Report: Money Management Keeps Women’s, Older Entrepreneurs’ Small Businesses Afloat Despite Lower Revenue, Slower Growth


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While businesses that are owned by women and those 55 and older survive, they make less money and grow more slowly than businesses owned by men and younger entrepreneurs.

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The JPMorgan Chase Institute, based in New York, has released a new report that shows conservative cash management strategies may play a key role in the survival of businesses owned by female entrepreneurs and those older than 55, despite experiencing lower revenue and slower growth than their younger male counterparts.

The report is titled Gender, Age, and Small Business Financial Outcomes and leverages JPMorgan Chase’s transaction-level data to shed light on daily revenues, expenses, and financing flows. The study focused on the financial outcomes of a cohort of 138,000 firms founded in 2013 to observe performance in their early years.

“Cash management strategies and cash buffers are key to the survival of small businesses, and this new research shows that is true, especially when a business is experiencing lower revenues or slower growth,” says Diana Farrell, president and CEO of the JPMorgan Chase Institute.

“While women and older entrepreneurs may have lower revenues or slower growth, their conservative approaches to cash management appear to be paying off. Our hope is that this report can better inform policies that allow small businesses owned by women or people of all ages to make more substantial contributions to overall economic growth.”

The report explores differences among small-business outcomes by owner gender, owner age, and geography. One of the key findings is that female-owned businesses have lower revenues, experience slower growth, and are less likely to receive external financing than their male-owned counterparts. However, female-owned businesses have the same survival rates as male-owned businesses.

Women start about 30 percent of firms, and female-owned small businesses have an average 34-percent lower first-year revenues than male-owned small businesses. They also experience slower growth — the median first-year revenue was about $50,000 for women-owned small businesses, while male-owned small businesses generated an average of $75,000 in first-year revenue. In the fourth years, the numbers jump to $68,000 and $104,000, respectively.

Female-owned small businesses are underrepresented among firms that leverage external financing to drive growth, making up only 18 percent of small businesses that experience financed growth.

Firms with older founders (55 years old and up) have the highest survival rates but are the least likely to have employees. They also have the largest cash buffer, a key factor in firm survival. A typical firm founded by a 30-year-old has an 11.1 predicted probability of exiting the marketplace after its first year, whereas one founded by a 60-year-old has an 8.2 percent probability of doing so.

Firms founded by owners ages 55 and up have the most cash buffer days – an average of 17 – while firms with owners younger than 35 have 12 days. The cash buffer days are a measure of small businesses’ ability to withstand emergencies using cash balances.

Only 6 percent of firms with older owners were employers, which is nearly two percentage points lower than the overall share of employer firms.

Across geographies and industries, there is significant variation in revenues of small businesses owned by women compared to those owned by men.

Firms founded by women were smaller than firms founded by men in every metropolitan area tracked, though the size varied by location. For example, in San Antonio, new women-owned small businesses had 46 percent of the revenues of new male-owned businesses, while women-owned small businesses in Miami had 85 percent of the revenues of their male-owned counterparts.

Women were more likely to start businesses in the personal services, health-care services, retail, and real-estate industries, but they still experience smaller revenues than male-owned businesses in those same industries.

In three male-dominated industries — high-tech manufacturing, construction, and metal and machinery — the relatively few women-owned businesses had larger first-year revenues than male-owned firms.

The new research follows the institute’s July 2018 report, Growth, Vitality, and Cash Flows: High-Frequency Evidence from 1 Million Small Businesses, which found that although small businesses across the country are often treated as a uniform sector, they are not, varying in growth, employees, and cash flow.

The JPMorgan Chase Institute is a global think tank.

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