are either bootstrapping (self-funding) or getting help from people they know.

Determine the State of Incorporation

Where do you plan to operate your business? The state you choose is where you’ll incorporate it. This is true whether you’re opening a physical location or operating remotely.

Selecting a state determines the taxes and regulations you must adhere to. For example, California has strict regulations for business owners compared to states like Delaware. So you’ll find more startups in locations where laws are laxer.

You also can incorporate in more than one state if you choose to branch out later on.

Decide Your Business Structure

Will you operate as a solo woman business owner? Or will you have a partner? This will determine the structure you choose for your business. There are four to select from, including:

Sole Proprietorship

A sole proprietorship means only one person owns the business. In this case, you would be both an employee and employer. Sole proprietorships aren’t taxed separately from personal earnings, but they still require IRS filing.

The downside is your personal assets aren’t protected if your company gets sued. Or when you owe creditors and debt collectors.

Partnership

In a partnership, each member contributes equally to the venture. Each party receives equal shares of profits and losses. Partnerships are taxed at individual tax rates. This is one of the simplest structures for businesses with two or more owners.

You have the option of being a limited partnership (LP) or a limited liability partnership (LLP). If you opt for an LP, then one partner holds unlimited liability, making them entirely liable for the business (like with a sole proprietorship). The other owners have limited liability.

In an LLP setup, there’s more protection but less control (for each owner) since all partners have limited liability. Another bonus is it protects the owners from the actions of their partners.

Corporations

Incorporate when you want to form a legal entity separate from yourself. Corporations can hold property, issue stock, hire employees, and collect sales taxes. A corporation requires shareholders who contribute cash or other forms of equity.

Opting for incorporation gives all owners protection for their personal assets. However, the downside is corporations have higher taxes and regulations. On the upside, you can sell shares to raise capital.

It’s an ideal structure for high-risk businesses and industries.

LLCs

Limited liability corporations are similar to partnerships, except there are fewer restrictions placed on them by law. An LLC allows members to buy and sell shares just like stocks. An advantage to using an LLC structure is that it safeguards your personal assets from business liabilities.

For example, if your business gets sued, the plaintiff can’t seize your home or garnish your personal bank account.

Another benefit is the taxes are lower compared to a corporation.

Choose Your Business Name and Register It

Your business name is your brand’s identity. So choose one that’s memorable and reflects the products or services you offer. But before you sell yourself on a name idea, be sure it’s not already taken.

One way to find out is by using an online business lookup tool. After finding an unused business name, you can begin registering your company and eventually trademarking your business name.

Get Your Tax IDs

Unless you’re operating as a sole proprietor, you’ll need to apply for a federal tax ID. This is called an employer identification number (EIN). You’ll use this to pay taxes, hire employees/contractors, apply for business licenses, and open bank accounts.

Apply for Certifications, Licenses, and Permits

There may be several licenses and permits you’ll need to obtain, depending on factors like your business’s:

  • Structure
  • Location
  • Industry
  • Business activities
  • Local and federal laws

After obtaining everything you need, you’re ready to operate.

Other Factors to Consider as a Woman Business Owner

woman business owner

Taking care of all the bells and whistles above is the first step to business ownership. Now, you have other considerations to keep in mind going forward. Ignoring these potential problems can hurt your success in the future.

Here’s a look at the factors to prepare for now:

  • Maintaining a work-life balance: It’s easy to succumb to your work as a business owner. But doing so will hurt your work-life balance and eventually lead to burnout. Put processes in place early on to prevent this. For example, not bringing work home (or shutting down your devices after a specific time if you work remotely).
  • Networking (professionally and personally): Having mentors, partnerships, and contacts in your industry can help grow and sustain your business. There’s a lot to learn, so it’s nice to have others more experienced help you along. You’ll also find growth is easier when you have contacts driving referrals to your company.
  • Managing finances: Securing capital is only the first phase. You’ll need to reinvest revenue into your company and possibly even acquire additional funding for business development, growth, and expansion.

Black Women Entrepreneurs

Being a woman of color comes with unique challenges, particularly when it comes to gender and race inequalities. For example, there are issues with growing their network. It’s not always easy gaining partnerships and opportunities from business owners of other races and backgrounds.

This is why it’s ideal to find groups that cater to minority groups. You can find them on Facebook, Slack, and LinkedIn.

Having a mentor is critical for black women to excel in business. And it’s critical to succeed as a minority woman business owner, so you can help other up-and-coming black women entrepreneurs.

The more women of color in board seats improve the odds of other black women receiving better work-related opportunities. As an example, in 2019, women of color accounted for half of all women-owned businesses. And nearly 6.5 million black women business owners employ over 2.3 million people.

Veteran Women Entrepreneurs

Starting a business as a female veteran comes with its own set of disadvantages. When you’re part of a small minority group, it may be challenging to find mentorship that understands your particular situation.

This is especially true if the veteran is suffering from mental health conditions. It’s critical for women suffering from PTSD and other mental ailments after their service to seek help. This way, they can pursue their dreams of business ownership without running into a wall caused by poor mental health.

Operating a company can be stressful, so it’s not ideal to stack more problems on top of a mental health condition.

It’s a good idea to network with other female veteran business owners to help you transition back into civilian life. There are groups online you can connect with on social media networks like Facebook.

