THE U.S. businesswoman, particularly the sole proprietor of a small business, is becoming a new force in the economy. In 1982 alone, women opened up some 567,000 new single-owner businesses, according to Juanita Pierman, regional adviser for the U.S. Small Business Administration's Women-Owned Business Program. The number of women-owned firms is increasing at a phenomenal rate, Pierman says, about five times faster than their male-owned counterparts.

Small businesses have always been hard to keep track of, and their female owners have been notoriously under-counted. (In the past, nobody cared about them, says Pierman.) But the trends are unmistakable: The Small Business Administration's 1983 Report to the President estimates that between 1977 and 1980, nonfarm sole proprietorships owned by women increased from 1.9 million to 2.5 million, while the number of self-employed women entering the work force increased by an amazing 60 percent between 1972 and 1981.

Illinois was one of five states — along with California, New York, Texas and Florida — in which 39 percent of the nation's women-owned firms were located at the time of the last economic census. In 1977, 52 Illinois cities boasted more than 100 women-owned businesses with 8,935 in Chicago alone. A total of 34,323 Illinois businesses were women-owned, grossing nearly $2.5 billion annually. Of these businesses 77 percent were in the service or retail fields, although such enterprises generated only 56 percent of state women-owned business revenue. This reflects the fact that service and sales, traditional activities for women-owned businesses, make less money.

But things are changing. Women are becoming increasingly sophisticated in their efforts to gain equity in the business world, and the Second Midwest Women in Business Conference, held July 14-16 at the Palmer House in Chicago, was a testimony to that fact. Sponsored by Northwestern University's Division of Continuing Education and the Chicago district office of the Small Business Administration (SBA), the conference provided workshops, keynote speakers and special events for "future, recent, experienced and special entrepreneurs." It also provided some glimpses of these entrepreneurs at work — their ideas, products and problems.

Addressing themselves to the role of women in business, keynote speakers included INC's managing editor, Roberta Shell, who spoke on "Working with Men," publisher Christie Hefner and foreign correspondent Georgie Ann Geyer. In one of her last public appearances, the late NBC anchor-woman Jessica Savitch spoke wryly and eloquently as she and Geyer zeroed in on the advantages (few) and disadvantages (more) of being female pioneers in the overwhelmingly male fields of broadcast and print journalism. A few seminars such as "Color Me Beautiful" and "Hiring, Firing, Sexual Harassment, Pregnancy and Title VII" were geared specifically to women's needs; otherwise, the many conference topics were unisex, relevant only to starting and developing a successful small business.

Many conference participants were either aspiring or new entrepreneurs who were interested in financing their ventures. Jean Sachs, an employee of the University of Chicago Press, and her son are opening a shop to sell hand-dipped chocolates. They're currently assembling equipment and getting costs together. Sachs asked the question that was on every participant's mind: "Where do you look for money?"

The question of loans

Money-related seminars drew consistently large audiences. A recurrent topic in these meetings was how to get loans, specifically those guaranteed by the SBA. Because women frequently have big dreams and limited financial resources, many are turned down for conventional bank loans. An owner of a small business who has had two such rejections (or only one, if the business is located in an area of fewer than 100,000 people) can apply for a 90 percent guaranteed SBA loan for up to $500,000. These loans are financed by conventional banks, and the interest rates are fixed by law: The banks can charge no more than 2 1/2 percent above the prime interest rate for a loan due in six years or less, and no more than 2 3/4 percent above the prime for a loan of seven years or longer. Another option is the SBA direct-financed loan. This type of loan is much more limited: The maximum amount that can be borrowed is $150,000, and a personal investment of 20 to 30 percent by the applicant is required.

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According to Sam McGrier, assistant district director for management assistance of the Chicago district branch of the SBA, money is available on a first-come, first-served basis. He recommends, however, that his office be used only as a last resort for a loan. "Most applicants are rejected by banks for good, sound reasons," he stated. "Either their venture is unsound, they lack sufficient equity, or their management abilities are insufficient."

