Female entrepreneurship is flourishing. In 2016, there were an estimated 11.3 million women-owned businesses in the United States, generating $1.6 trillion annually. Between 2007 and 2016, women-owned businesses grew at a rate of 45 percent, five times faster than average.
But finding financing remains more challenging for female entrepreneurs than their male counterparts. Only 29 percent of female small business owners who seek business loans succeed, compared to 37 percent of all small business owners, a survey by Pepperdine and Dun & Bradstreet found. If you’re struggling to find financing, here are four strategies to help get your business on the right track.
Minimize Your Expenses
Before seeking financing, reviewing your business plan to trim your expense estimates can help lower the amount of financing you need. For most companies, payroll is a leading cost. Successful companies typically spend between 20 to 30 percent of their total revenue on payroll, says business administration expert Amber Keefer. You can keep payroll costs down by using strategies such as employing part-time workers, hiring remote workers and outsourcing.
Another effective cost-cutting strategy is automation. Automation can save you money by reducing the amount of labor and time needed to perform repetitive tasks. For instance, you can reduce the amount of time spent on payroll by using a cloud-based payroll app that syncs with your accounting software to automatically calculate payroll tax deductions. Review your business functions to see if there’s anywhere you can apply outsourcing or automation.
Maximize Your Income
You should also look for ways to increase your income projections before seeking financing. Marketing expert Jay Abraham says there are three basic ways to increase revenue for any business.
One is increasing the number of clients you serve. This does not necessarily mean spending more on advertising, but it means you should review your marketing strategy to identify more cost-efficient ways to gain clients. For instance, reactivating past clients by marketing to your mailing list can be a rapid way to increase your client base. Changing your unique selling proposition, joint venturing and content marketing are some other high-leverage marketing strategies.
Another way to increase revenue is increasing your average income per transaction. Review your line of products and services to see whether any items lend themselves to premium pricing or bundling through up-sells and cross-sells.
A third way to increase revenue is turning your clients into repeat buyers. Look for opportunities to sell other products and services to clients who have made an initial purchase.
Consider All Your Financing Options
After you’ve reviewed your business plan to reduce your expenses and increase your revenue, you’ll be in a better position to explore financing options. Traditional options such as loans, grants and venture capital should be considered; the Small Business Association’s website includes resources to help you explore these avenues. But these means of financing can be hard for start-ups to secure, especially considering only 3 percent of women-owned businesses attract venture capital. Therefore, it’s smart to include other options in your financing strategy.
Business credit cards, personal credit cards, personal loans and personal savings are the most common sources of financing for women-owned businesses, Pepperdine and Dun & Bradstreet found. Borrowing from family and friends, peer-to-peer lending, joining a business incubator and crowdfunding are other options; SCORE provides resources to help you explore some of these alternative financing options.
Build Your Credit Score
If you’re considering using a credit card or a business loan to finance your business, one thing you’ll need is a good credit score. You generally need a score of at least 640 to secure a loan from a large bank, and you’ll have a much better chance if your score is 700 or higher.
To improve your score, make sure you pay all your bills on time; keep your credit balances at no more than 10 to 20 percent of your limit; and establish a credit history by taking out a small installment loan and repaying it on time each month over the course of a year. You can further protect your score by using an identity protection service such as LifeLock to make sure identity thieves don’t damage your credit.