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The Leadership Focus of Women Entrepreneurs at Start-up and Early-Growth Stages

February 25, 2002 

"The increase in the number of women-owned businesses and their substantive contribution to economic growth in the last decade have led to a greater focus on the woman entrepreneur and the influences on the start-up and growth of female-headed organizations.  Women choose entrepreneurship for a variety of reasons.  Many desire greater independence and discretion in decision making than is present in their employment by someone else.  Others seek increased flexibility and balance in their work lives, with control over how they work and on what they work. Some are frustrated by limited opportunities for advancement and recognition and are motivated by the opportunity to reap the rewards of their own performance.  Women entrepreneurs start and grow businesses around a creative idea or in response to an opportunity they discern in the marketplace.

The stages of development which a firm proceeds are comprised of organizational activities, structures, leadership strategies, and specific entrepreneurial needs that determine whether or not a business proceeds sequentially to the next stage in the life cycle (Churchill and Lewis, 1983; Quinn and Cameron, 1983).  For the present study, Cooper's (1981) model of business development stages is used as a framework for comparing the characteristics and outcomes of women-owned businesses in the sample.  The first stage, labeled 'Start-Up,' describes the commitment of resources by the entrepreneur to an idea and the establishment of a business guided by a strategy that may not yet be articulated.  As the newly founded firm grows, employees may be added and delegation of operating decisions takes place.  The stage is labeled 'Early-Growth.'

The present study expands previous work by empirically testing differences across the stages of the life cycle and by comparing groups of women-owned businesses across two stages of development.  Little research has been done on samples of women entrepreneurs using stage-of-business development as a differentiating factor (Brush, 1992). 

The sample consisted of 311 women entrepreneurs affiliated with a business development center for women in a large Midwestern city.  The center provides assistance, resources, and training for business owners, as well as individualized and group business counseling and advocacy on behalf of women entrepreneurs in the public and private sectors.  Of the firms samples, 41% were in the business and professional services industry, 20% were in personal services, 23% were in retail firms, 8% were in wholesale, 4% were in manufacturing firms, and 4% were in the construction industry.  Within the two stages of business development, industry breakdowns were similar.  The entrepreneurs tended to be young: 23% were 20-30 years of age; 46% were 31-40 years of age; 24% were 41-50%; 6% were 51-60; and 1% were older than 60 years of age.  Over one half of the entrepreneurs had completed high school; one third had a college degree; and 12% had attained a graduate degree.  The racial background of the women business owners was: Caucasian (47%), African American 40%), Native American (5%), Hispanic (4%), and Asian (4%).

The women entrepreneurs completed a questionnaire during one of their visits to the center.   Questions assess the strategic emphasis of their firms for which they were actively seeking assistance and information (that is, what the entrepreneur feels she needs to know to successfully grow her business).  Sixteen areas were measured, including financing, selling to the government (procuring contracts), increasing sales, and conducting market research.  Questions were asked about business characteristics, such as legal status, structure, and industry, number of full- and part-time employees, and annual sales revenues.  Entrepreneurial characteristics assessed were educational level, age, ethnicity, and sources of income.

There were significant differences between start-up and early-growth firms.  Entrepreneurs in the starting stage were much more likely to focus on the business idea and the practices surrounding its implementation, although not an insignificant number of entrepreneurs in the early-growth stage (22%) desired to emphasize innovation and new ideas in their businesses also.  Early-growth-stage entrepreneurs reported a strong market focus, with significant emphasis on increasing sales, advertising and promotion, and engaging in market research.

While identifying and securing sources of credit and financing were important to both groups of entrepreneurs, nearly 70% of early-growth-stage entrepreneurs were more strongly focused on this activity, citing that obtaining external financing was crucial to their firms on the threshold of expansion.  Twenty-two percent of firms at this stage were actively seeking information on how to secure government contracts, in comparison to 15% of start-up businesses.  One third of the firms in each group desired to establish internal controls more effectively, including formalized procedures of accounting and recordkeeping.  Less likely to be emphasized in the firms sampled were operations strategies - such as inventory control - purchasing, and office/plant management.

Significant differences were found in the structure and performance of the firms studied.  First, approximately one half of the firms in the start-up stage were classified as sole proprietorships and one half had taken no action regarding the legal status of the firm.  However, within the early-growth firms, most had declared legal status: 36% were sole proprietorships, and 31% were corporations or Sub-Chapter @ firms.  Sales revenues for the businesses were also significantly different.  Start-up firms reported sales ranging from $5,000 - $10, 000; however most of the firms had not been in existence a full year.  The early-growth stage firms' sales ranged from $5,000 - $350,000, with an average of $50,000 per year in revenues.

Among the most interesting findings were the employment changes between start-up and early-growth firms.  Only 15% of the start-up firms had full-time staff, and only 7% had part-time workers in the business.  In the early-growth-stage firms, however, 60% employed up to four full-time workers, and several of these firms employed more than 10 full-time workers.

Results showed that the revenues of the early-growth-firms were more likely to provide women entrepreneurs with the major source of her income.  Nearly one half of the women entrepreneurs in start-up-stage firms held a separate, full-time job in addition to running their own businesses.  This outside employment, and not the entrepreneurship, provided start-up-phase business owners with the major source of income.

As women entrepreneurs found and grow their organizations, they actively seek strategic information and implement organizational changes as a consequence of this information search.  It was found that entrepreneurs who lead newly founded companies need to know how to continue building the business after their initial idea, how to get their financial house in order by implementing more systematic processes of accounting, and how to secure initial funding for their business. 

The results of this study reveal the characteristics associated with start-up-stage and early-growth-stage businesses; the movement from the one-person show with no declared legal status to the informally structured, team-based organization that is incorporated.  This research contributes to the literature on women entrepreneurs by expanding previous work to include perceived needs for information linked to the leadership strategy of the entrepreneurs.  One implication of this research is that it is appropriate to segment women entrepreneurs and their firms along various dimensions for analysis.  Stage-of-business-development used here is one such dimension.  Others that could be considered for future research include industry, product or service, location (home-based), and technology (Gundry, 1997, pp. 69-77)."

Reference:  Gundry, L.K., (1997).  The leadership focus of women entrepreneurs at start-up and early-growth stages.   A Leadership Journal 2 (1), Fall 1997.

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Created: 2008-02-25, Updated: 2009-02-17