There are many disadvantages, McGrier explained, in primary SBA loans. It takes an average of six months to acquire such financing, and the client does not establish a working relationship with any banking institution. Should she require immediate additional funds for expansion, it would take an average of two-and-a-half months to acquire them through the SBA. A banker could refinance in two or three days. Also, the SBA is extremely cautious about granting direct-financed loans. Applicants must prove their ability to manage a business and to repay the loan.

Besides loans, the SBA provides many services for the fledgling entrepreneur. It retains paid management consultants who aid SBA clients with accounting, marketing, budget and production problems. The SBA also contracts Title VIIIA noncompetitive jobs to socioeconomically disadvantaged businesses on behalf of the federal government. Another program cited by McGrier is the SBA's Small Business Institute, through which university business seniors and graduate students are interned with small businesses. The service is free to SBA clients, and the students receive credit towards their degree. Twenty-three Illinois universities, including DePaul and Sangamon State, participate in this statewide program.

The SBA has also launched SCORE (Service Corps of Retired Executives), as its volunteer cadre of business advisers with offices in Glencoe and the Chicago Loop. SCORE personnel led several seminars at the conference on topics such as "Success and Failure Factors in Several Small Businesses," "Opening a Retail Store" and "How to Import." Irving Davis, an 87-year-old retired food importer co-chaired the "How to Import" session with Robert Rubin, a director of the U.S. Customs.

Masayo Koshiyama is one of Davis's protegees. Born and educated in Japan, she came to the U.S. because she feels business opportunities for women are better here. Koshiyama imports and distributes green soybeans from Taiwan. Her goal is to become "the soybean queen" by distributing this popular Japanese snack throughout the U.S. Her product, Soy Zest, is distributed by 10 Treasure Island stores and several co-ops and health-food stores. She hopes to capitalize on this nation's current health consciousness: "I know that soybeans will be the snack of the future," the Evanston resident said. "They're high in proteins, vitamins and minerals, and they're salt free." After unsuccessfully field-testing 10 varieties of soybeans in Effingham and Morton Grove, Koshiyama realized that the Taiwanese beans were genetically vulnerable to Illinois insects. She then decided importing was her best bet. Koshiyama learned most of her business skills through SBA seminars — "I took them all" — and from her mentor from SCORE. "Mr. Davis helped me with packaging, marketing and advertising my product," she said. He also helped her apply for a $40,000 SBA loan to help her develop a bug-resistant strain of green soybeans to grow here.

Other federal agencies were represented at the conference. Crystal Hudson, information services specialist for the U.S. Department of Commerce, conducted several seminars on how the Census Bureau can assist entrepreneurs. The bureau provides data on site locations and market profiles, direct mail information, and an overview of potential sales areas. Hudson also offered to conduct on-site training work-shops to groups of 10 or more business persons on how to use census data.

The Women's Bureau of the U.S. Department of Labor was represented by Estelle Cortinas. Her three-woman bureau is an advocacy group whose purpose is to assist networking around employment-related issues. Among its programs are WING, a program for high school students which promotes women in nontraditional careers, and another program which provides tecnical help to employers on how to set up child care for employees. The Women's Bureau works with the SBA's Women-Owned Business Program and the Illinois Commission on the Status of Women to expedite legislation on federal employment issues. Currently, the bureau is holding training seminars for community organizations to explain how the federal Job Training Partnership Act (JTPA) will operate and how women's organizations and women in business will be involved. In its 1984 report the commission will make recommendations on JTPA to the General Assembly.       

