Report: Women-owned businesses add $9.5 billion to Arkansas economy

Arkansas now has an estimated 80,400 women-owned businesses employing 55,700 staff and contributing $9.5 billion in revenue to the state economy, according to an American Express OPEN report that analyzes data from the U.S. Census Bureau’s Survey of Business Owners and factoring in relative changes in Gross Domestic Product.

The number of female-owned businesses is up 88% from 20 years ago, according to the 2017 report. On a national level, the count has more than doubled during the time frame, marking a growth rate that is 2.5 times faster than the overall number of businesses in the U.S., there are an estimated 11.6 million women-owned enterprises that employ close to 9 million people and generate more than $1.7 trillion in revenue.

In fact, an average of 849 new businesses are started each day by women, according to American Express, which has commissioned the State of Women-Owned Businesses report annually the last seven years. That number peaked at 1,143 per day during the Great Recession and recovery period between 2007 and 2012.

“One thing is, I think we have a better understanding of what constitutes a business. That knowledge has been increased over the last 20 years,” said Anthony Armstrong, loan mobilization manager in the Minority and Women-Owned Business Enterprise Division at the Arkansas Economic Development Commission in Little Rock.

In the past, many women who provided a wide range of services including sewing, housekeeping, childcare and planning events, did not consider themselves business owners, he said.

“Now, there is an understanding of many individuals, women included, that you are a business owner.”

Those individuals are increasingly receiving 1099 forms for their earnings and claim them on their taxes. E-commerce is another space where business propriety has increased, he Armstrong said.

“With e-commerce you are able to be vendor from the privacy of your own home, and you are a business owner. … So, technology is also at play in those increased numbers.”

LACKLUSTER REVENUE, EMPLOYMENT
Arkansas is ranked 23rd in growth of women-owned companies during the past 20 years. However, it didn’t stack up as well in the reams of revenue and employment from female-owned businesses. It ranked 50th in growth of jobs created during the last 20 years with a 13.5% decrease, and it ranked 50th in growth of firm revenues with a 46.3% increase, according to American Express.

Arkansas ranked last nationally for a metric referred to in the report as “economic clout,” based on the combined growth rates of women-owned businesses for number of firms, employment and revenues. The state also scored poorly on the report’s “employment vitality” metric, which is a combined measurement the employment growth rate of women-owned  businesses over the past 20 years and the average number of employees per women-owned business in 2017. Armstrong said he was not surprised by the low employment numbers or wages.

“Most companies across the board, the only employee is themselves and in some cases maybe a partner or spouse that is also engaged in the business.”

Armstrong said self-employed individuals without incorporated businesses also make low wages across the board. U.S. Census estimates for 2016 show those individuals made an average of $22,483 in Arkansas.

In terms of a gender gap, Armstrong said Arkansas is making improvements.

“I think the state as a whole has made some strong initiatives to move those numbers forward. The fact that my division within AEDC has been in operation 40 years speaks to that.”

The scope of the Minority and Women-Owned Business Enterprise Division officially changed Sept. 1 to include women and U.S. military veterans. The move opened the state’s minority-owned business certification and training/networking programs to those two populations. The division’s loan mobilization program works with lenders throughout the state to connect certified minority-owned businesses to capital sources, Armstrong said.

NATIONAL STATISTICS
Women-owned businesses now make up 39% of all U.S. businesses, employ 8% of the total private sector workforce and contribute 4.2% of total business revenues, according to the American Express report. The combination of women-owned businesses and firms equally-owned by men and women account for 47% of all businesses. These firms employ 14% of the workforce and generate 7% of revenues.

Half of women-owned businesses fall within three industries.

Close to one-quarter of female-owned businesses fall into the Census Bureau’s “other services” category, including hair and nail salons and pet care businesses. There are 2.8 million firms nationwide, according to American Express. Health care and social assistance, including child care and home health services, accounts for 15% of female-owned businesses. The category of professional/scientific//technical services, which includes lawyers, accountants, architects, public relations firms and management consultants, accounts for 12% of all women-owned firms.

The three industries with the biggest increases in female business ownership in the past year are construction, arts, entertainment and recreation and other services.

The U.S. has seen also seen in the last 20 years growth in firms owned by women of color, according to the report. Firms owned by women of color grew at more than 400%. The 5.4 million businesses owned by minority women now make up almost half of all women-owned firms, according to American Express. They employ more than 2 million workers and generate $361 billion in annual revenue.

A breakdown of estimated number of firms by minority population in 2017 follows.
• 2.2 million African-American, women-owned firms
• Almost 2 million Latina-owned businesses
• 1 million Asian American women-owned companies
• 161,500 Native American/Alaska Native women-owned enterprises
• 34,200 Native Hawaiian/Pacific Islander women-owned firms.

The report estimates that if revenues generated by minority, women-owned firms matched those generated by other women-owned businesses, they would add $1.1 trillion in revenues and 3.8 million new jobs to the U.S. economy.