Over the years, my husband has taught me lots of things: how to safely operate a circular saw; how to build patience for innovative laundry folding techniques; and, perhaps most importantly for my career as a creative entrepreneur, how to (smilingly) embrace debt.
Left to my own devices, there’s no way I would have applied for my first $5,000 business loan a decade ago. We had just bought our first house, and the idea of going even further into debt felt like an extravagant and potentially reckless move. While the $5K seems like small potatoes now, at the time I was a young Liberal Arts grad with a cringing fear of exposing my family to undue risk for the sake of my self-described “little venture.”
In other words, I was behaving like the majority of women entrepreneurs who are, anecdotally speaking at least, a risk-averse crew.
The trouble is, the “freedom from risk” strategy is no way to grow a business. Just ask Kelsey Ramsden, a thirty-something road builder who was recently named Canada’s top female entrepreneur by Chatelaine and PROFIT magazines for the second year running. “Risk and reward are related,” she says. “If you want reward, you’ve got to be prepared to take on some risk.” Over the years, Ramsden has assumed tremendous financial risk, and the inevitable sleepless nights, in order to secure the cash needed to help her build what has become a multimillion- dollar business (which she runs from a home office, by the way). “Your business needs fuel to grow, and that fuel is cash,” she says. Unless you’re independently wealthy, the only way you’re going to secure the money to drive significant growth is to go into debt, whether that’s to the bank, an investor, your family and friends, or a government agency.
Unfortunately, it appears that too few women entrepreneurs choose one of the above. And an absence of cash is leading to an absence of growth. According to a recent BMO study, despite the fact that more women than ever are starting businesses, womanowned firms still experience lower revenues relative to their male-owned counterparts.
“Women entrepreneurs are often under financed,” was the pronouncement a senior business banking professional (herself a woman) recently made to a group of established women entrepreneurs. “They have a tendency to try to finance their businesses through cash-flow and when they do assume debt, they try to pay it down as quickly as possible.”
The banker went on to point out that while male entrepreneurs seeking loans have no problem asking their wives to co-sign a personal guarantee for the money, women entrepreneurs are less likely to ask their husbands to return the favour, leaving bank meetings empty-handed.
“Women entrepreneurs just need to remember that they have options,” she said, and then proceeded to rhyme off a half-dozen financing options entrepreneurs can investigate that don’t involve them sacrificing precious cash flow in order to fuel growth.
Perhaps the very first option on the table is for women entrepreneurs to eschew their risk-adverse tendencies and put a little more skin in the game. And by skin, I’m referring to debt. I’ve spent a good chunk of the last decade interviewing highly successful entrepreneurs. One commonality has been their willingness to calculate risk, assume it, and then go for broke.
Now, I’m not advocating a Pamela Wallin-esque spending spree of other people’s money. I’m talking about smart debt: an infusion of cash that fuels your growth and the associated fear that focuses your efforts. Of all my women entrepreneur friends, the ones who are best poised for knock-your-socks-off growth are the ones who have had the courage to go all in, taking out loans, wooing investors, betting the farm.
A female entrepreneur I know recently secured close to a million dollars’ worth of financing, plus a number of powerful investors for her company. In light of her newfound debt load, she confided in me that her friends have started asking her how she’ll hold her head up if she fails.
Her answer is a rallying cry for ambitious female entrepreneurs everywhere. “When you’re in this deep, you can’t fail.”