Business Resources for Successful Women Entrepreneurs

 

reading a report

Having access to the right resources can mean the difference between succeeding or failing as a business owner. So here are links you may find useful along your journey to entrepreneurship:

Women-Owned Business Certification

Apply online to become a certified women-owned business with the U.S. Small Business Association (SBA). You can use this checklist to see if you qualify before applying. Then use this quick-start guide to help you complete your WOSB application.

Other available certifications include:

Grants for Female Entrepreneurs

There are several grants available to women entrepreneurs. Here’s a look at several options to receive financial assistance:

  • The Halstead Grant: Grants for women who run a jewelry business. Grants are $7,500, and you receive $1,000 worth of Halstead jewelry supplies. To apply, you’ll need to answer questions and include an outline of your business plan.
  • Amber Grant: A grant program designed specifically for women small business owners. There’s a $15 app fee, and you have to submit your story. If you’re chosen, you’ll get $10,000 (one person chosen monthly) or $25,000 (one person chosen annually).
  • IdeaCafe Grant: This is a micro-grant for female small business owners or those looking to start a company. The app is free, and you can get $1,000.
  • GrantsforWomen.org: This is a database you can use to find opportunities for women. The grant sizes vary depending on which you apply to. Instructions are available on the site.
  • Cartier Women’s Initiative Award: Gives grants to 21 female business owners across the world annually. Finalists will receive $100,000, plus one-on-one business counseling. Second-place prize is $30,000.
  • Open Meadows Foundation: Offers grants for women-backed projects. It also promotes equality for all genders, races, and classes. The program gives $1,000 in grants for eligible projects.
  • The Women Founders Network Fast-Pitch Competition: Offers annual grants to winners of its fast-pitch competition. If you win, you can get $40,000+ in cash and $100,000+ in professional services (i.e., pitch coaching, mentoring, and sponsorships).

Startup Business Loans for Women

There are a variety of loan options women can apply for. Here’s a look at several available funding programs for business people:

  • Kabbage: Uses your current small business finances and data to personalize a loan offer. Loans are given quickly, regardless of your credit situation.
  • Small Business Administration: SBA doesn’t offer loans but is a resource to find a lender match for your small business.
  • SmartBiz: An online platform that helps small business owners with loan assistance. It pairs you with lenders offering loans between $30,000 and $350,000.
  • StreetShares: This is a veteran-run company that helps veteran entrepreneurs receive financing for their small businesses.
  • Credibility Capital: Offers loans to small business owners that range between $10,000 and $350,000.
  • OnDeck: Provides a range of financing options to small business owners for short-term loans and lines of credit. You’re approved based on your business performance and personal credit.
  • QuarterSpot: One of the online-only lenders offering to fund small business owners with not-so-great credit. The qualifications and loan size depends on your particular situation and needs.

Resources for Women Entrepreneurs of Color

Women of color are springing into entrepreneurship. However, many don’t receive the backing needed to succeed. Here’s a list of resources that can help disadvantaged businesses excel:

  • New Voices Foundation: A business community designed to help black women entrepreneurs get access to capital and expertise to start, grow, and scale their companies. It offers flexible funding, education, and networking opportunities.
  • LISC Small Business Lending: This CDFI (Community Development Financial Institution) helps small business owners of color grow their companies. Its microlending program called KIVA will match your crowdsourced funding with a loan of up to $5,000.
  • Entrepreneurs of Color Program: This LegalCORPS initiative helps immigrants and Black/Indigenous/People of Color. It offers business legal resources and consultations to small business owners that stem from historically marginalized areas.
  • Venturize: This is run by Sam’s Club Giving Program and offers small business owners clear, trustworthy information about business loans, retirement, and healthcare insurance.
  • Women of Color Program (WBENC): Offers a variety of valuable resources, human capital, capital programs, innovation, market access, and government advocacy.

Resources for Female Veteran Entrepreneurs

Female veterans have plenty of resources at their disposal to help them excel in business. Here are a few to consider:

  • Veteran Women’s Enterprise Center: Helps women veterans and military spouses with business certification, contracting opportunities, financial preparedness, and building social capital.
  • Women Veterans Entrepreneurship Program: Provides in-person and online support to veteran entrepreneurs and military spouses. They offer business loans from $500 to $500,000, business and financial consulting, small business workshops, and discounted interest rates.
  • Boots to Business: Offers business training to veterans wanting to become entrepreneurs.
  • V-Wise: Helps women vets and their families with online training and mentoring. Conferences are also available.
  • IMVF: The Institute for Veterans and Military Families is a program offered by Syracuse University. It teaches you about accessing capital, managing business finances, and bootstrapping your business.
  • Service-Disabled Veteran-Owned Small-Business Program: Helps entrepreneurs obtain sole-source government contracts worth up to $5 million.

Digital Tools for Women-Owned Businesses

woman looking at the laptop

Using digital tools helps small business sustain their operations. This is especially true during economic downturns like we faced during the pandemic.

One report shows 76% of small businesses rely more on digital tools than before COVID-19. And women owners (43%) were more likely to use them than men (29%).

Here’s a look at the type of tools you need to maintain a small business today:

Start Building Your Path as a Woman Business Owner

If you’re serious about becoming a female entrepreneur, then who’s to stop you? Numerous resources, funding options, and mentors are available to help you achieve your goals.

Hopefully, this guide gives you the confidence and direction needed to get you there. The next step now is to take your first step towards entrepreneurship.

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