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Minority Businesses, Women in Business

Why Women Start Businesses: They’re Undervalued at their Corporate Jobs

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More women are starting businesses than ever before. According to stats cited in this Kabbage article from October in honor of National Women’s Small Business Month, since 1997, the number of women-owned businesses has increased by 59 percent, and the revenues of women-owned companies have increased 63 percent.

The rise of female entrepreneurship is a positive development for the economy as a whole and for the women themselves who are embracing the opportunity and freedom of running their own businesses – but what is really driving the move toward entrepreneurship for so many women? Why do women start their own businesses? What incentives and opportunities (or frustrations and challenges) are women responding to when they decide to take the plunge into entrepreneurship?

Recent research has shed some light on the subject, and it appears that many women decide to start businesses because they feel undervalued by the corporate world and feel limited by the traditional corporate career path. There are good insights here into why women become entrepreneurs – and also good insights for small business owners who want to know how to create a positive, supportive company culture that will help them retain their talented female employees.

Women are Burned Out on Corporate Life

According to an article published in the Harvard Business Review, many women decide to start businesses because they want more flexibility and control over their time and schedule. Especially if women have children, the traditional corporate grind isn’t always a good fit for the changing needs of a family. However, while it’s great that so many women are seizing the opportunity to have freedom and flexibility, there is a dark side to this story: women apparently are motivated to start businesses in part because they’re being systematically underutilized and underpaid by corporations.

The Harvard Business Review article states, “Women’s wages as compared to men have only increased about a half a penny a year for the last 30 years…women are now stuck in middle management. According to the Feminist Majority Foundation, ‘At the current rates of increase, it will be 475 years – or until the year 2466 – before women reach equality in executive suites.’”

When women are feeling stalled in their corporate careers – underpaid, overworked, not enough flexibility – starting a business might give them more flexibility and control. But it’s also a huge missed opportunity for companies that are failing to promote talented women to leadership positions and failing to make the best use of women’s skills.

On the one hand, it’s great that women are pursuing entrepreneurship as a better lifestyle for themselves and their families – but on the other hand, it’s unfortunate that so many companies are so inflexible and inhospitable to talented women.

Women are Tired of Office Politics

Another study from The Guardian Life Index cited in an article in Forbes (“Entrepreneurship is the New Women’s Movement”) found that “office politics” was mentioned as a driving factor for women who decided to leave their corporate jobs to start new businesses. The article states, “Many women view corporations today as being fundamentally flawed and limiting in their value structures…with the cost of starting a business at an all-time low, women are saying ‘no thank you’ to spending years climbing and clawing their way up the corporate ladder, dealing with corporate politics, and working long days without feeling the overall fulfillment they crave…’The glass ceiling that once limited a woman’s career path has paved a new road towards business ownership, where women can utilize their sharp business acumen while building strong family ties,’ says Erica Nicole who left Corporate America to start YFS Magazine.”

Perhaps the movement of many women toward entrepreneurship could be the beginning of re-shaping the work world to be more flexible, generous and welcoming of different perspectives. If corporations keep losing some of their most talented people, they will have to adapt.

Young Women are Especially Entrepreneurial

Women tend to drop out of the corporate workforce as they get older – according to data from McKinsey cited in Forbes, women hold 53 percent of entry level jobs, but only 37 percent of middle management positions and only 26 percent of senior management jobs. There’s something about the traditional corporate world that does not fully recognize women’s contributions or does not create a hospitable climate for women to succeed at the highest levels – whether it’s gender discrimination, family-unfriendly policies that punish women who choose to take time off to care for children, or just an overall culture that only rewards certain personality types (who are more likely to be men), it’s clear that many corporations are losing lots of talented women.

This problem is especially pronounced among Millennial women, who are often already feeling jaded and disappointed with corporate America. The Forbes article cites survey results showing that 54 percent of Millennials want to start a business or have already started one, and 96 percent of Millennial women said that being “independent” is their most important life goal. All of these facts suggest that the rising generation of Millennials could be the most entrepreneurial women yet.

Millions of talented, ambitious women are venturing out on their own to start businesses and get what they want out of life, without the restrictions and frustrations of a traditional corporate job. This trend is likely to accelerate in the next 10 years, which the Kauffman Foundation has dubbed “the Decade of the Woman Entrepreneur.” Companies need to re-think the way they train, promote, and pay their employees, and they need to re-evaluate their overall company culture to make sure they’re not driving away some of their most talented female employees.

Is corporate America listening? Maybe not – but that’s not entirely a bad thing, because for talented women with the will to succeed, the world of entrepreneurship is beckoning.