Attorney Kathleen Blunt represented the U.S. Equal Employment Opportunities Commission and conducted the seminars on "Hiring, Firing, Sexual Harassment, Pregnancy and Title VII." In recent years, Blunt has seen an increase in sex-discrimination cases filed. Blunt discussed a few recently decided cases, defined what constitutes sex discrimination and explained the procedures for filing a complaint. She said that seventy-five such complaints were filed in Chicago in the first six months of 1983, 40-50 percent of which will be settled out of court. The commission also litigates age-discrimination cases. Blunt noted a trend for companies to computer-train their younger employees and then fire senior workers because they cannot cope with the new technologies. All job-discrimination cases are tried by juries, she explained, and damages are often awarded.

Another keynote speaker at the conference was econometrician Michael Evans. Evans believes that interest and inflation rates have "troughed" and will remain fairly stable until the fall of 1984. He is confident that corporate profits will rise 30-40 percent in the next year-and-a-half. An advocate of radical reform in the U.S. tax structure, he advocates a modified flat-rate tax structure such as the 11.2 percent Bradley-Gephart "fair tax." This, he believes, would eliminate widespread tax evasion by corporations and by the vast underground economy. Evans claims that 57 percent of all possible tax revenues are never collected. A flat-rate income tax, he said, would produce an extra $80 billion in tax revenues, cut interest rates in half and stimulate great economic growth.

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While Evans was talking about tax reform, a multitude of workshops were teaching businesswomen how to fork over the smallest possible amount of their profits to the government. CPA Robert Miller conducted workshops titled "Tax Sheltered Investments for the Small Business Owner," and Sol Povlo, an accountant representing the National Society of Public Accountants, held several sessions on "Taxes and Your Small Business." Povlo emphasized the variety of city, county and state taxes and their peculiarities, ranging from Chicago's $2 per month per employee head tax to the recently abolished Illinois inheritance tax. He cautioned the women present to explore all applicable tax structures before deciding where to locate. Despite Illinois' tax on 100 percent of all capital gains, Povlo believes Illinois is a "cheap" state in which to operate, relative to taxes.

Povlo also delineated the advantages and disadvantages of forming partnerships, incorporating and establishing sole proprietorships. "A corporation," he explained, "is legally an artificial person." Liability stops at the level of the stockholders; they bear the burdens of any losses and reap the benefits of profits. The individual businesswoman who incorporates is therefore free of liability. The corporation must, however, like any individual, pay its own taxes. "In a partnership or proprietorship," he continued, "creditors can come after you personally." The federal tax structure caters to small businesses, especially Subchapter S of the Internal Revenue Code, which allows a qualified businessperson to pay no tax but pass profits along to shareholders. She can also pass losses along to herself and deduct them from her personal income tax. Such corporate losses, however, are limited to the original amount of investment; personal losses are limited to the amount of investment plus loans. As of 1983, extra losses can be carried over to future tax filings.

The businesswomen

Judy Bodem is a corporation. Her Lighthouse Computer Systems, located in Downers Grove, is incorporated under Subchapter S for tax purposes. "At this point, I don't anticipate much gain," she affirmed. She is also protected against large losses. Herself a CPA, Bodem was mildly critical of the state bureaucracy. "I knew I was liable for certain taxes, and was more than willing to pay them," she said. Instead of receiving specific information about what she owed, Bodem had to contact separate agencies for unemployment insurance, withholding and sales tax. All these, she felt, should have been handled by one agency. Also, she was never given an itemized tax bill. "As a CPA, I found the instructions from the state almost incomprehensible. If I found it difficult," she mused, "how will others without an accounting background handle it?"

Bodem is also a member of the Chicago chapter of the National Association of Women Business Owners (NAWBO). The only organization of its kind in Illinois, NAWBO publishes a directory where the active members are listed by name and type of business, thereby providing a network for women in business. Although most members provide services from household help to computer consulting, there are store owners, tub refinishers and construction contractors in those pages.

