Small U.S. Firms Owned by Women Are Catching Up But Still Behind

(Bloomberg) -- U.S. small businesses founded by women tend to start smaller and grow more slowly than those owned by men, though female-founded firms are just as likely to survive.

That’s the conclusion of a report on small enterprises released Thursday by the JPMorgan Chase Institute, which uses the largest U.S. bank’s customer data to track economic trends. While women make up 36 percent of business owners, up from about 5 percent in 1972, their companies start with revenue levels 34 percent below male-owned firms, the study found.

“Young and female small business owners are well-represented among firms that grow organically, but underrepresented among firms with external financing,” Diana Farrell, president of the institute and a former economic adviser to President Barack Obama, wrote in the report with fellow researchers Christopher Wheat and Chi Mac. The analysis tracked 3.1 billion transactions from 1.3 million small firms that use Chase Business Banking deposit accounts.

Understanding the 30 million small businesses is critical to understanding a sector that has an outsize impact on the economy, the researchers wrote, adding that enterprises with fewer than 500 employees produce almost half of gross domestic product and create 65 percent of new jobs.

The study also found substantial differences in the gender of owners by sector: Women are more likely to own services enterprises, with more than half of small firms in personal services, and a large share of health care services and retail companies, while men dominated in construction, metal and machinery, and high-tech manufacturing industries.

However, there was some evidence that the few female-owned businesses in those three male-dominated industries were generally getting off to a better start: They had larger first-year median revenues than the firms owned by men, the institute’s report said.

To contact the reporter on this story: Jeff Kearns in Washington at jkearns3@bloomberg.net

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Sarah McGregor, Alister Bull

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