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Women-owned firms’ competitive advantage

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If you plan to transfer ownership to your daughters, your company may qualify as a ‘women’s business enterprise.’

By Ellen Frankenberg

A successful manufacturer in the Midwest transferred ownership of the business equally to five second-generation siblings. Since three of the successors are daughters—who together hold 60% of the stock—the business is now positioned to become certified as a “women’s business enterprise.” Although this outcome may not have been a major consideration in the founder’s strategic thinking, certification offers a big advantage for family businesses that transmit a majority of their shares to women. Certification can get a company in the door of potential client organizations and through their supplier diversity departments.

To qualify for certification as a “women’s business enterprise,” at least 51% of a company must be owned by a woman (or multiple women), and a woman (or several women) must manage and control business operations, according to the Washington, D.C.-based Center for Women’s Business Research (CWBR). The center’s website (www.womensbusinessresearch.org) notes that “Certification assures corporations and prime contractors that a company has been validated by a third party as being woman-owned and operated.” Many purchasing professionals consult lists of certified corporations to find new suppliers.

To become certified, a company must undergo an application process through a third-party organization like the Women’s Business Enterprise National Council (www.wbenc.org). The organization also provides training programs, networking opportunities and access to Internet tools that connect women’s business enterprises with potential customers.

Another certification organization is the National Women Business Owners Corporation (NWBOC), which has an online database of certified companies. The website www.womenbiz.gov offers information about selling to the federal government.

The process, cost and benefits of certification vary according to the certifying organization. Some are regional and some are national. A consultant can help you identify the right certifying organization and assist with the application process.

Of course, companies that opt to pursue certification must consider the long-term implications. Daniel J. Hoffheimer, an estate planning attorney at Taft, Stettinius and Hollister in Cincinnati, has written that the terms of a trust “could legally direct the trustee to sell or give assets only to a female beneficiary or purchaser... to easily create a structure that would assure that the business remain in female ownership.” But, as Hoffheimer notes, it’s important to have a contingency plan to cover what would happen in the future if no female successor were available.

Enterprising women

Odds are that at least half of your customers and suppliers are or will soon be female-owned, even if your company isn’t. According to CWBR, nearly half (48%) of all privately held U.S. firms are at least 50% owned by women. These companies generate 19.1 million jobs and contribute more than $2.5 trillion in sales to the economy.

CWBR estimates that between 1997 and 2004, the number of women-owned firms with employees expanded by 28%. The fastest growth in women-owned firms occurred in the following industries: construction; transportation, communications and public utilities; and agricultural services. Some of this growth may be attributed to succession in family firms.

“Women are moving into the economic mainstream,” writes Myra M. Hart, a professor of management practice at Harvard Business School who chairs CWBR. “They have the skills and business savvy to obtain the growth capital they need to expand their businesses aggressively.”

Women’s management styles differ from men’s. Women tend to emphasize relationship-building and information-gathering. They are more likely to consult with others—including experts, employees and fellow business owners—and they may take more time to make major decisions. But the key business concerns cited by female entrepreneurs mirror those of their male counterparts: maintaining profits, finding good employees and managing cash flow.

According to a survey by OPEN: The Small Business Network from American Express, 72% of the women business owners who expanded their businesses achieved or exceeded their expansion goals. These female “expanders” rated themselves as confident in their management competencies, especially in planning and strategy, sales and marketing, personnel and human resources, and finance.

Identifying the best leaders

The primary goal of any family business succession plan is to identify and prepare the most competent successors available, so the “Golden Goose” that supports the family can grow plump and profitable for many years to come. Too many family business owners still view their companies as monarchies, insisting that the eldest son “should” inherit the kingdom.

But evidence shows that daughters should not be overlooked as family business leaders. In a competitive marketplace marked by increasing diversity, more family business women will be at the helm as their companies grow and prosper.

Ellen Frankenberg, Ph.D., is a family business consultant who facilitates family meetings and coaches executives and successors ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it ).

 
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