When Women Entrepreneurs “Tip the Scale”

By Nina Kaufman, Esq.

After reading some stats on the growth of women-owned companies, I was tempted to get depressed. According to the U.S. Department of Commerce (2010), 88% of all women business owners are sole proprietorships without employees. 80% of all women-owned businesses earn less than $50,000.  (It’s not so fabulous for men-owned businesses either: 77% for ownership and 59% for income).  It seems like a huge amount of toil for very little return.  And isn’t business about getting a return on investment?  What kind of return on your investment of blood, sweat, and tears can you get if your business is “just you”?  (Answer: bupkis)

Hard lessons

I’ve been noodling on this because I learned some hard lessons not long ago. In mid-2007, the revenues of my 11-year-old law firm choked. I saw that for all of our efforts over more than a decade, my business partner and I had never achieved real leverage within our law business. And given the lack of scale–or anything saleable about our company—there was nothing we could do but shut our doors. All that work, for all those years, and no return on the time, money, and effort. (Let’s leave aside the thousands of dollars in debt the firm had accumulated—that’s for another post). I can make the money back, but I can never reclaim the time.

Looking at the stats, I’m not alone in having a business that couldn’t “scale.” That got me wondering: at what point do women business owners realize they need to “tip the scale”—that is, leverage their service business organization so that it can function independently of them?


The owner-independent business mindset

It helps to have worked in industries where owner-independence is a matter of course—and part of the consciousness.  Elle Kaplan, CEO & Founding Partner of Lexion Capital Management LLC, came from the investment management world.  Plus, she had a particular social mission that, by definition, had to have huge impact.  “I want to build a better Wall Street for all Americans,” she announces. “That’s not something I can—or should—keep to myself because there are so many who can benefit from this perspective.” Her fee-only advisory firm surpassed her first-quarter goals within three hours of opening its doors.

Debbie Womack, Principal of Texas-based Greater Yield, Ltd., earned her stripes in the U.S. Air Force, having served nine years in the Pacific and European theaters.  “The big lesson from the Air Force,” she says, “is the importance of structure, discipline, and having a strategy.”

Similarly, serial entrepreneur and Gen Y change-agent Erica Nicole already had one robust business humming along when she founded YFS Magazine (get this: horsepower products for the marine engine market).  A prior background in global business also provided perspective. When the magazine’s traffic skyrocketed within a matter of months, she saw the monetization opportunities, and the need for a platform that didn’t require her active involvement.  “I got out of the dirty details and up to the strategic bird’s-eye level real fast,” she quips.


Accidental lessons

For those from more traditional (read: less male-oriented) service industries, “scale” is a lesson learned somewhat by accident.  Bonnie Dewkett took “accident” literally.  Her epiphany was a 2010 running injury.  Given the physical demands of her professional organizing business, The Joyful Organizer, Dewkett’s injury put her out of commission for nearly 3 months. “That got me thinking about developing a sustainable business that didn’t depend on me,” she confides. “Fair enough in my late 20s that I can work 60 hours a week on my hands and knees. But there are quality-of-life issues that I realized I needed to address … and I didn’t want to keep working those hours when I was ready to start a family.” As a result, Dewkett developed multiple streams of income in the form of information products, online marketing, and assembling a team of subcontractors.

And life balance issues factor in for many women.  The National Alliance for Caregiving reports that more than 65 million people, 29% of the U.S. population, provide care for a chronically ill, disabled or aged family member or friend during any given year and spend an average of 20 hours per week providing care for their loved one.  “Caregiving in the United States” (November 2009).


A matter of survival

Other women entrepreneurs developed a bigger vision from a personal challenge. For example, Donna Miller, Founder and President of New Jersey-based Above & Beyond, Inc., watched her father struggle financially. When Miller became her family’s breadwinner, she was determined not to suffer the same fate.

A frequent speaker on the subject of “building a self-sustaining organization”, Miller sees many women entrepreneurs falling into the “I can/should do it myself” mentality. “They don’t delegate or hire staff to build an organization,” she laments.


Financial frustration, leading to legacy

Serial entrepreneur Jill Salzman learned about the importance of “scale” from too many years on the profit rollercoaster.  With home-based Paperwork Media, she endured financial ups and downs in her artist management and event company.  To even the cash flow, she formed BumbleBells.com, which sells baby anklets.  BumbleBells.com opened her eyes to the freedom that creating a scalable business could provide through outsourcing and delegation.

For Salzman’s next phase, she wanted to create something that didn’t rely on her. She began to consider the “legacy” she wanted to leave to the world of women’s entrepreneurship. Enter Founding Moms, a community for mom entrepreneurs. Salzman has created systems for training and orientation so that anyone who wants to start a meet up group has the template for resources and monthly calls. Founding Moms is now in 30 cities nationwide, along with an international presence in countries such as Mexico, Australia, Canada and the Netherlands.


