Small Business Risks for Women Entrepreneurs


Risk exists for every sort of business venture and at all points in the lifecycle. Whether you’re operating a food truck or launching a small tech startup, the type of risks you encounter may increase over time, especially as your company grows.

Around 29% of private businesses in the U.S. are owned by female entrepreneurs, a number that has grown 68% since 2007. Clearly, a growing number of women are willing to take on the risk of starting a new business. But what risks await female entrepreneurs and their newly-budding startups?

According to Yuka Nagashima, President of Astia (a nonprofit striving to level the playing field for women entrepreneurs by providing access to capital and networks) and co-founder of two tech startups, women take on and manage risks just as well as men do. The real issue at hand? “The investor lens is biased,” she explains, “often in the way that demands the female entrepreneurs to change rather than fix the broken system.”  The lack of access to capital continues to be cited as one of the top reasons entrepreneurial businesses fail.

Where Small Business Risk Exists for Female Entrepreneurs

But if you are a female entrepreneur, you can’t wait for the system to get fixed to get a fair shake at the money tree. For that, Nagashima suggests three things: build meaningful relationships outside of your own immediate community; seek out sponsors as well as mentors and advisors; and craft a robust business plan which asks for the right amount of money for your enterprise to succeed.

Building Relationships isn’t the Same as Networking within your Own Community

When the system is rigged in such a way that a majority of the population is an underrepresented group (there are more women than men in every U.S. state except for Alaska), networking within that group is not sufficient. While there may be some benefit in having a safe space to share lessons learned within your own network, strength in entrepreneurship and innovation come from embracing diversity. Networking alone, isn’t enough. It isn’t about exchanging business cards but about listening to others to see what contribution you can make, and knowing “your ask” besides funding. One of the risks for entrepreneurs is fixating on networking to get to the funding, when building relationships can open up opportunities for alternative methods of funding such as foundation and government grants, crowdfunding, and resources that will reduce your need for funding, such as working with an entity who can help you bootstrap your operation.

Mentors, Advisors and Sponsors

We can all use good role models and mentors to help us along the way. Again, building meaningful relationships in communities outside of your own can reach people who are in a position to help you.  Astia makes a distinction between mentors and advisors. “They may be similar in qualifications,” says Nagashima. It is the intention behind why they are helping you that can differentiate mentors from advisors. Mentoring is popular with women because women make good mentees: listening to the guidance of someone who has walked the path before them. But think of advisors from the academic tradition, where the professors advise you with the expectation that you will join as their equal, as you complete your dissertation. “It is with that spirit that Astia refers to our volunteer experts as advisors,” Nagashima added. So what of sponsors? If a mentor or an advisor speaks with you, a sponsor speaks on your behalf to others. When you are treated as an underrepresented group by the system, it’s important that you have people speaking up for you on your behalf when you are not in the room. You need sponsors.

Mitigating Risk with a Robust Business Plan

According to Nagashima, one of the biggest errors entrepreneurs make is to keep the idealistic lens when crafting the business plan. “Entrepreneurs have to think optimistically to continue to go up against the naysayers and the obstacles they face,” said Nagashima. “But the business plan has to be realistic. If you need three stellar sales people to generate the level of sales you projected, why would you just budget for salary for three sales people? When was the last time anyone hired three sales people and they turned out to be all stellar? Budget for five! Budget for incentives.” Nagashima explains that a robust plan is one that achieves the goal despite all odds. “A plan that assumes variables outside of your control will all align in your favor is not a robust plan. To make it robust, ensure that mechanisms and provisions are in place for your enterprise to recover and get back on track when things don’t go your way.”

When you have developed meaningful relationships outside your own community, which you can use to identify your mentors, advisors and sponsors, they can then review your business plan to ensure it is robust.

What now?

From Nagashima’s perspective, risks differ along each growth point, but the biggest risk may be in balancing your own emotions throughout the process. “There are many risks,” said Nagashima, “and each time, what I pursued was a balance of healthy skepticism instead of crippling self-doubt; inspiring optimism over delusional ‘drinking of one’s own Kool-Aid’; and being strong for others and myself.” That strength, she explained, required, “being vulnerable as opposed to having to live up to the Superwoman ideals,” and “being opportunistic while being true to my values.”

Women who are capable of getting past the systemic problems in the funding phase will face risks, but many of the same risks that exist for male entrepreneurs exist for women as well. Such issues as hiring concerns, industry-specific state and federal legal requirements, and even protecting customer and employee data all exist equally, regardless of gender.