Starting up a business has always been difficult, but with COVID-19 in full effect, it’s become even more difficult. To add even more to the challenges, you have an even greater uphill battle if you live in certain regions of the world, or if you happen to fall into a certain demographic such as being a woman or other minority. Business lenders and investors have to make decisions based on how risky entrepreneurs and new franchise owners are, and in the past, female entrepreneurs have often been considered high risk.
Fortunately, this is beginning to change as more investors are starting to see tremendous value in female-owned businesses. There are several reasons why you should invest in female-owned businesses, and how you can.
1. The Potential To Invest In Untapped Markets
Female-owned businesses have the potential to reach customers that traditional male-owned businesses don’t sell to. For example, cosmetics, women’s fashions, jewelry and other various products are where most female customers will shop. Women business owners usually have a better understanding of what their customers are looking for, so in investing in their companies, you have the potential to tap into sales and profits from these customers, and therefore get a return on your investment.
2. You’re Supporting More Business Leaders
Women who have emerged in the business world over the last several decades have proven they are just as capable if not more so than their male counterparts. While their leadership style may be a little different than how men lead, they can be just as inspirational in more creative ways. They can bring different perspectives to a company’s executive board, but even in the lower management levels women have shown they can make a difference.
Leadership is by far the key to a business’s long-term success, so when female entrepreneurs show they can lead a company, there’s a good chance you’ll be investing in a very solid female-led company.
3. Female-led Companies Often Have Very Sound Financial Practices
Various studies have in fact shown that women-owned companies can keep their books balanced, and they also utilize sound financial practices. There can be any number of reasons for this. For example, perhaps the woman owner of the business is a single mother who’s learned how to balance a family budget and make savings stretch so that she can feed her family. But they may even have other ideas on how to avoid high business expenses and substitute cheaper alternatives. Just keep in mind that women business leaders can break the stereotype of women being spendthrifts.
4. There Are Female Business Leaders With Great Track Records
So after hearing about how well run female-led companies can be, you might wonder who these female leaders are who have done this. Here are a few successful female leaders:
Susan McGalla has had quite a history of business leadership and helping build companies. For many years, she was the president and CEO of American Eagle and its subsidiaries. She was actually one of the first females to attain such a position on a publicly traded retail company. But from there, she went on to sit on the boards of several foundations, start her own consulting firm, and today she manages the fan merchandise department of the NFL’s Pittsburgh Steelers. McGalla helped turn American Eagle into one of the nation’s top fashion outlets, and more female customers became part of their customer base.
Nina Vaca started one of the first female-led tech staffing firms that gained high recognition in 2014. Vaca had started this firm right out of her own apartment in 1996, and she had to face major financial hurdles and make personal sacrifices just to keep it running. But she persevered through all of that, and in 2017, she was given the Woman of Distinction award by the Women’s Business Enterprise National Council. Former President Barack Obama also once gave her a medal at a well-known ceremony.
5. Investing In Female-led Companies As An Angel Investor
One way you can help support female-led companies and potentially earn passive income is to become an angel investor for them. As an angel investor, you would get an ownership stake in the company while hopefully watching it grow. You would have to come to an agreement with the owner on how much say you would have in running the company. But you could sit back and let the founders run the company and simply enjoy a cut of the profits.
6. Investing In Female-led Companies As A Philanthropist
One way you can support new women owned companies is to invest as more of an act of philanthropy. One way you could do that is to partner with an organization like JUST. Companies like JUST dedicate funds to help female entrepreneurs from under-served communities succeed. This month JUST has teamed up with silpada.com who is donating a percent of sales to JUST through the month of August. Partnerships like this can not only empower female entrepreneurs, but they could also help the local communities that have great needs.
7. Investing In Female-led Companies Through Lending Organizations
One way you can invest in female-led businesses without taking an equity position in them is through an online lending platform. More startup businesses including female-led ones are being financed by online lending organizations because they’re often easier to get financing from than regular banks. These online lenders, which are usually known as peer-to-peer lenders or microlenders, get their funding from private investors. When you invest through one of these lending agencies, you can get your money repaid with interest, and sometimes at higher rates than junk bonds.
The bottom line is female-led businesses are just as vital to the US and global economies as their male-led counterparts, and they have every bit as good a chance of succeeding. Whether you want to invest to make gains in your portfolio, or as a form of charity, you should take the time to get to know some female-led companies, and find out not only what they sell, but what their values are.