Study after study shows that one group outperforms others in running businesses. What do they have in common?
They’re women-led businesses.
The number of women-owned business has grown by almost 75 percent between 1997 and 2015. This is 1.5 times higher than the national average according to “2015 State of Women-Owned Business Report.” [pdf] Women currently make up 30 percent of all U.S. businesses.
Why does this matter to your business?
It matters because women-led businesses fare better than the average business. A Peterson Institute Research has found that companies with women in top leadership positions have higher profitability. This study looked at more than 21,000 global companies.
Furthermore, multiple studies like those mentioned in this NY Times article show women-led business — whether as owner or CEO — outperform their male counterparts.
How can this be?
Women solve problems and build relationships differently than men do. It helps them gain trust.
To be more successful like women-led businesses and increase your company’s profitability, here are four things to try. You don’t have to do them all at once. Start with one and go from there.
1. Have passion
Some business owners dive into a specific business because it’s a moneymaker. But if you don’t love the business, it’ll be tough to muster the needed energy to drive it to success.
One owner sold his successful website because the topic didn’t interest him. He made a lot of money, but the business burned him out. This sapped the strength he needed to do business development to help it grow.
You spend hours day-in and day-out on the business. And when you hit a wall — and it will happen — will you be able to push through it as if you’re a marathon runner on the 19th mile? By the 19th mile, the runner’s drained. Yet, the finish line isn’t close enough to motivate you to push on.
Women leaders don’t let the money do the talking in how they manage their business.
2. Build trusting relationships
In Employee Engagement Isn’t Your Problem, Nan S. Russell says there’s a connection between trust and employee engagement. Engagement appears higher when employees trust their leaders.
“Low employee engagement is not new news,” writes Russell. “But its connection with trust might surprise you. Leaders operating with trust enjoy higher engagement levels.”
What’s one effective way to gain trust?
One way to do this is to be transparent and keep employees informed, even if it’s bad news. Leaders who protect them from bad news essentially make things worse because their employees sense something is up.
Another is to be a good listener.
People typically listen with the intent to respond. They’re not focused on what the other person’s saying and reading between the lines. Free your mind of what you’re going to say next, and you’ll understand and respond better. As a result, it’ll motivate employees and increase profits.
Another way to build trust is to find something in common. Most employees want the company to succeed so they can keep their jobs. That sounds simplistic. But having common interests and goals makes a difference.
3. Reinvest profits
While passion may be a driver, the women keep an eye on their companies’ finances like any other owner and CEO. As stated before, they tend to focus on profits instead of revenue.
This calls for little refresher on finance. Merriam-Webster defines profits as “money that is made in a business, through investing, etc., after all the costs and expenses are paid.” Thus, profit is based on this formula:
Profit = Total Revenue - Total Expenses
The definition of revenue according to Merriam-Webster is “money that is made by or paid to a business or an organization.” So revenue is all the money that comes in the company before paying the bills, employees, and other expenses while profits is everything the company keeps.
Successful women-owned or women-controlled businesses tend to reinvest the profits in the company. They convert their profits into working capital to support business development, add property, improve products and services, fund innovation, and sustain the business.
Profits may provide working capital, but it may not be enough. This isn’t a sign that your business isn’t doing well. You may need to review the timing of when cash flows in and out of the business. That’s why cash management is critical in business. A company can have plenty of clients, but it doesn’t mean it has cash in the bank.
4. Encourage using vacation days
A Psychology Today article references studies like the Framingham Heart Study that have repeatedly shown a clear link between taking vacation and longevity. More than half of U.S. employees don’t use up their vacation days.
Women-owned businesses value their days off and vacation time. One company closes shop for the entire week for July 4th, another takes a month’s vacation, and another shortens the work week from five to four days in the summer.
Science has proven that people who don’t get the needed rest have decreased blood flow into their brains. This affects their ability to come up with new ideas, be creative, find solutions, and grow the business.
Nelson B. Powell, co-director of the Stanford Sleep Disorders Clinic and Research Center, conducted a sleep study that has found that the performance of the sleep-deprived matched those who had blood alcohol in their systems. The sleep-deprived group performed as bad as or worse than the legally drunk group on three out of seven measures.
Women-owned and controlled businesses don’t just measure success in terms of revenues. They consider growth, sustainability, company culture, trust, and employee benefits.
The more women there are in higher leadership roles, the greater chances a business has in achieving its goals.
Image credit: Gorskiya
If you don’t have enough profits to reinvest in your business to take it to the next level, you may need help with working capital management for positive cash flow. Contact us now at (800) 499-6179 or fill this form for a no obligation conversation.
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