GENDER BASED DIFFERENCES IN SMALL BUSINESS START-UPS
Peter DeVries, University of Houston - Downtown
Charles Smith, University of Houston - Downtown
Liz Mulig, Columbus State University
This study examines the differences between men and women with regard to the establishment of
ultra-small businesses and their methods of obtaining capital at various stages of the business life
cycle. The study utilized data gathered from a structured interview in an urban southwestern
city. Women were less likely to borrow start-up capital from a bank, but were more likely to
borrow expansion funds. Writing a business plan did not appear to help in correctly estimating
start-up capital. Men and women are motivated by similar driving factors, but women are more
affected by the “glass ceiling” effect in Corporate America.
Small businesses are an essential section of the American economy as a source of economic
growth and job creation. The U.S. Small Business Administration reported that small businesses
accounted for over 50 % of the gross domestic product and the majority of new jobs created
(Coleman, 2000). Although the number of small businesses owned by both men and women has
been on the rise in recent years, the number of women-owned businesses has grown at nearly
twice the national rate (National Foundation of Women Business Owners, 1998).
Women entrepreneurs have become a driving force in today’s economy. In 1998, the National
Foundation for Women Business Owners (NFWBO) reported that over the past 10 years, the
number of women-owned businesses has increased by 78 % and the number of people that they
employ has increased 183 % (1998). The National Women’s Business Council (1996) has
reported that women own approximately one-third of all businesses.
This study reports some of the findings concerning the differences between men and women
entrepreneurs in ultra-small businesses in an urban southwest city. The study is limited to
businesses employing fewer than 100 employees. First, the study reports on four factors relating
to the establishment of their business:
1. Why they decided to start their own business
2. Whether or not a business plan was written
3. The amount of capital needed for start-up
4. Whether or not the estimated amount of start up capital proved sufficient.
Second, the study compares the differences between men and women owned businesses in terms
• Obtaining capital for initial startup,
• Obtaining capital for expansion, and
• Obtaining capital if the business runs short of cash.
Review of Literature
In response to the growing influence of women entrepreneurs in the business world, women have
increasingly become the subjects of research for small businesses. Literature concerning women
entrepreneurs has focused on what motivated them and their ability to obtain needed capital for
their business. The profile of the female entrepreneur is between 30 and 50 years old, married,
with a college education, a dominant personality, and sufficient savings for starting her own
business (Kruger, 2000). Kruger used the DISC assessment to define a dominant personality as a
risk taker, goal orientated, assertive, active, creative, judgmental, and hard driving.
Several studies have reported the influences of “push” and “pull” factors in motivating men and
women in starting their own business (Birley and Westhead, 1994; Buttner and Moore,1997;
Cooper and Dunkelberg, 1981). In early investigations, researchers have concluded that men
started their business as a result of “pull” factors such as control over one’s work, a desire for
more money, and the opportunity to work independently (Birley and Westhead, 1994; Cooper
and Dunkelberg, 1981). Female entrepreneurs reported “push” factors as their primary
motivation. Some “push” factors are frustration and boredom in their previous positions and an
interest in business. In a later study, Buttner and Moore (1997) concluded that based on analysis
of means that women’s entrepreneurial motivation stems more from “pull” factors than “push”
factors. Women entrepreneurs desire challenges and self-determination; “pull” factors were the
most influential reasons for women to start their own business (Buttner and Moore, 1997).
Briley (1989) found that both male and female small business owners were motivated by the
same need for money, desire to be independent, and response to business opportunities (Birley.
The only factor showing a significant difference between genders is self-confidence, with men
being more self-confident than women in launching a new venture.
In 1988 Butner and Rosen reported that women were seen as lacking in important entrepreneurial
characteristic such as leadership, autonomy, readiness for change, and endurance. In 1992, they
reported that gender was not a factor for rejection of bank loans by loan officers, and that female
entrepreneurs did not perceive gender bias from the banks (Butner and Rosen). Haynes and
Haynes also concur that there was no discrimination perceived by female entrepreneurs. Haynes
and Haynes (1999) conducted studies comparing women entrepreneur’s debt structure in 1987
and 1993. In both 1987 and 1993, women had a significantly lower probability than men of
using traditional means of obtaining capital for their venture (1987 – 62 versus 69 %; 1993 – 60
versus 67 %), and a significantly higher probability of using family and friends (1987 – 19
versus 14 %; 1993 – 20 versus 14 %). They also found that women were more likely than men
to be indebted to their family and friends.
One theory of researchers indicates that the reason that women are less likely to be candidates for
bank loans is because they are primarily in the service and retail sector and lack the assets to be
used for collateral (Coleman 2000; Hirsh 1989, Riding, Haines, and Thomas 1994). Researchers
have concluded, that not only are bankers less receptive to loaning funds to female small
business owners, but that these women are reluctant to do business with banks (Birely 1989;
Butner and Rosen 1992; Colemen 2000).
