Did you know that in the United States, 90% of the 12 million female entrepreneurs have no employees and half of them make less than $10,000 a year? This sounds fake but it’s true. It’s shocking because it shows just how little of a piece of that economic pie business women are getting, and there are a lot of business women in the United States! Looking into this problem, Ben Baker speaks with experienced entrepreneur, business leader, and angel investor Liz Sara, the Founder and CEO of BestMarketing and the Chairperson of the National Women's Business Council. Tune in as Liz talks about her career as an entrepreneurial woman, and learn about the common mistakes that new businesses tend to make. Don’t miss this episode to find out how women can earn a bigger piece of that economic pie.
Thank you, my wonderful audience, for joining me on yet another episode. I love that you respond to me on social media, ask me questions, think about guests and different things that you want to know. Every single episode, I try to come up with things that are going to be responsive to your particular needs. Thank you for hanging in another episode. I have Liz Sara with us. She is the Chair of the National Women's Business Council. Before I bring her on, I want to give you guys two stats, 90% of the twelve million female entrepreneurs in the United States have no employees. We're talking 10.6 million businesses that are solopreneurs. Of that 10.6 million solopreneurs, half make less than $10,000 a year. Liz, welcome to the show.
Thank you, Ben. I look forward to our conversation. Every time I hear those statistics, it shocks me that we don't have a bigger piece of this economy given the numbers that we have of women-owned businesses. That's one of the issues that we're tackling at the National Women's Business Council. How do we help all of those solopreneurs take that entrepreneurial leap, take that risk and hire that first employee?
That's a psychological thing in a lot of particular cases. Being a small business owner, I get it. I want to get into this but before we do, tell me a little bit about you. You are an accomplished entrepreneur in your own rights. Let me know a little bit about you and a little bit about the National Council so we can give people some reference about where we're coming from.
I've worked in entrepreneurial roles in tech companies my entire career. I have to preface that by saying I don't have a technical or computer science background at all. There's nothing about software programming and development that interests me. What does interest me is what technology does and how it changes the way we do our jobs, the way we order food, the way we get a taxi from here to there or whatever we do. That is the thing that has kept me working for many years in the technology space.
Most of these companies that I've had roles in, whether they were big companies or ones that I helped to start, all we're doing groundbreaking things with technology that hadn't been done before. We had to figure out, how do we convince people who never had this opportunity for some piece of automation to change their day-to-day work life or what they do at home? Also, make them understand how much better it would be or how much more they could get done or how much faster they could get that task accomplished or how much easier it would be to get a ride from here or there. That's the part of the technology that always excites me.You don’t have to be a CEO of a company to say, “It’s time for me to give back and be your mentor.” Click To Tweet
My background is in business and marketing in particular. One of the things that I did with two other cofounders is to start a software company in the early ‘90s. We were one of the early companies before the internet even took hold. When the internet came around in the latter part of the ‘90s, we had to tremendously pivot that company to go from what we were doing in a pre-web world into everything is now shifting to an internet-based economy and business model. We did that successfully. We built that company up to about 300 employees and maybe $25 million in the course of about three years.
Ultimately, we wanted to go public. That's when the dot-com bubble burst in the year 2000 for those of you who are around then. We then sold the company because we needed more capital. Even at $25 million in annual sales, we needed money to continue to compete. Things were moving fast. Accidentally, some CEOs in the local DC area where I'm based called up and said, “You don't know me but we've read about you. We don't know why we're not growing our company and why we aren't getting sales. Can you come and help us?” I figured this is going to be a little short stint until I figure out my next startup.
Lo and behold, twenty years later, I've been working with technology startups and growth-stage companies and helping solve their business challenges. I'm helping them go from being small companies to go into being big companies. I've been around entrepreneurial endeavors deeply for the last several years. That got me involved in the entrepreneurship center at the University of Maryland where I got a Master's degree. I was the chair of that center, which is one of the top ten in the country. I helped students take those ideas that they might have or businesses of their own, and get them executed and implemented.
From there, I was then approached by the White House if I would take over as Chair of the National Women's Business Council, which is a federal agency that has one sole mission, which is to advocate for women business owners around the country. We make recommendations to Congress or the White House or other federal agencies on things that they can do to help women get new businesses off the ground or help the women that already had companies in place and get them to the next level. That's what we do at a high level.
