Women by the Numbers

Capturing the Impact:
Women-Owned Businesses in the United States
Copyright © 2005 Center for Women's Business Research. All Rights Reserved.
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Women-owned businesses have been a major element in the evolution of the U.S. economy in recent decades. Women-owned businesses are increasingly recognized as part of the business mainstream. Yet the full impact of women as business owners, and the economic impact of their firms, is still not widely understood. In this report, the Center for Women's Business Research documents the impact of women on entrepreneurship by providing the most comprehensive data available on women's business ownership. In addition, for the first time, the Center provides estimates of the impact of these firms on the U.S. economy. 

In recent years, data on women-owned businesses has tended to include only privately-held firms which are majority (51% or more) owned by women. This definition, which is consistent with many government and corporate supplier diversity programs, is clearly appropriate for certain purposes. However, this narrow definition understates the full impact of women as business owners by excluding many businesses in which women play a major ownership and management role. 

In April, 2003, the Center addressed this concern by releasing national estimates of women-owned businesses in 2002 which for the first time included privately-held, equally (50-50) women- and men-owned firms as well as privately-held, majority (51% or more) women-owned firms. This report builds on that effort by providing updated national and state data on this more comprehensive set of firms which are 50% or more women-owned. In addition, detailed data is included on each of the two segments that comprise this group. This report therefore provides the fullest and most detailed portrait ever available of the impact of women as business owners. 

The data on the numbers, growth and expansion of women-owned firms, while dramatic, are however only the beginning of the story. In this report, the Center goes beyond the descriptive data to examine the economic impact of women-owned firms on the economy as employers and consumers of key business products. Included for the first time are comprehensive estimates of expenditures by women-owned businesses on salaries; employee health, retirement, and other benefits; and selected business goods and services. 

Growth and Employment of Women-Owned Firms
(See note 1) 

The Center for Women's Business Research estimates that as of 2004, nearly half (48%) of all privately-held businesses in the U.S. are owned 50% or more by women, for a total of 10.6 million enterprises. This includes 6.7 million majority (51% or more) women-owned firms, and another 4.0 million equally (50-50) women- and men-owned firms. 

Growth in women-owned businesses has outpaced that of other firms. Since 1997, the Center estimates that women-owned firms have grown at nearly twice the rate of all firms (17% vs. 9%). Growth in employment by women-owned firms has been even more dramatic–24% compared to 12% for all firms. 

The impact of women-owned businesses as employers is clear–and dramatic. The number of women-owned firms with employees has expanded by an estimated 28% during the past seven years–three times the rate of growth among all employer firms.

Previous Center research indicates that this growth trend includes dramatic growth among the largest (100 or more employees) women-owned employer firms. (See note 2) 

Nearly one-quarter (23%) of women-owned firms have employees. Furthermore, the proportion of women-owned firms with employees is virtually the same as that for all firms (23% vs. 25%). Recent research suggests that these women-owned employer firms are just as strong and stable as other firms. Women-owned employer firms were found to have a three year survival rate equal to that for all firms. (See note 3)

The Center estimates that women-owned firms currently employ over 19 million people nationwide. One in seven of all employed persons in the United States are employed by a women-owned business. 

Salaries and Benefits 

Women-owned businesses are a critical component of the economy, not only in terms of their sheer numbers, but also in terms of their economic impact. 

As employers of millions, women-owned businesses help fuel economic growth not only as producers of goods and services, but also by spending billions on employee wages, salaries and benefits. As of 2004, women-owned businesses' expenditures on salaries and wages are an estimated $492 billion per year. These billions of dollars in employee pockets stimulate spending throughout the economy.

Women-owned businesses also expend billions on benefits for their employees. Health benefits comprise the largest share of benefit expenditures, with 2004 spending estimated at $38 billion. Estimated spending on retirement benefits, life insurance, and disability insurance comprise more than $16 billion, for a total of $54 billion in benefit expenditures. Thus in total, women-owned firms spend an estimated $546 billion on salaries and benefits for their employees. 

Business Products and Services

Women-owned businesses also contribute to economic vitality as major consumers of business products and services. While comprehensive data on the purchasing power of women-owned businesses is not available, women-owned businesses clearly account for billions of dollars annually in business expenditures. Estimated annual spending in just four areas–information technology; telecommunications; human resource services; and shipping–accounts for over $100 billion annually.

Spending by women-owned firms in these areas–and many others, including travel; financial and tax products and services; and office furniture and supplies–is clearly a substantial driver of demand in these markets. 

Conclusion

Trends in the number, employment and revenues of women-owned businesses tell a dramatic story of the expanding role of these businesses in the U.S. economy. However, these numbers are only the beginning of the story. The economic impact of these firms is felt throughout the economy, as they provide jobs, income and employee benefits to millions. Further, women-owned businesses contribute billions of dollars worth of annual purchasing power to the economy as they obtain the goods and services they need for their companies to continue to thrive and grow. 

NOTES:

Salary and Benefit Estimates are for 2004, Spending Estimates based on 2002/2003 data.

Information Technology estimates include spending for Internet, Web, Intranets, hosted applications; networking hardware, software, WAN; PC hardware, software, peripherals; and IT service support.