A second theory contends that women are less likely to use banks to finance their business
because they are more adverse to risk than men and thus less likely to take on debt (Olsen and
Currie 1992). Other research disputed this theory, concluding that both men and women
entrepreneurs have a tendency toward being risk takers (Kruger 2000; Master and Meir 1998).
In 1998, Masters and Meir conducted a study to determine whether men and women differ with
regard to taking risk. They concluded there was no significant difference between men and
women in their propensity toward risk and risk aversion (Masters and Meir 1998).
Sample and Data Collection Procedures
The sample was comprised of 353 small entrepreneurial businesses in an urban southwest city.
The subject businesses were randomly selected with the restriction that they employ less than
100 people. Initially, the business owners were contacted by phone and advised that the
questionnaire was part of an ongoing effort directed toward studying small business. Upon
agreement to participate, an interview time was established.
A structured interview was conducted that resulted in a questionnaire being completed for each
firm. To insure the validity of the interview, the interviewers were trained in how to conduct the
structured interview. The questionnaire was pre-tested. A structured interview was used to limit
the variation among interviewers and increase the reliability and validity of the responses. The
questions were structured to obtain data concerning demographics, factors related to the
establishment of the businesses, and factors related to financing alternatives available for
Participating companies in this study were well distributed across age, ethnic background, years
in business, company size, educational level, and annual sales. Male owned businesses
represented approximately 70 % of the sample, which is representative of the current population
of entrepreneurs (approximately 70% male and 30% female) (State of Small Business 1993). The
ethnic backgrounds of the participants showed great diversity with approximately 31% being
White, 30% Asian, 20% Hispanic, and 13% Black. Over 72% of participants had some college
experience. A demographic summary is presented in Table 1.
Demographic Breakdown of Ultra Small Businesses
Variable Number of Percentages Variable Number of Percentages
Respondents of Total Respondents of Total
Gender Number of Employees
Female 96 27.2% 2 or less 98 27.8%
Male 254 72.0% 3 to4 94 26.6%
Blank 3 0.8% 5 to 10 105 29.7%
11 it 20 31 8.8%
21 to 90 25 7.1%
Owner’s Age Education Level
25 or under 31 8.8% Some High School 38 10.8%
26 to 35 98 27.8% Finished High School 56 16.7%
36 to 45 75 21.2% Some College 96 27.2%
Finished 2 Year
46 to 55 102 28.9% Degree 34 9.6%
Finished 4 Year
56 or older 46 13.0% Degree 104 29.5%
Blank 1 0.3% Finished Master/PhD 20 5.8%
Blank 2 0.6%
Income Ethnic Background
$20,000 74 21.0% White 109 30.9%
$40,000 104 29.5% Black 47 13.3%
$60,000 62 17.6% Hispanic 71 20.1%
$80,000 44 12.5% Asian 106 30.0%
100,000 23 6.5% Other 17 4.8%
Over $100,000 38 10.8% Blank 3 0.8%
Blank 7 2.0%
Differences between Men and Women Business Owners
The data collected for the questionnaire reported differences between men and women in two
1. Factors relating to the establishment of a small business
2. Sources of capital for the small business
Factors Relating to the Establishment of a Small Business
The data reports the differences between men and women entrepreneurs in relation to factors that
influenced them in the establishment of a small business. Men and women entrepreneurs choose
their major influence in starting their own business out of five choices: always wanting their own
business, had a good idea, laid off from job, felt opportunities were limited in a large company,
and other (Table 2). Both men and women were strongly influenced by the desire to have their
own business (men 51%; women 48%). There was not much difference in motivation factors:
being laid off (men 5%; women 5%) and had a good idea (men 13%; women 14%). The greatest
difference reported was the factor of having limited opportunities in Corporate America (men
19% versus women 25%). The NFWBO reported that, out of 800 men and women
entrepreneurs, only 16 % reported the glass ceiling effect to be a motivation factor in the
decision to start their own business (Paths to Entrepreneurship 1998).
Why Did You Start Your Own Business?
Men Women Men Women
Always wanted own Business 157 57 51% 48%
Laid off from job 15 6 5% 5%
Limited Opportunities in Corporate
America 59 29 19% 25%
Had a good idea 39 16 13% 14%
Other 40 11 13% 9%
Mean 62.00 23.80
In preparing to start a business, the participants were asked if a business plan was used to shape
their business (Table 3). Approximately half of the male entrepreneurs reported that they used a
business plan (46 %). However, women entrepreneurs were much less likely to write a business
plan (37 %).
Did you use a business plan?
