Last year, La Kesha Wash made her long-time dream come true. Like many women during the pandemic—especially women of color—she started her own business: an interior design firm called Meticulous Designs. To do so, La Kesha quit her full-time job and relied mainly on loans from family and friends. It wasn’t easy, but she built her business up to more than 100 clients.
For La Kesha, and the millions of other women at the forefront of America’s entrepreneurship renaissance, business ownership is a path to financial freedom. One study by Boston Consulting Group found that in a pool of about 1,500 businesses, women-owned startups generated 10% more revenue than those founded by men over a five-year period. Despite this success, our financial system is not set up to support women entrepreneurs. Women account for only $1 out of every $23 in conventional small business loans, and in 2021, women raised just 2% of the venture capital funds distributed that year.
Loan and equity capital are vital but only part of the equation. Entrepreneurs like La Kesha also need business advice and coaching to get their enterprises off the ground, reach the right customers and create new jobs. Every founder benefits from mentors, advisors and a network of support.
Coaching has a demonstrable effect on small business success. For instance, one study found that business owners that received advisory support created 1.4 jobs within 1.7 years. Additionally, a small survey from the UPS Store found that 70% of its small business customers surveyed who received mentoring in some way survived more than five years. They also found that 88% of the customers in the survey reported that having a mentor was invaluable.
Women entrepreneurs often have less access to business networks and can, therefore, particularly benefit from mentorship and coaching. In fact, 61% of the entrepreneurs that came to Accion Opportunity Fund, the organization I lead, for business coaching in 2021 were women. In part, this may be because women business owners tend to own younger businesses and are less likely to have prior business ownership experience than men.
As a practice, business coaching can be provided in many different forms: classes and workshops, one-on-one coaching, mentorship, online learning, and peer learning. It can also touch on many different subjects, such as startup advice, accessing capital, certification and procurement, hiring and human resources and building a digital presence.
New business owners can particularly benefit from advice from more seasoned entrepreneurs. Starting a business is complex, and new business owners not only need to figure out how to access startup capital but also how to establish a presence, reach a customer base, and appropriately price their products or services. When La Kesha was thinking about starting her business, she worked with a coach at Accion Opportunity Fund. That early coaching helped her explore new ways to sell her products online and in person and build strategic partnerships with other local businesses to accomplish her sales goals.
Accessing and applying for capital is another key area where women can benefit from business coaching. According to research from Fundera, women frequently ask for less capital than men (and less than they need). Women are also approved for debt funding at a lower rate and pay higher average interest rates than their male counterparts. With help from a business coach, women entrepreneurs can right-size their loan requests and better avoid unscrupulous lenders who offer exorbitant interest rates and trap unsuspecting business owners in a cycle of debt.
As women lead the growth of new small businesses amid an ongoing labor shortage, coaching in hiring and human resources is especially important. Women-owned businesses employ approximately 9 million people. But most small-business ventures have limited human resources capacity—often, the founder/entrepreneur does all the hiring, retention, benefits and termination work themselves. Business coaching can provide women entrepreneurs with advice on building company culture, standardizing internal operations and staying in compliance with local and federal employment laws.
Business coaching can also facilitate innovation on a limited budget. The pandemic spurred many entrepreneurs to go digital. In 2020, 2.8 million more online microbusinesses (<5 employees) were created versus 2019—unsurprisingly, it was primarily women, many of whom urgently needed flexible hours to contend with childcare responsibilities, who led this growth. Business coaching can advise women entrepreneurs on how to create and manage websites and social media to reach new customer bases, as well as how to facilitate online transactions to increase revenue.
It’s clear that business coaching is a critical resource for women entrepreneurs to build their companies. Yet, with women-owned businesses generating $1.8 trillion in annual economic activity, this investment in women’s business success is also important for our economy as a whole.
As the country faces whatever economic road bumps may come our way, we must not cut ourselves off from a tremendous source of entrepreneurial dynamism that can fuel job creation, economic growth and global competitiveness. We need to build a more inclusive economic system—one that provides business coaching and advice to women entrepreneurs like La Kesha Wash, along with fairly-priced and sufficient investment to ensure businesses and their owners can thrive.
Sources: Luz Urrutia