Telecommunications estimates include spending for: wireless phone and paging; local and long distance phone.

Human Resource Services estimates include spending for: temporary staffing; online recruitment; outsourced services such as payroll, liability management and compliance, benefits administration, recruiting, employee education, and other miscellaneous services; and employee training.

Shipping/Mailing estimates include costs for mailing and shipping letters and parcels through the U.S. Postal Service and private carriers.

Methodology

Growth and Employment 

Unless otherwise noted, all estimates cited in this section are based on the Center for Women's Business Research's Women-Owned Businesses in 2004: National and State Estimates, April 2004. A detailed description of the methodology used for these estimates can be found in the fact sheets included in this report.

Salaries and Benefits

Salary Estimates are based on data from the Census Bureau's 1997 Survey of Women- Owned Business Enterprises (SWOBE), March,2001. The Center calculated average (per-employee) salaries for 1997 using reported Census data on total payroll and total employees for majority (51%) women-owned firms and those owned equally (50-50) by women and men. These 1997 estimates were projected to 2004 based on the Employment Cost Index published by the U.S. Department of Labor, Bureau of Labor Statistics for 1997-2003. The average salary increase for 2004 was assumed to be equal to the average annual increase for 1997-2003. The estimated 2004 average salaries were multiplied by the Center's employment estimates to arrive at 2004 estimates for total salary payments.

Health Insurance Benefits Estimates are based on the Employee Benefit Research Institute's (EBRI) 2002 Small Employer Health Benefits Survey, January 2003. This report provides estimates of the proportion of employees with employer- provided health benefits by employment size of firm. This data was used in conjunction with data from the SWOBE to develop estimates of the proportion of employees of majority (51%) women-owned firms and employees of firms owned equally (50-50) by women and men with employer-provided health insurance benefits. Employees of these two types of firms were assumed to be as likely to have health benefits as employees of all firms of equivalent size.

These estimates of the proportion of employees with employer-provided health benefits were multiplied by the Center's 2004 estimates of the number of total employees to develop an estimate of the number of employees with such benefits. The EBRI 2002 Small Employer Health Benefits Survey provides an average per-employee cost to employers of health benefits for 2002, as well as an annual inflation rate for such benefits. This data was used to develop an estimate of the 2004 average per-employee cost to employers for heath benefits. The total cost of employer-provided health benefits was estimated by multiplying this average estimated per-employee cost by the estimated number of employees with such benefits. 

Other Benefit Estimates are based on June 2003 data from the U.S Bureau of Labor Statistics (BLS) on total employer costs for employee compensation, which include data for health, life and disability insurance, and retirement benefits. Using this data, the Center calculated the average cost of non-health benefits as a percentage of health benefits for firms with 1-99 workers. These percentages where applied to the Center's 2004 health benefit cost estimate to develop separate estimates for life, disability and retirement benefits. 

Business Products and Services 

These estimates are based on publicly-available market research data on small business spending (see below for specific sources). These sources define small businesses as non-home-based firms with fewer than 100 employees. 

The Center estimated the proportion of these firms which were majority (51% or more) women-owned and equally (50-50) owned by women and men using its 2004 estimates on the gender of ownership of all privately-held firms, along with data on the propensity of firms to be home-based depending on the gender of owner(s). This latter data was taken from Home-based Businesses: The Hidden Economy, 1999 by Joan Pratt for the Small Business Administration. These estimates were used to determine the share of total small business spending as reported by these market research firms which is attributable to firms which are majority (51% or more) women-owned and equally owned by women and men.

In addition, the Center includes in its estimates spending by home-based firms. The estimates assume that home-based firms spend, on average 1/10th of the amount spent by non-home based small businesses. 

Sources of Spending Estimates by Category:

Information Technology and Telecommunications: Access Market International (AMI) Partners, Inc, “AMI-Partners' Study Shows U.S. Small Businesses Added 382,000 New Employees, Opened New Sites and Spent $86 Billion on IT Products and Services in the Past 12 Months and Outlook for 2004 Remains Strong” (Press Release), October 1, 2003.

Human Resources Services: Access Market International (AMI) Partners, Inc, “Temporary Employment /Staffing Spending Is Expected to Drive 50% ($25.3) Billion of total HR Related Spending, Followed By Outsourced HR Services ($17.6 Billion) and Employee Training ($80 Billion)” (Press Release), June 2, 2002.

Mailing/Shipping: IDC, U.S. Small Business Mean Monthly Shipping and Delivery, 2003.

Notes:
1. Unless otherwise noted, “women-owned firms” are defined for this summary as privately-held firms that are owned 50% or more by women; comparisons to “all firms” are to all privately-held firms. 

2. Center for Women's Business Research, Removing the Boundaries: The Continued Progress and Achievement of Women-Owned Enterprises, November 2001. This study defines women-owned business as those identified by Dun and Bradstreet as having majority (51% or more) ownership by women. 

3. National Women's Business Council, Trends in Women-Owned Employer Establishments, 1997-2000, January 2004. This study defines women-owned businesses as those with majority (51% or more) ownership by women.