I've had other tech entrepreneurs on the show and people in insurtech and fintech. What I found is that it's not the technology that makes or breaks a company. It's understanding what your client's needs are. Being able to communicate your value and being able to understand, “Am I truly solving a problem?” That's what makes you magical, profitable and valuable. Your tech stack is your tech stack. It could be a little bit better or it could be a little bit worse than somebody else's. If you can understand your clients better, communicate with them more effectively, and get that trust of your clients, you can grow where other companies can't.
That tends to be the number one problem that most early-stage tech entrepreneurs come to me for assistance with. Most tech companies are founded by technology gurus. They are great at software development and they come up with an app or some type of SaaS platform that helps companies do one thing or another. They lack the business side and they don't know who needs what they built. I can't tell you how often I'm brought into a company where they show me this whiz-bang product and we'll say, “It's awesome but who needs it? Who do we sell this to?” That becomes the number one project that I help them figure out. What problem does it solve? Why should somebody need to pay money for it? What's it going to do to help them? It's amazing to me that partly, it’s still prevalent because we have to get away from technology for the sake of it. More in the line of technology that provides some type of value or advantage, whether it's us as home consumers or to business executives.
It’s not just the tech community. I use the analogy of the twelve-slice toaster all the time where people create this wonderful twelve-slice toaster, but nobody needs it unless you've got a family of seven. A buddy of mine has got seven kids. He needs a twelve-slice toaster, but how many families truly need this? It's not just a tech issue. It's an entrepreneurial issue where most entrepreneurs have a great idea. They're driven by a certain philosophy or idea or problem that they think is out there in the world, but they don't know how to translate that to the real world and get other people to think the same way and believe the same things they do. They haven't checked to make sure that the world out there has the same problem that they think is there.Technology has changed the way we do our jobs, order food, and whatever we do. Click To Tweet
The benefit of all of these incubators and accelerators, both the in-person places as well as the virtual ones that have sprung up over the last few years, has served a great purpose in helping these would-be entrepreneurs who might be working full time in a job in a big company. Secretly, they had this product idea on the side that they are passionate about, but they don't know how to get it from their head out onto the street. Participating in these programs and these incubators that have all sorts of resources, mentors and advisors available is helping to shape this whole next generation of businesses that are focused on bringing innovation to the marketplace affecting many facets of our life. Whether it's just ordering groceries.
Let's talk about your three initiatives because that’s a great place to start this conversation. The initiatives that you have for the National Council are far-reaching. They truly help move the needle for women entrepreneurs. I'll let you explain those three initiatives and then let's dive deep into them.
One of the first things I had to do once I was appointed chair was to appoint a board and the council was formed by legislation back in 1988. I'll tell a little interesting anecdote about why was this council formed in the first place. In 1988, many states had laws on the books that required a woman business owner who wanted to take out a commercial loan from a bank to have a male relative cosign the loan, her father, uncle, nephew or son. A woman alone could not take out a commercial loan. I was in the workforce working on startups and working in entrepreneurial roles. I never even knew that this was part of the business and financial landscape.
A group of women worked with and lobbied Congress and legislation was introduced that did two things. One, it got rid of that requirement. This was in 1988 and it was then signed by President Reagan. Secondly, it created this National Women's Business Council and it set up some guidelines on how this council would function. Every new White House administration would appoint a chair, and that chair would fill fifteen seats on the council with women business owners. Eight of them from around the country with diverse businesses, and then five seats would be devoted to women that ran business organizations of women. The last seat was always set aside for the chair or president of an organization called the Association of Women's Business Centers, which is an SBA-funded group of 150 centers around the country that offer free advice to women business owners.
I put a council in place and that took some number of months. Based on my entrepreneurial background as a founder of software companies and as part of a team that worked on a new startup with a big company. There were issues that I face that I felt everyone else faces, especially my female counterparts. The big one is access to capital. When we were looking for money for my software startup, we were on the plane, myself and my male cofounder, over to Silicon Valley every other week talking to venture capital firms. There were no Angels in the world at that point in time. There were no grants. There were no pitch competitions that we hear about all the time. There were a handful of venture capital firms and either you convinced them or you didn't convince them.
Access to capital is an important business requirement to get a company off the ground as well as fund growth stage and scale requirements if your company is already there. The second thing I decided we would focus on as a group touched home for me, which is I spent my career in technology in an industry where women make up less than 5% of the founders of all tech companies. I can't even imagine what it was in 1993 when we got my first tech company off the ground. We've gone from probably 0.01% to 5% now and that's a long period of time.
