Do we need specific initiatives to help female entrepreneurs? Some say no, because men and women face similar obstacles in business. However, there can be no denying that women face challenges not experienced by their male counterparts.
LAST May, the SME Association of Malaysia organised a talk on women entrepreneurship at its regular SME Club get-together. We were worried that the topic would not be interesting, but to our surprise, the event was well received.
About a hundred people participated in the talk.
When we told the SMEs that we were going to have a talk on women entrepreneurship, some of them asked: Why talk about women entrepreneurship? Does it matter? Why bother?
After all, business is a men’s world. The place for women is at home.
Others said there was no need to differentiate women entrepreneurs from entrepreneurs in general, as many of the barriers faced by female-owned SMEs were similar to those faced by male-owned SMEs.
To this, I would say: Yes and no.
While male and female entrepreneurs may face similar constraints in general, women face specific barriers and challenges not experienced by their counterparts.
While women make up about 50% of Malaysia’s population, less than 20% of the SMEs are owned by women. Even though the number for women entrepreneurs is small, it’s nonetheless encouraging as it shows that women no longer buy the stereotype of business being a male domain.
There are several key reasons for women to get into business. Running your own business provides flexibility in managing career and domestic responsibilities.
Also, it gives some degree of personal freedom to women who are dissatisfied with “fixed” employment. Job flexibility, like work hours, office location, environment, and the people they work with, is appealing to many women.
Other reasons for women to start a business include income security and career satisfaction. Some women become entrepreneurs due to some personal circumstances, like being laid off, divorce, or the retirement of their spouse. They start a business to improve or maintain their social or economic status.
Some women who do not have any previous work skills or experience start a business in order to prove that they can be productive and useful.
The majority of women-owned businesses are smaller outifts than those owned by men, and they are mostly concentrated in the service sector (about 90%). Many of these businesses are likely to be unregistered micro-enterprises operating in the home or on temporary premises, with few employees and limited capital for expansion.
Access to financing is one of the biggest challenges. They are less aware of the options relating to loan and grant opportunities. In addition, women usually lack the collateral required compared to men, stemming in part from restrictions on asset ownership.
Women entrepreneurs are also less likely than their male counterparts to have a history of interaction with formal financial systems, lowering their credit-worthiness and potentially raising interest rates on loans assumed.
They also encounter obstacles in accessing opportunities to acquire knowledge and skills that underpin successful entrepreneurship. This may be due to impediments in access to education, training and job experience. These are usually compounded by the demands of domestic responsibilities.
Time constraints further limit women entrepreneurs’ formal networking, which, in turn reduce access to skill and capacity-development opportunities. Formal networks, such as business associations, provide a wealth of information on business opportunities, access to government officials, grants and support programmes, as well as credit credentials and access to loan packages, to name a few.
Good networks provide good access to information and resources. First-hand information allows entrepreneurs to move one step ahead and grab the opportunities. A good pool of resources would help entrepreneurs to survive in bad times and to expand more effectively.
The Government needs to take a proactive role in promoting women entrepreneurs. We need to put in place gender-responsive policies and capacity-building initiatives to address the structural, institutional and socio-cultural inequalities.
It would perhaps be best to start by enhancing their access to finance, which is essential in building a good business foundation.
By Datuk Michael Kang who is the national president of the SME Association of Malaysia.
Mind your finances
IN GENERAL, more than 50% of startups fail within five years, and up to 36% of business failures are caused by inadequate financial management, according to a report by the Association of Chartered Certified Accountants (ACCA) entitled “Financial management and business success – a guide for entrepreneurs”.
The report says many entrepreneurs are not equipped to make informed and effective decisions about their financial resources.
“Having the right financial capabilities remains vital throughout the life of a business, whether you are just starting out, have an established business or are looking towards a final exit from a firm,” explains Rosana Mirkovic, ACCA’s head of SME policy.
“Businesses are changing and innovating more rapidly than ever, and the financial management needs of organisations must continue to evolve alongside their developments. Recognising the right financial management capabilities is therefore imperative to their success,” she explains.
Mirkovic adds that understanding financial information is vital for offsetting the risk of business failures as it reveals the early warning signs of impending problems.
The report by ACCA addresses the financial literacy skills gap, potentially serving as a guide to those starting their own businesses and are new to financial management.
Business planning plays a critical role at every stage of the business, says the report.
“Preparing a business plan pushes you to identify and assess the opportunities and threats facing your business. It helps ensure that you have an in-depth understanding of your market, the competition and the broader business environment,” it elaborates.
Effective planning takes into account long-term goals, objectives, strategy, tactics and financial review.
ACCA also advises startups to seek good financial advice and involve their accountants or individuals with financial expertise at the planning stage to take full advantage of their expertise in areas such as business planning, raising business finance, tax planning and setting up financial management systems.
Significant financial expertise may be needed to understand and evaluate the different financial options entrepreneurs may have. This includes knowing the company’s financial strength, financing cost, financial flexibility, business control, financial risk, personal finances and business strategy.
“Good financial control offers far more than just keeping track of purchases and sales. Rather than approach financial control as a chore to be left to the bookkeeper, your aim should be to see how the right capabilities can improve your business,” the report advises.
ACCA notes that business owners should gradually develop the capabilities of their in-house financial team.
“Choosing the right solution for your particular business takes careful planning. Your overall investment in financial capabilities — whether you are paying for additional employees, higher salaries for more skilled employees, training costs, use of external providers or upgraded systems — must be affordable and offer value for money,” it adds.
But financial management is at its most powerful when used to drive improvements in business.
Moreover, for many entrepreneurs, it could also lead to a successful business exit. Preparation for a successful exit typically begins far in advance of its final date.
Effective exit planning needs to start early and take into account a whole range of issues like timing, succession, management systems and tax efficiency.
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