Female entrepreneurs remain a relatively untapped resource for economic growth: RBC Economics

New report finds female-run businesses are growing in numbers; however, increasing female representation could provide meaningful boost to GDP

TORONTO, Oct. 17, 2013 /CNW/ - 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 per cent in 2011, up from 14.9 per cent and 13.7 per cent in 2007 and 2004, respectively, according to a new RBC Economics report entitled Canadian Women Grabbing the Baton. Still, RBC notes that the prevailing ratio of female- to male- majority owned firms suggests that there exist opportunities for further growth.

"SMEs are a significant source of productivity gains and a major driver of Canada's economy," said Laura Cooper, economist, RBC. "Female entrepreneurs have been steadily contributing more and 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 terms of contributing to economic growth."

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 per cent rise in the number of female majority owned firms over the next decade would boost the economic contribution to $198 billion.

Demographic shift presents an opportunity
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 - females 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 seven per cent 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."

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 four per cent boost to GDP in 2032, says RBC.

"Women entrepreneurs are a dynamic and powerful economic force that make up 38 per cent of our small business relationships," said Kim Ulmer, vice president, Small Business, RBC. "We recognize that Canada's future economic development and prosperity depends on the encouragement and cultivation of women entrepreneurs and we are here to support women in business and continue to close this gender gap."

Addressing barriers to growth
According to the report, in 2011, female business owners said that 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, RBC says 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 that female-led industries have often had lower financing request rates and faced various impediments in obtaining needed funds.

"The fact that female-led firms are seeing positive prospects is encouraging," added Ulmer. "Seeking out advice from their small business advisor can help them overcome challenges and identify financial solutions that will help them reach their growth potential."

Characteristics of female majority-owners and businesses
Nearly one-in-four female business owners in Canada are born outside of Canada, and close to 70 per cent of female business owners have a post-secondary degree. However, RBC notes that 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 four per cent and 18 per cent, respectively, RBC says that further aligning these ownership rates with associated population shares for both genders could serve as a supplemental source for further SME growth.

A complete copy of Canadian Women Grabbing the Baton is available as of 8 a.m. ET at rbc.com/economics.

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SOURCE: RBC

Angela Harkey, RBC Communications, 416 313-5001
Kate Yurincich, RBC Communications, 416 974-1031
Gillian McArdle, RBC Capital Markets, 416 842-4231