Sector News

Small Talk: Women benefit business – so we must rethink how to attract them

March 9, 2015
Diversity & Inclusion
Here’s a conundrum to ponder on the day after International Women’s Day: how do we balance the desire to increase the number of women who start their own businesses with evidence showing that  policies aimed at specifically encouraging female entrepreneurship may actually put many off doing so?
There is certainly a problem to tackle here. Government statistics suggest that fewer than one in five smaller companies are led by women. That’s not enough – not just because social justice demands equality of opportunity, though of course it does, but also because there is every reason to expect women-led companies to outperform. At larger companies, there is overwhelming evidence that getting more women into  senior positions leads to superior performance, and an increasing number of studies suggest that the same is true of smaller companies. Research published last week by the business software group Xero, for example, found that women-led start-ups tend, on average, to lose less money and have more success in winning new contracts.
How, then, to get more women small  business leaders? Well, the typical answers  to this question centre on better support structures for women – think mentorship and networking, for example – as well as policies that address some of the practical problems that have tended to hold women back, such  as issues around childcare provision and  flexible working.
However, there’s a problem with that approach; if one of the reasons women aren’t starting businesses is because they lack the confidence to do so, singling them out as a group in need of special treatment risks undermining that confidence even further.
In fact, of the women surveyed in Xero’s research, a third said a lack of self-belief had been the biggest barrier standing in the way of them launching their small business, the single reason most often given. This is a well-documented trend: all the academic evidence suggests that women are far more likely to suffer from “imposter syndrome” than men. This is the condition where people attribute their success in life as being down to luck, rather than their own intelligence and hard work. Sufferers routinely feel as if they have deceived people into thinking highly of them.
The problem with imposter syndrome is that it’s very difficult to attack. Praising people suffering in this way reinforces their self-doubt – tell someone they really do deserve their success and they end up feeling even more fraudulent. Also, many of the policies advocated to encourage more women into taking on high-achieving roles can fuel the syndrome – the danger is that women begin to feel they’ve made it because of positive discrimination, rather than on their own merits.
None of which is to say that policymakers should not be thinking hard about how to boost the number of women who start their own businesses, or that the initiatives and policies adopted thus far should be abandoned. It is simply a warning that this may be a far thornier problem than it might first appear – and one that it is not possible to tackle solely with traditional socioeconomic policies.
It’s also worth making the point that some of the factors that play a part in women’s disposition towards imposter syndrome may also be part of the explanation for why they so often make better business leaders. At the risk of slipping into easy stereotypes, men are encouraged from an early age to bluff it out – to take the lead, even where they are ill-equipped to do so, rather than to seek consensus and build mutually beneficial relationships. They’re more likely to be poor listeners and to make hasty decisions. None of these are qualities to be encouraged in someone who is trying to build a small business with the potential to deliver sustainable growth.
Finally, there is one other piece of evidence that stands out in the argument over whether women make better entrepreneurs than men. A recent Goldman Sachs report into 10,000 small businesses found that women bosses paid themselves just 80 per cent of the salaries their male counterparts were enjoying. In a conclusion befitting an investment bank, Goldman declared this was because women needed to develop the confidence to value their own time more highly: might an alternative thesis be that women prefer  to channel profit back into their business, in order to build a more valuable enterprise over the long term?
‘Mini-bonds’ to raise money for homes
An affordable housing developer is to attempt to tap the market for “mini-bonds”, with a scheme launching today to raise £1.5m via the crowdfunding platform Crowdcube.
Pocket plans to build 4,000 homes in London over four years. In return for an initial investment of £500 or more, investors get an annual interest payment of 7.5 per cent for four years, when their money is due for repayment.
Mini bonds are in effect corporate bonds issued by smaller companies, though the market for them is far less liquid and they attract less regulatory scrutiny. Despite the higher risk profile, the bonds are popular on crowdfunding platforms as well as the specialist market launched for them by the London Stock Exchange five years ago.
Crowdcube’s founder, Luke Lang, expects mini-bonds to “continue to disrupt the market”, while Pocket says this financing option is crucial to its plans.
Its properties are targeted at buyers with an average household income of £40,000.
Costly delays at regulator punish lenders
Is the explosion of interest in crowdfunding beginning to cause problems for the regulator? A financial consultancy says crowdfunding platforms are having to wait an average of six months to get authorisation to do business from the Financial Conduct Authority (FCA) – and that 15 firms are caught up in a backlog that has built up at the regulator.
The delays follow the launch last year of a new system of regulation for the crowdfunding sector, with the FCA given direct responsibility for policing platforms. Equity-based crowdfunding platforms in particular must now meet stricter standards.
“The FCA wants to ensure quality control, particularly relating to consumer protection, but it needs to weigh that against the costs and uncertainties that the approval process causes for businesses,” said Gillian Roche-Saunders, head of venture finance at Bovill. “The Government is keen to promote innovative financial technology and help fill the funding gap, yet many viable businesses may not get off the ground if it continues to take so long to be authorised.”
Small business person of the week: Scott Law, Founder, Pay4Later
“I launched Pay4Later in 2008 – I had recently set up a business that processed card transactions and that got me looking at the retail finance business, where people pay for large ticket items using credit over a number of years. It was a dying sector that had shrunk each year for 12 years and seen most of the big banks pull out, but there was a simple explanation for that: more people were buying big-ticket items online and no one had set up a retail finance arrangement that online shoppers, as opposed to those make purchases in the store, could sign up for.
“I decided to do exactly that. We spent two years building a platform that enables retailers to offer online customers a payment plan based on credit, just as they always had in their stores. It’s just another payment option, as simple to sign up for as paying by debit or credit card.
“It was a difficult business to get off the ground in the wake of the financial crisis. We don’t make the loans ourselves; we have a panel of lenders offering credit, but because of the crisis, the first bank we persuaded to come on board was forced to pull out of the market just a month before we were due to launch, leaving us scrambling for a replacement.
“We’ve come a long way since then – we’ve signed up more than 1,000 retailers and we have six lenders providing credit, though we expect another four to join this year. We offer a great solution for smaller retailers who couldn’t do this for themselves, but we’ve got some big names too – Mothercare recently joined the platform, for example.
“The beauty of the model is it benefits everyone. The retailer gets more business and customers tend to spend more, lenders are keen to increase their exposure to the retail sector and this enables them to do it in a safe way, and customers can spread the cost of their loans, at a fixed interest rate, over time, which helps them manage their finances.
“We have been growing quickly – some £20m of credit was approved through the platform in January alone, and we did 124 per cent more business in the run up to Christmas than in the same period of 2013. We’ve gone past 600,000 customers now.”
By David Prosser

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