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One service supplier is Coralee Kern of Chicago, who conducted a seminar on developing a home-based business. Kern, owner of Maid-to-Order, a domestic employment agency which has employed between 450-475 workers, is also the founder of Cottage Connection, the National Association for the Cottage Industry. Kern publishes "Mind Your Own Business — at Home," a newsletter for the cottage industry. Kern's business is super organized; it is computerized and operates from 14 feet of home workspace.

Kern intends to organize home-based businesspersons, most of whom are women, in an alliance for political change. Her association held a regional conference, cosponsored by the SBA, in Chicago in October. One of Kern's newsletters highlights mail-order distribution, small business success stories and the effect of the underground economy. The newsletter distinguishes between tax evasion and bartering and gauges the effects of such activities on the Gross National Product, unemployment statistics and productivity rates.

Virginia Potter's productivity rate is up. Her Lisle business, Architectural Designers, did $1.6 million in construction work during the first six months of 1983. Potter, a general contractor, has found working in Illinois a challenge: Not until last year would a bank finance her ventures. "But you're a woman! What do you know about construction?" was what she often heard. Although she has been working in the industry since she was 18, she was nonetheless charged higher interest rates than her male counterparts.

Potter, who employs 65 people, is past president of the Oak Brook chapter of the National Association of Women in Construction, an international group with 9,000 members. "Illinois has everything," she said, "transportation, good utilities and manpower resources." She claims, though, that Illinois unemployment insurance and workmen's compensation laws are driving businesses across the borders to Iowa, Wisconsin and Indiana. She also deplores the volume of paperwork the state requires. Like most small business owners, she is snowed under by paperwork for loans, waivers and contractor's statements. She has had additional problems with (The Minority Business Enterprise (MBE) program. "Most small businesses," Potter said, "lack the personnel and knowledge to deal with the thick packets of paperwork required for bids on federal jobs." Between 2 percent and 4 percent of federally founded MBE contracts are earmarked for women. The low percentage, Potter explained, reflects the small number of women in construction rather than any discrimination against female contractors.

Architectural Designers was one of 90 businesses with displays at the Women in Business exhibition hall. MCI, Dean Witter Reynolds, Metropolitan Insurance, Hertz, Motorola and Bresler's 33 Flavors were some of the other exhibitors hoping to generate some business of their own at the conference.

Six hundred women attended the First Women in Careers and Business Conference in 1979; 546 women from nine states paid a respectable $225 admission fee to attend this year's Women in Business Conference. These numbers reflect a desire to generate a network of contacts between female entrepreneurs across the Midwest similar to those established by men in clubs, fraternal orders and chambers of commerce. With help from the SBA and Northwestern University this network is expected to expand.

The rise and shift

Certainly the need for mutual help appears to be great. Although the numbers of women-owned businesses are increasing, their earnings are still abysmally low compared to their male-owned counterparts. SBA's 1983 report reveals that in 1980 the receipt for women-operated sole proprietorships averaged $14,348 compared to $53,039 for men; in services, the area of greatest female concentration, women averaged $8,998 compared to $29,495; the average receipts in retail trade were $21,354 for women and $111,866 for men. Not surprisingly, the average net income of women and owned firms was also significantly lower. Part of this, says SBA's Pierman, is because women-owned businesses are often a supplement to retirement or family income rather than the sole source. But, she adds, it is also because women underprice their work and tend to work in low-return traditional fields.

A shift is taking place, however. According to the SBA report, the most rapid growth in the number of women-owned sole proprietorships between 1977 and 1980 was in "nontraditional" areas: mining, manufacturing, agricultural services and finance, insurance and real estate. The most rapid increases in business receipts were in the same areas and in construction. It will be interesting to see what the 1984 report has to say.

One thing is sure, whether they are driven by necessity or ambition (or a potent combination of both), women-owned businesses are becoming increasingly important in the economy. Kern's prediction that "the cottage industry is going to sweep across Illinois and Indiana county by county," may well be right.

Judith Bloom Fradin is a free-lance writer who has written on a variety of subjects for Illinois Issues.

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