What do we have to do to motivate women who had an entrepreneurial aspiration to think outside of their comfort zone and look at starting a company that would have a bigger footprint and a bigger impact than just their neighborhood or their community? Most women business owners tend to have service-oriented businesses. Many of them tend to have boutiques, bakeries and those large numbers that are in the solopreneur category. Our personal trainers, dog walkers, graphic designers, all of those services are important. They add vibrancy and interest in the neighborhoods that we choose to live in, but then women as a gender are not ever going to have the kinds of scalable companies that attract large investors and then have an impact at a state or national level. We need to get women to start companies in STEM-related fields. That's the second initiative.
The third one looks at the country as a geographically uneven dispersed place for entrepreneurism. Entrepreneurism thrives where we've got universities with entrepreneurship centers, where we have companies that are funding job creation and innovation within their company. Where does this take place? It's on the coast, the East Coast, Southern Coast and West Coast. The midland of the country is a challenge. My third initiative is how do we help women in rural communities overcome the geographic challenges? In many cases, it’s distance and the lack of things that we take for granted in big cities like access to broadband internet, incubators, accelerators, mentor networks and business centers that can help with these business ideas. Those are the three things that we've been focusing on. Each year, we've made various recommendations to different government agencies or the SBA or Congress on things they can do that will better help women get more businesses off the ground. Also, tackle these three initiatives in one way or another.
I want to start with the latter point and then work my way back. I want to start with broadband internet because you're right. We were talking about Alaska and Canada, the Yukon, and also through the Midwest. We all assume that everybody has 300 megabytes, high-speed internet, access to cheap connectivity, but it's not true. There are places in this country where you don't have a strong internet and that is an enormously underestimated deterrent for economic growth.
I look at my son. My son is sitting here in Vancouver, BC, and is taking courses online at MIT, Harvard and other major universities. What he's doing is he's auditing these classes because he has access to a high-speed video that he can watch the classes online anytime he wants and be able to have the ability to look at that stuff. Not everybody has that access. Because of high-speed internet, you can have a business that is beyond the 30 square miles around your house.
What is the major initiative that you guys are doing to be able to help with that? I see that as almost systemic, to be able to hamper growth within the Midwest and within a lot of these rural communities, to be able to elevate entrepreneurs, women and men, but in this particular case, women, to be able to allow them to be bigger and expand and get their products to a larger market. What is the council doing to be able to further the initiatives to help with that technology piece to make things better?
Some of the work that we've done and some of the roundtables that we've been holding around the country in 2020 have been virtual. Prior to that, they would be in a place where we would go into a city and invite women business owners. We invite the entrepreneurial ecosystem partners in that community. Those could be banks, SBA office employees, entrepreneurship centers of a community college and local economic development office. What we've learned is that certain states, especially those in rural areas of the country, have come up with good models of using state and private money to help fund in bringing them internet access to that last mile.
It's elevating some of those success stories so that the rest of the communities around the country can see what it’s worth and what does it take to make those things happen? The Biden administration does have a big infrastructure piece in the latest round of bills and initiatives coming from the White House. That would ensure that broadband high-speed internet is available to more rural communities than it is now. We're watching that legislation where we're hopeful that it will start to close the gap and provide that needed access.
If you look at not just small businesses that use the internet to sell their goods and services, but even employees and big companies that have had to work remotely need that same access as well to do their job. It becomes more of a utility that is essential for our day-to-day business productivity. We're keeping an eye on what Congress is doing and making sure that our voice is heard as a representative of women businesses in those rural sectors. Another big issue that women in rural communities face is access to childcare. Those of us that live in big cities have lots of options.
Sometimes yes and sometimes no. It’s a challenge for big cities as well. We can't kid ourselves.Everything is now shifting into an internet-based economy and business model. Click To Tweet
One of the things that we recommended is ways that we can encourage communities to provide investment incentives to organizations or women that start childcare centers and provide childcare solutions that might not exist now. We continue to look at supporting and advocating for federal recovery dollars that need to cover the childcare industry, as well as allowing childcare providers that might be organized as a nonprofit to be able to have small business aid, but that wasn't the case. Even small things like that that involve little tweaks to the laws that are in place. If a childcare center is a nonprofit, it had not been eligible for federal small business dollars.
Also, the tax benefits that go along with it.