Total 117 137
Percentage 46% 54%
Total 36 61
Percentage 37% 63%
Although women were less likely to write a business plan, they were noticeably more successful
in allocating the correct amount of cash for start-up (Men 59%; Women 69%). Studies have
shown that women tend to be more financially conservative than their male counter parts
(Masters and Meir 1988). Women estimated too low 27 % of the time, while men estimated too
low 34 % of the time (See Table 4).
Correct Estimation of Start-up Capital
About Too Too
Right High Low
Total 150 13 85
Percentage 59% 5% 22%
Total 67 4 26
Percentage 69% 4% 27%
The amount of capital used for start-up (bracketed as less than $10,000, $10,000 up to
$20,000, and $20,000 up to $30,000) did not show large variation based on gender (Table 5).
The survey showed that 34 % of both men and women needed less than $10,000 in capital to
start their venture. The men tended to use over $30,000 in start-up capital more than women
entrepreneurs (men 39%; women 35%). Women owners tend to employ different founding
strategies than men, which require fewer resources (Carter, Williams, and Reynolds 1997).
Women entrepreneurs’ dominance in the service industry may influence the lack of requiring
large start-up capital (Birley 1989).
Amount of Capital Needed for Start-up
Amount of Capital Men Women Men Women
Less than $10,000 87 33 34% 34%
$10,000 to $20,000 43 17 17% 18%
$20,000 to $30,000 28 13 11% 13%
More than $30,000 98 34 39% 35%
Mean 64.00 24.25
Sources of Capital for the Small Business
The participants selected among sources of capital for start-up, for expansion, and in
emergencies. Men were more likely than women to obtain start- up capital from banks (men –
39% versus women – 36%)(Table 6). In 1993, Haynes and Haynes reported that 60 % of women
owners and 67 % of men owners obtained a bank loan or lease. The data from the structured
interview also indicates that 66 % of women used their personal saving as start-up capital.
Kruger (2000) reported that 60 % of women entrepreneurs used savings to finance their business.
Sixteen % of the men in the sample reported that their source of start-up capital came from
friends while only 12 % of the women cited friends as a source.
Women were slightly more likely to borrow from relatives than men (women – 33% versus man
– 30%). In 1993, Haynes and Haynes concluded that women small business owners are more
likely to borrow from friends and family than are men.
Source of Start-up Capital
Home Leasing Private
Bank Savings FriendRelative Equity Company Investor SBA Other
Total 98 162 41 77 7 4 15 10 25
Percentage 39% 64% 16% 30% 3% 2% 6% 4% 10%
Total 35 64 12 32 1 0 10 3 12
Percentage 37% 66% 12% 33% 1% 0% 10% 3% 12%
While only 36 % of the women reported that start-up capital came from banks, 66 % cited that
they would seek funds from banks for expansion (Table 7). Fifty-four % of the men interviewed
said that they would use banks as a source of capital for expansion. Both men and women
entrepreneurs cited personal savings as a source of capital for expansion (men – 37% versus
women – 36%). Only a small percentage of the men and women entrepreneurs in this study
gained assistance from the Small Business Association (SBA) (men – 4% and women – 3%).
Young and Brenner (2000) reported that women were more likely to gain assistance from the
SBA than men.
Source of Capital for Expansion
Men Women Men Women
Bank Loan- No Collateral 137 64 54% 66%
Home Equity Loan 24 7 9% 7%
Personal Savings 95 35 37% 36%
Take in a Partner 30 17 12% 18%
Cash Advance on Credit
Card 21 6 8% 6%
Other 36 8 14% 8%
Mean 57.17 22.83
Men cited that if their businesses ran short of cash they would seek funds primarily from bank
loans (32%), loans from a friend (30%), and other sources (28%) (Table 8). If the women were
to run short of cash, they were most likely to obtain the necessary funds from a bank loan (36%)
or a loan from a relative (23%).
Source of Capital if Business Runs Short of Cash
Bank Home from From
Loan Equity a Friend a Relative Other
Total 81 8 77 31 70
Percentage 32% 3% 30% 12% 28%
Total 35 1 7 22 15
Percentage 36% 1% 7% 23% 15%
Home equity loans ranked low as a source of start-up capital among both men and women
entrepreneurs (men – 3% and women – 1%) and as a source of emergency capital (men – 3% and
women – 1 %).
Conclusions and Recommendations for Further Research
The reported findings provide insight into the differences between men and women ultra-small
business owners. Several interesting findings were observed.
The methods that women and men used in financing and starting their business varied among the
participants in the study. As previously discussed, women were more likely to borrow capital
from banks for expansion, but were less likely to use banks as a source for start-up capital.
