A myth-shattering study shows that women business owners are more willing than the general population to take financial risks. The study, Worth the Risk: Women Business Owners and Growth Capital, focuses for the first time on women business owners' attitudes towards risk taking. It was released today by the Center for Women's Business Research with exclusive underwriting by OPEN: The Small Business Network from American Express.

The study compares women who currently are seeking, preparing to seek or have sought growth capital ("expanders") with those who never have sought growth capital ("non-expanders"). It found that women who want to substantially expand their businesses are willing to take the risks necessary to obtain financing, and two-thirds of capital-seekers have been 100% successful in previous efforts to obtain the growth capital they sought.

"This study demonstrates that women are moving into the economic mainstream," said Myra M. Hart, Chair, Center for Women's Business Research and Professor, Harvard Business School. "They have the skills and business savvy to obtain the growth capital they need to expand their businesses aggressively. They know where to get professional advice, can make a strong case to potential investors and are willing to accept the risks that come with the territory. They are role models for all women who want to grow their businesses."

Taking Financial Risks

Women business owners in the study are more risk-tolerant than women and men in general when saving or investing for their households. More than half the women entrepreneurs (57%) indicated they were willing to take above average or substantial financial risks, compared to just 14% of all women and 26% of all men who participated in the 2001 Survey of Consumer Finances conducted by the Federal Reserve.

The willingness of the women entrepreneurs to take financial risks is even stronger when considering business decisions.

"Contrary to commonly held perceptions, most of the women business owners in the survey (66%) are willing to take above average or substantial financial risks when saving or investing for their businesses, and their risk-taking is worth it," said Catherine Foucher, Vice President, OPEN: The Small Business Network from American Express. "Two-thirds (67%) of the women currently seeking expansion capital were 100% successful in previous efforts to obtain capital."

Almost two-thirds (72%) of those who expanded their businesses achieved or exceeded their expansion goals. Most of those currently seeking capital want it to hire staff (82%), expand markets (76%), add a new product or service (68%), and improve the quality of their product or service (58%). The most important reason for wanting to expand was "to increase revenues and profits." This reason received an average rank of 1.4 on a scale from 1 to 4, where 1 was the most important and 4 the least important reason.

Training, Experience, and Self-Confidence

The survey also shows that women have a solid base of training and experience that can be called upon when seeking expansion capital. The majority (62%) of the respondents have some kind of training in business finance and almost twenty percent (19%) have an MBA. Half (50%) of all expanders have previous entrepreneurial experience.

In addition, although all respondents (expanders and non-expanders) give themselves ratings that indicate they are confident of their personal competence in business management in such areas as planning and strategy; sales and marketing; personnel and human resources; and finance, expanders rate themselves higher in each of these categories.

The expanders are more likely to be serial business owners than non- expanders (50% vs. 32%); and are more likely to have held "line" positions in their previous work. These ex panders also are more likely to own firms in information industries (15% vs. 8% of non-expanders) and manufacturing (13% vs. 5% of non-expanders).

Seeking Capital

For survey respondents who had been through the process of seeking capital, the experience was positive. Past expanders indicated that success in expanding their businesses made them set more ambitious goals for growth and profit. Their success affects their view of risk by making them more risk-tolerant and/or changing their perspective on what they consider to be risky.

Expanders use more sources of capital than non-expanders. Nearly half (47%) of expanders use commercial loans secured with business assets. Commercial loans secured with personal assets are used by 37% of expanders. Equity also is an important source of growth capital, with 19% using equity from family or friends, 21% from individual angel investors and 17% from investment companies.

Current seekers' most preferred sources of capital to fund expansion are commercial loans secured with business assets (35% chose this as their preferred source of capital), followed by equity investment from investment companies (17%) and equity investment from individual angel investors (16%).

More than three-quarters (77%) report using a variety of advisors including accountants, financial specialists, attorneys, and women's business centers. Nearly 90% of current seekers are able to provide potential lenders with detailed revenues, profitability and net income trend data for at least three years.

Future

The population surveyed came from groups most likely to be seeking growth capital. Three organizations provided access to the women business owners in their networks: Women President's Organization, a membership organization for women presidents of companies grossing at least $2 million; women who participate in the Women's Leader ship Exchange, which produces educational conferences; and clients of Springboard Enterprises, which is dedicated to increasing access for women entrepreneurs to equity markets.

"More than half (58%) of the women business owners surveyed were expanders who were either currently seeking, or previously sought, capital to expand their businesses," said Hart. "A question for future inquiry is why nearly half (42%) of the women are not seeking and have not sought growth capital for their businesses in the past."

This study of women business owners was conducted through an online survey from October 21 through November 30, 2003. In order to be able to maximize the reach to women business owners who were seeking or had sought capital to grow their business, the sample was drawn from proprietary lists specifically targeting women entrepreneurs with a likely growth orientation or growth experience.

The study sample included 368 women business owners. Women business owners who were seeking capital, preparing to seek capital or had sought capital to expand their cur rent business in the past are considered "expanders" (58% of the sample). Women business owners who were not seeking capital and had not sought capital for their businesses in the past are considered "non-expanders" (42% of the sample).