Those are a couple of things. I'm excited about some of the things that we're doing in the access to capital. In 2019, we spent a good amount of time sharing our feedback with some of the House and Senate small business committees. A piece of legislation that was introduced that hasn't yet been acted on and we're hoping that it will be at some point in 2021. It would allow for anyone who invested in a small business as an Angel investor to receive a federal tax credit on their tax return for three years. Why is that a good thing? My hope is that it will bring more Angel investors to the table, especially in communities that don't have a large network of people that have dollars to spare to invest in businesses.
I've been an Angel investor in tech companies for about 7 or 8 years in the DC area, but I look at the small communities that we visited outside Des Moines, Iowa or in Nampa, Idaho. There are plenty of successful doctors, real estate attorneys, car dealership owners who might never think of themselves as Angel investors. If they started to look at some of the tax advantages that making an investment in a local business might do both for them as well as being able to support their community and the businesses there. We’re feeling that the pool of Angel investors would grow. More people would be part of it and more businesses would have access to seed capital from among the people in their community that their businesses will serve going down the road.
We're hoping that will get voted upon at some point. Part of that same piece of legislation that was introduced provides the company tax credit for their first employee. In the numbers then that you reiterated at the top of our conversation, how do we get those 10.6 million women businesses with no employees to take that crucial first step? Capital is important because they know they've got to write that paycheck every two weeks. They don't want to end up short, and then stuck, and then have to let that person go. A tax credit can go a long way to eliminating some of the fear and getting that first employee on that payroll.
The Angel investor community is sitting there going, "What's the benefit for me?" Angels have different motivations. There's no question about it. VCs are different animal. If you can make it tax-deductible or at least tax creditable for an Angel investor to sit there and say, "I've got an extra $25,000 this year. Instead of that money going directly to the government in taxes, what if I could invest that money in 3 or 4 small businesses?" This one gets $3,000, this one gets $5,000, this one gets $8,000. It doesn't seem like a lot, but to these small companies that are making $10,000 a year, it's an enormous amount of money.
It's the difference between doing nothing for that startup founder to getting the company registered as an LLC or an LLP or an S corp or a C corp because those filings cost money. It's getting the website up, the business cards printed and things rolling. For companies that are producing a physical product, it could mean buying the supplies necessary to get that product into the marketplace. It's a small number for many people, but given the potential to have it become a tax deduction or a credit against taxes owed can make a difference by bringing more people to the table.
If you could take those five million businesses, even take half of those five million businesses that are making $10,000 or less a year, and bring them up to a point where they're paying taxes. Go from being no tax whatsoever to at least paying some amount of tax. It hopefully would become revenue-neutral for the government or even to the advantage of the government to be able to allow that thing to happen. It's allowing the government to work with industry to be creative and then it's a matter of communicating this to financial planners, accountants and the investment community to sit there and say that this is now an opportunity. When people know that this is an opportunity and they can sit there and say, “I can be far more tax-efficient. I can also be an Angel investor and I can also help people get a hand up.” There's value to everybody by doing this. I see that this is a way to be able to bring capitalization in small ways that can add significant value.
It would be a win-win for everybody, for the investor, entrepreneur and community because more businesses would be available in a way that they can thrive. That's what we have to support. Not just getting the company off the ground but doing the things that will enable them to grow and flourish, hire people, make money, come up with more products, do more and get bigger. In other words, go through the company lifecycle that the large companies have already done and at their pinnacle. We need to do more in terms of access to capital in different ways to help those entrepreneurs not just start the company but to scale them.
Let's get into scale and the mentality behind scale. Also, STEM and how we do that STEM. How do we get those people to sit there and say, “It's now time for me to create a business that's not just a hobby, but something that is a viable business that allows me to employ other people and become a part of the tax basis to be able to make a significant contribution to society?” Not that single entrepreneurs don't. We still need the bakeries, personal trainers and all the solopreneur businesses. I'm not negating that. If that's where you want to be, if that’s what drives you, and that's the business that you want, there's nothing wrong with that. The people that want to be more that don't know how to get there, how do we help them? How do we help them learn about the advantages of being able to hire that employee and how to access the capital? How do we get them involved in the next generation of businesses, the science and technology, engineering, math type businesses that allow the economy to grow? Because that's where the economy is going.
Believe me, driverless cars are the first step of what we can't even imagine might be in place in several years. The first thing that needs to happen is we need to, at a young age, share with young girls, even at the K-12 grade levels, that thinking outside of the comfort zone is possible. They don't have to have a degree in computer science to start a software company or a degree in chemistry to come up with a product that might make clean water more accessible in areas that are poor or don't have the resources for clean filtering and whatever. A company is made up of a team of people.