Previous research indicated that women were less likely to use traditional methods, such as
banks, because they are primarily in the service industry and lack assets to be used for collateral
(Coleman 2000, Hirsh 1989, Riding Haines, and Thomas 1994). In the instance of expansion,
the business is more stable and has acquired the necessary assets to obtain capital from banks.
Further investigation should be done to determine if the type of business has an effect on where
men and women business owners obtain capital.
Birley (1989) found that motivation factors, such as money, independence, and opportunities for
men and women entrepreneurs are similar. The results of this study also indicate that men and
women are motivated by similar factors, but that women are more affected by limitations in
As mentioned previously, conflicting conclusions have been drawn concerning men and women
with regard to propensity for risk, but the more recent research indicates that there is no
difference. Concerning the amount of capital used at start-up, men were more likely to require
more than $30,000. Is there a relationship between a person’s inclination towards risk and the
amount of cash used at start-up or is this correlated to the type of small business being launched?
The study reports that women are less likely to write business plans, but were more
successful than men at predicting the amount of start-up capital required. The relationship
between writing business plans and other factors in establishing a small business needs further
investigation. Another topic that needs more research is the variation between how men and
women obtained capital in the various stages of their small businesses. Methods of obtaining
capital changed throughout the business life cycle for both men and women. Additional topics
for future research include:
• What is the deciding factor in what makes women more likely to choose banks for
expansion, but not as often for start-up or emergency capital?
• Does the type of small business influence the source of capital used by men and women
entrepreneurs for start-up, expansion, and when running short of cash?
• Are the differences between genders the same when controlling for ethnic background,
education, or age?
A statistical analysis is forthcoming.
Birley, S. (1989), “Female Entrepreneurs: Are They Really any Different?” Journal of Small
Business Management, 27(1), 32-37.
Birley, S., & P. Westhead, (1994), “A Taxonomy of Business Start-up Reasons and Their Impact
on Firm Growth and Size,” Journal of Business Venturing, 9, 7-31.
Buttner, E.H., & D. P. Moore, (1997), “Women’s Organizational Exodus to Entrepreneurship:
Self-Reported Motivations and Correlates with Success,” Journal of Small Business
Management, 35(1), 34-35.
Buttner, E.H., & B. Rosen, (1988), “Bank Loan Officers’ Perceptions of the Characteristics of
Men, Women, and Successful Entrepreneurs,” Journal of Business Venturing 3 (Summer), 249-
Buttner, E.H., & B. Rosen, (1992), “Rejection in the Loan Application Process: Male and female
Entrepreneurs’ Perceptions and Subsequent Intentions”, Journal of Small Business Management,
Carter, N.M., Williams, & P.D. Reynolds (1997), “Discontinuance among New Firms in Retail:
Influence of Initial Resources, Strategy, and Gender,” Journal of Business Venturing, 12(2), 125-
Coleman, S. (2000). “Access to Capital and Terms of Credit: A Comparison of Men- and
Women-Owned Small Businesses,” Journal of Small Business Management, 38(3), 37-52.
Cooper, A., & D.C. Dunkelberg, (1981), “A New Look at Business Entry: Experience of 1805
Entrepreneurs,” Frontiers of Entrepreneurship Research, Wellesly, Mass, 1-20.
Haynes, G.W., & D.C. Haynes, (1999), “The Debt Structure of Small Businesses Owned by
Women in 1987 and 1993,” Journal of Small Business Management, 37(2), 1-19.
Hisrich, R.D. (1989). Women Entrepreneurs: Problems and Prescriptions for Success in the
Future Women Owned Business, Ed. Oliver Hagen, Carol Rivchun, and Donald Sexton. New
Kruger, D. (2000) “Characteristics of the Female Entrepreneur,” Journal of Business &
Entrepreneurship, 12(1), 87-92.
Masters, R., & R. Meir, (1988), “Six Differences and Risk-Taking Propensity of Entrepreneurs,”
Journal of Small Business Management, 26(1), 31-35.
National Foundation for Women Business Owners (1998), Paths to Entrepreneurship, Silver
Olsen, S.F., & H. Currie, (1992), “Female Entrepreneurs: Personal Value Systems and Business
Strategies in a Male-Dominated Industry,” Journal of Small Business Management, 32, 104-120.
The State of Small Business: Annual Report of the President (1985), Washington D.C.,
Government Printing Office.
Riding, A., G.H. Haines, & R. Thomas, (1994), “The Canadian Small Business-Bank Interface:
A Recursive Model”. Entrepreneurship Theory and Practice, (Summer), 5-24.
Young, M., & C.T. Brenner, (2000), “Needed Information and Assistance for Women
Entrepreneurs: A Comparison with Male Small Business Owners,” Journal of Business &
Entrepreneurship, 12(1), 31-41.