Women of color have collectively taken an important seat at the table when it comes to business ownership. Nearly 13 million of the 33.2 million small businesses in the US are women-owned.1 Black women business owners increased by 33% from 2022 to 2023, while Hispanic and Asian female entrepreneurs also doubled.2 And their businesses are doing well: In 2022, women-owned business earnings grew by 27%, compared to 22% for male-owned businesses.3

With these five important financial considerations in mind, women proprietors can take helpful steps to set their businesses up for success.

1. Prepare backup funding plans

While some women have been able to establish flourishing businesses, this hasn’t been true for all female entrepreneurs. Our research shows that women are 40% less likely to report having positive financial wellness, and women self-identify as less financially confident than men.4,5 Thirty-seven percent of women don’t have a financial strategy at all, compared to 24% of men.6 And as a business owner, it’s even more important to have one.

Regarding funding, it can be best practice to have a backup plan, if not multiple. Once you’ve determined the cost of starting your business, think of multiple ways to obtain your funding, whether it’s simply your personal savings or applying for grants and loans. Also, as a woman business owner of color, you can register your company as a minority-owned business (MBE). This gives you the option to reach out to organizations that exist solely to support MBEs, such as the Minority Business Development Agency (MBDA), which provides access to a variety of resources from consulting to capital.7 You can easily certify your business as a MBE online through the National Minority Supplier Development Council (NMSDC).8

2. Prioritize risk protection

Along with the positive impact you can make as a business owner, there can be a potential increase in risk. If your business inadvertently caused damages, such as traffic accidents, customer data leaks, or others, you could be held liable. This may even force you to temporarily pause your business, so not only would you incur any costs for repairs, but you would also need to cover business expenses.

The first, and simplest, step to protecting your business is through general liability coverage or traditional whole life insurance. You may already know whole life insurance can provide coverage for your family, but with guaranteed cash value, it can help protect your business too.9 Despite its ability to help protect small business owners, life insurance ownership dropped from 57% to 47% between 2016 to 2021, and Hispanic workers were the least likely ethnic group to own it.10,11 Alternatively, disability insurance can also help provide the appropriate coverage that meets your unique needs and priorities in the event you became too sick or injured to work.

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3. Connect with a financial professional

New business owners often encounter unforeseen challenges, but you don’t have to face them alone. With the help of experienced entrepreneurs, you can properly navigate these challenges. Surrounding yourself with like-minded entrepreneurs can help you gain insights, resources, and connections that drive you forward. In fact, our research shows that 77% of business owners have an experienced person to guide them on financial topics.12 A great place to start for women business owners of color is the Professional Women of Color Network (PWOCN).13

Furthermore, women generally have lower financial and emotional confidence than men, and while starting a business is a very exciting time, your finances may become complicated as you face intricate tax and budget issues.14 Working with a financial professional can help you understand how to manage your finances and empower your decisions. As a result, you can work towards protecting what you have while expanding your future.

4. Do your research on pricing goods

One of the common mistakes new business owners make is underpricing their products or services. If your prices are too low, you may undercut the value you provide, as well as your bottom line. But if your prices are too high, you may lose business to the competition. Your ability to forge favorable relationships with customers, suppliers, employees, lenders, and partners may directly affects your profit margin and cash flow. To ensure you enter the market at the right price point and maximize your margins, be sure to research the “going rates” in your industry.

5. Manage your cash flow

Many new business owners may be inexperienced in navigating the ups and downs of business cash flow. To maintain your cash flow, consider building a strong cash reserve to sustain you for three months or more, consistently following up on past due receivables, and opening a line of credit with your financial institutions. You may want to consider not relying too much on lines of credit or credit cards to sustain your cash flow, so you don’t bring a significant impact to your personal credit if you default.

Financially informed business owners build financially strong businesses

Not only can a thriving business help open a new future for you, but also it can create opportunities for your employees and help you positively impact your community. Following these steps can help inspire financial wellness that creates a foundation for your budding business.

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1 Women’s Small Business Ownership and Entrepreneurship Report, US Senate Committee on Small Business & Entrepreneurship, July 2023

2 2023 Women in Business Trends, Guidant, 2023

3 Women-Owned Businesses Thrived In 2022, Forbes, March 8, 2023

4 Mind, Body, and Wallet™ 2023: Economic challenges and uncertainty take a toll on well-being, Guardian, 2023

5 The gender confidence gap: The state of women’s financial and emotional confidence, Guardian, 2022

6 The gender confidence gap: The state of women’s financial and emotional confidence, Guardian, 2022

7 MBDA Programs, Minority Business Development Agency

8 Benefits of Certification, National Minority Supplier Development Council

9 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values. Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.

10 The gender confidence gap: The state of women’s financial and emotional confidence, Guardian, 2022

11 Mind, Body, and Wallet™ 2023: Economic challenges and uncertainty take a toll on well-being, Guardian, 2023

12 Financial confidence flourishes with business owners, Guardian, 2022

13 Professional Women of Color Network

14 The gender confidence gap: The state of women’s financial and emotional confidence, Guardian, 2022

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