When I look at myself, I brought business experience and expertise to the table. My second cofounder was the software guru. He built the software platform. My third cofounder was the funder. He had the bankroll that was going to get us off the ground, pay salaries in the beginning, pay the rent for the office, buy the computers, and pay for the phone system. A company is about assembling the right team with the set of skillsets that every company needs. I had no idea about software development nor did I want to learn it. We were the three-legged stool and there was no overlap in any of the three of our skillsets. We came together and everybody did their thing and it worked.
We've got to get that message to women at a young age. One of the ways we can do that is by showing role models. Role models are critical. Not just women who have created, built and run successful companies in STEM-related areas, but women of all ethnic backgrounds that are doing that. When I look at some of the mentor networks that are in place around the country, whether they're government-sponsored or locally put together by organizations or nonprofits, we need to make sure that there's a representation of women that are in the STEM fields in those mentor networks. Also, women of diverse backgrounds in those mentoring networks.
Too often, it's the old guys that have retired from business that are giving their time. I'd like to challenge every woman who is reading this, they can become a mentor. You don't have to be a CEO of a company to say, “Now it's time for me to give back and be your mentor.” Everyone has got skills in different areas, whether it's HR or bookkeeping. Young women need to see the opportunity for them if they have entrepreneurial aspirations. It can be anything they want. It's not limited to their expertise in the subject area. They can be good at managing people,r supply chain or logistics. That could be something that interests them. I know there are degrees in that field now. I would challenge women to step up and become entrepreneurial advisors. Local colleges around the country are always looking for them to support their student base. When women that are at the college level see other women that have done it, it gives them that extra boost and extra piece of confidence that perhaps they can too.
I volunteer and mentor at a couple of different universities within the business departments to teach people about communication, networking, personal branding, etc. When we get these large groups of women together, half of the mentors are women. I love seeing that half the people in the room are women and they’re diverse women. It's not just white women but women from all backgrounds, and men for that matter. Sometimes, a minority being a 50-year-old white male in the room, which is great. It's great to see that there are role models for people to sit there and say, “This person's already done this. This is what's possible.” That’s what people need. This is possible. Somebody else has already done this. It's not something that I've never seen somebody do before.It’s not the technology that makes or breaks a company; it’s understanding what your client’s needs are. Click To Tweet
When the first female astronaut went up, that opened our eyes that women can go into space too. It was an amazing thing. Women could go into space but it took the first one to open the eyes to a lot of people to sit there and say, “It's not just men that go onto a spaceship. All people can go onto a spaceship.” Having active role models in all different areas of life is important. You don't need to be the CEO of a billion-dollar company to be a mentor. Anybody can mentor because we all have skills that we can share. That's important.
I completely encourage everyone to look in your communities for those incubators that are there and entrepreneurship centers that are associated with schools. See where you can participate and give an hour a week or half a day a month or whatever it might be because it will make a difference. You will get a tremendous amount of satisfaction out by doing it.
Liz, I'm going to ask you one last question. The work that you guys do as an organization and you personally are vital. The question I'm going to ask you is when you leave the room, leave a meeting, and get in your car and you drive away, what's the one thing you want people to think about you in the organization when you're not there?If you can understand your clients better, communicate with them more effectively, and get their trust, you can grow where other companies can’t. Click To Tweet
That's a tough one. I'd say entrepreneurship is a risky venture but you're never going to know if you can do it if you don't try. There's a baseball analogy that I always think about when I'm about to do something high risk and that is, you can't steal second base by keeping one foot on first. If you have any entrepreneurial aspirations, give it a try. You'll never know unless you do.
Liz, thank you for being an inspiration. Thank you for being on the show and thank you for your words of wisdom. I've loved every minute of this.
Thank you, Ben. It's been a pleasure and I've enjoyed our conversation.
Liz Sara has more than 30 years of experience in the DC high-tech community as an entrepreneur, business leader and angel investor.
Since founding Best Marketing LLC in 2001, she has consulted with more than 100 early stage and growth-stage tech companies on their go-to-market strategies, delivering increased revenue, market adoption and brand awareness.
In 2018, she was appointed as Chairman of the National Women’s Business Council, a federal agency that advocates for female founders. She is immediate past Board Chair of the Dingman Center of Entrepreneurship at U-MD. She mentors startup CEOs at the leading incubators and accelerators in the Washington, DC area. She is a frequent author and conference speaker on topics related to entrepreneurship and business.
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