Female majority-owned businesses are making their mark among Canadian small-medium size enterprises (SME), with the share of female-run firms rising to 15.6% in 2011, up from 14.9% in 2007 and 13.7% in 2004, according to an RBC Economics report.
But the ratio of female- to male-majority owned firms suggests there’s room for improvement.
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“SMEs are a significant source of productivity gains and a major driver of Canada’s economy,” says RBC economist Laura Cooper. “Female entrepreneurs have been steadily contributing more to this level of growth; however, there remains a tremendous untapped opportunity for female majority-owned SMEs to have an even deeper impact.”
In 2011, the aggregate contribution of female majority-owned SMEs was an estimated $148 billion in economic activity. The RBC report projects that a 10% rise in the number of female majority owned firms over the next decade would boost the economic contribution to $198 billion.
A larger proportion of Canada’s population is reaching retirement age and this trend is being echoed in SMEs. For female majority-owned firms, the share of those over the age of 65 has nearly doubled in the past four years, which in part reflects a rising female participation rate in the 65+ age bracket.
RBC notes that at the same time, younger female entrepreneurs are not balancing out the aging ownership trend: women under the age of 40 run a relatively lower share of SMEs in the marketplace.
“We estimate that the increase in female labour force participation over the past three decades resulted in a $130 billion contribution to economic activity in 2012 — equivalent to 7% of GDP,” said Cooper. “There is a clear opportunity for women to not only act as a supplemental source for SME growth, but to also provide a further boost to Canada’s overall economy. There should be an emphasis on encouraging women, and younger women in particular, to pursue the entrepreneurial opportunities that are of interest to them.”
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A further narrowing and eventual elimination of the gap between female and male labour force participation rates over the next 20 years would result in a 4% boost to GDP in 2032, says RBC.
According to the report, in 2011 women business owners said maintaining sufficient cash flow and recruiting and retaining staff were serious internal obstacles inhibiting growth, while the rising cost of inputs and instability of consumer demand were identified as being the biggest external challenges.
As Canada’s economy strengthens a greater share of female firms are projecting positive revenue growth in the near-term, which could spark renewed optimism for small business formation and drive female entrepreneurs to expand.
The report notes female-led industries have often had lower financing request rates and faced various impediments in obtaining needed funds.
Nearly one-in-four female business owners in Canada are born outside of Canada, and close to 70% of female business owners have a post-secondary degree. However, RBC notes the share of businesses owned by aboriginals and visible minorities remains low. While these demographic groups represent relatively small shares of the overall Canadian adult population at 4% and 18%, respectively, RBC says further aligning these ownership rates with associated population shares for both genders could serve as a supplemental source for SME growth.