Some signs you need “scale”

Injury, legacy, determination to learn from the past—all provided the tipping point that made these women business owners realize they wanted a good income and freedom. For them, it’s not just about building a business—it’s about building a life.

Womack stresses: “If you want a balanced lifestyle and better health, you have to be able to walk away from your business and wean its dependence on you, the owner,” she says. All of her C-level employees have 20+ years of experience walking in their C-level clients’ shoes.  Many of them leverage their own connections and networking so that rainmaking responsibilities don’t fall on Womack alone.  “You want the right business processes in place.  You want employees who have a mix of complementary and identical skills so that you can entrust them to step in and step up.” Most importantly, “owner-independence makes a business that much more sellable.”

Other signs you may need (want!) more scale in your service-based business:

  • You’re fed up not making the kind of money that can support the life you want to lead
  • Your personal relationships are suffering
  • You can’t take time off
  • You had to miss a family vacation because you were back in the office fighting fires
  • You spent your child’s Little League game/dance recital/[insert activity of child’s choice] with your head in your BlackBerry/smartphone
  • You jump on every RFP, even if it means giving up your weekend plans
  • You’re facing health challenges brought on by stress
  • You’re working way to hard for way too little money
  • You’re a woman on the verge of a nervous breakdown
  • You’re dropping the ball; having difficulty focusing
  • You’re constrained and frustrated by your inability to make a greater impact in the world
  • You’re the family breadwinner and need to bring in the dough and make time for your family


Scaling in stages

Scaling your business, like scaling Mt. Everest, is not an overnight proposition.  Often, creating an owner-independent company comes in stages.

Miller’s Above& Beyond business went through several evolutions. First, she delegated client fulfillment tasks (Miller had been a virtual assistant before opening Above & Beyond as a shared office facility and administrative support company). Next, she put a management team in place.  More recently, she stepped back from being the prime rainmaker and sales generator. As she crows, “last year, I pretty much took the summer off, which was fantastic!” Her company is on the verge of opening a second location, and aims to have five locations with the next five years.

Similarly, Molly Matthews, now President and CEO of the Starfish Group, grew her business in stages.  “First, it was about survival. As a single parent, I had to put food on the table for my three small children.” When seeking larger and more lucrative contracts, she hired other people.  She moved the office out of her home when sister became horrified by the legion of Post-It® notes all over the house. (Plus, the FedEx® trucks showed up too often for the neighbors). She brought on VPs to lead sales efforts. Ultimately, she grew the Matthews Media Group to 150 people.


Creating an options strategy

Many women business owners shy away from—or simply don’t entertain—thoughts of selling their business. As a result, they don’t take steps to give their companies sellable potential.  Which is a huge waste of potential, because women business owners unknowingly curtail their options.

That’s why Built to Sell author John Warrillow encourages business owners to develop an “options strategy.” Not just an “exit strategy”—but rather, a strategy for structuring a company to maximize options.  What are the options if your business is totally owner-dependent?  Few. You can never leave it … or else it will fall apart. What are your options if your company is ready to “tip the scale”?  Many.

William Bruce, President of the Association of Business Brokers, concurs.  He points out that only 10 to 20% of service-based businesses can be sold successfully. “Key criteria for a successful sale include (1) a profitable business, (2) an upward trend of revenue and profits, and (3) a solid management team so that the business does not depend on the personality or presence of the owner.”

Leslie Grossman, former President of the New York City chapter of the National Association of Women Business Owners, says that in her experience, “Women in service businesses generally don’t think about exit strategies and positioning their companies for sale.” There’s a danger in not knowing your options.  “If you’re not prepared, you can’t adapt to changes like an economic downturn, or the competition that wasn’t there when you started your business.” Currently the Chief Connections Officer of Cojourneo, [http://cojourneo.com/] an online learning community for connection and collaboration, Grossman stresses “the time to prepare properly to sell is not when you past your prime–it’s just before you’ve reached your height.”

Molly Matthews was lucky. Unconsciously, she had created a framework for her company so it could function independently of her.  She didn’t really have “sale” on her mind until she was speaking about her business at a conference. “A man came up and asked me if I had any interest in acquisition,” which planted a seed. “I had to look up ‘acquisition’ in the dictionary. Who knew you could sell a business … like a house?” she jokes. “Turns out that you can and I did for 8 figures!”


What are you doing to “tip the scale”? And what’s your motivation for doing it?

Like what you read? Watch this short video to learn who we serve best.