Are Women-Led Businesses Perpetuating the Pay Gap?

I have noticed an unsettling pattern among my clients and peers. As the CEO of a small business working directly with other female-led businesses, women often undervalue their products and services dramatically in some cases.

The Hidden Challenge
I conducted a national survey of 122 women business owners in late 2023 to obtain hard data on the issue, specifically related to sales – the engine behind revenue. My findings were eye- opening. This undervaluation is driven by subconscious socio-economic biases and long-established mindsets and habits. The long-term results of these attitudes stunt growth, leading to lower revenues and salaries for themselves and their employees.

Women-led Businesses: A Rising Force
This is coming at a time when women are making strides. According to the 2024 Wells Fargo Impact of Women-Owned Business Report, women owned businesses represent 39.1% of all businesses in the U.S., employ 12.2 million workers and generate $2.7 trillion in revenue.

Overcoming the Obstacles
The gender pay gap in the U.S. has frustratingly remained at 80% of what men earn for the past 20 years. Women face a motherhood penalty, earning less if they take time off to have children and return to the office. And they often pay more for goods and services due to the “pink tax.” To combat these issues, women are leaving corporate America to start their own ventures at a record pace.

It’s All in the Mindset
My research suggests that women continue to carry socio-economic biases around pay as they start and run their businesses. It comes down to a few common mindsets that interfere with women valuing and claiming their worth, including feelings of inadequacy, lack of confidence, comparison, and scarcity, all of which are underpinned by fear.

When asked about sales, nearly two-thirds of women surveyed felt anxious or feared discussing money. These feelings directly impact their ability to drive revenue and pay. However, when women shift their mindset about sales to a problem-solving, solutions-oriented approach, it seems to unlock their earning potential.

Breaking Old Habits
Many women have inherited habits from working in a 9-to-5 or a corporate environment that worked well there but don’t translate well to business ownership. For instance, women often hesitate to take credit for their accomplishments to be seen as team players. However, owning and promoting their achievements is crucial for business success and resilience.

The Pricing Problem
Pricing products and services are critical to earning revenue. According to my survey, 18% of sales misfires were due to pricing and value issues. Women business owners often discount their services too quickly or aren’t prepared for pushback on pricing. They don’t consider their experience or value when establishing pricing because the business is new. They also don’t raise prices consistently to avoid insulting or losing clients.

Pay Yourself First
Many female-led businesses start as solopreneurs. 62% of the women I surveyed run a team of one to two people. As soon as a business is revenue-positive, owners must pay themselves first and consistently. Many female business owners prioritize paying employees or contractors first, which can demotivate them and reinforce a sense of scarcity and fear. The natural tendency to be responsible and helpful hurts them in the long run. What is the objective, after all, if you are the only employee?

Address the Issue Head On
Women-led businesses have made significant strides, but addressing the pay gap requires a different approach. The Smith Company 2023 Sales Survey highlights the importance of tackling unconscious fears, biases and habits to succeed in a male-dominated landscape. By addressing these issues, we can ensure women-led businesses thrive and lead the way in closing the gender pay gap.

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Author’s Note: This article aims to shed light on the challenges and opportunities for women-led businesses. If you found this useful, please share it with your network to spread awareness and support or contact me directly ljsmith[at]smithcus[dot]com.