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Smart Answers

Making Millions by Ignoring the 'Normal Way'

When sociologist Mary Godwyn was doing research on the clientele of the Small Business Administration's Women's Business Centers, she found minority and low-income women starting ventures that did more than simply make money for the individual owners: They also delivered significant benefits to their communities. Next month, the book Godwyn co-authored on that research, Minority Women Entrepreneurs: How Outsider Status can Lead to Better Business Practices, will be published.It includes research revealing that minority female entrepreneurs are both more creative and more concerned with giving back to larger society than Godwyn expected. Godwyn, an assistant professor of sociology at Babson College, spoke recently with Smart Answers columnist Karen E. Klein. Edited excerpts of their conversation follow.

Karen E. Klein: You found that minority women start businesses at nearly four times the national rate for women and men in general. Is that surprising?

Mary Godwyn: I think it is, because their stories are seldom told. We all think of business owners as white, educated males. Even here at Babson, in our MBA program, almost all the protagonists in our business case studies are men, and most are white men.

At the Women's Business Centers, they started producing a women's business culture. They brought in minority business women as role models. And as their clients began imagining themselves as successful entrepreneurs, they became successful entrepreneurs.

Data shows that women-owned companies generally don't grow as rapidly or become as profitable as male-owned companies. Did you look into why that is?

I found that women have a much harder time getting startup funds. All the women I interviewed confirmed that. So some of the lack of growth is that there is not a lot of fuel for the fire.

The other part comes from the entrepreneurs themselves. Is it better to grow a business quickly and sell it and harvest the money and move on? That's what young, maverick business students are told.

But many of the women we interviewed identified with their businesses as a vehicle for self-expression and a means to serve underserved populations. In the entrepreneurship literature, that is sometimes discouraged or even disparaged. You're told not to get too attached. But these women think about the larger implications of their business in the world community.

You profile 10 companies in the book. What kinds of businesses did you study?

We looked for a diverse group of businesses owned by women who self-identified as racial or religious minorities. One is physically disabled. They range from Legacy Bank, the first bank in the U.S. organized by African-American women, to very small ventures.

One of my favorites is Mannequin Madness in Oakland, Calif. Its owner saw mannequins being discarded in landfills and found out no one was recycling them. She was working in a dot-com company but really wanted to have a business that was environmentally oriented.

So she recycles mannequins, she rents them out, and she encourages her customers to consider mannequins that are outside the typical demographic of white, slim, and young. Even in very diverse neighborhoods, she found that most retailers did not consider using mannequins of color, or plus sizes.

One of the characteristics of the entrepreneurs you profile is using their businesses to foster some kind of social good.

Yes. Each of the women wants to make money, because they rely on these businesses to support themselves and their families. But they also have a dual objective around a commitment to social values.

What's interesting is that they are not alone. When you look at quantitative data from all over the world, women entrepreneurs use their earnings more often to support others, including their families, their communities, and certain causes.

Why do you think that is?

Actually, no one seems to have asked that question. This type of entrepreneurship is not well-documented. We have profit-driven businesses and social entrepreneurship, which is most closely associated with nonprofits, but these women refuse to be put into a situation where they have to choose between the two.

Can you give an example of someone who's doing both?

One of the women in the book is an Asian-American [Pauline Lewis of oovvoo design] who designs and manufactures handbags and is committed to Asian-Americans and Asian women. When she went looking for a factory in Asia to make her bags, she was disappointed because of the poor working conditions. The factories were loud, noisy, cramped, and not ventilated well. She didn't want the people making her bags to have that kind of life.

She found a group of women working in a residential neighborhood in Vietnam in a woman-owned facility with on-site day care, soft music, and tea, and she decided that was the place to make her bags. She pays her workers 15 percent above the going wage, gives them a month off for Vietnamese New Year and a paid vacation for a week every year. Most places in business education, you'd hear that that's irrational, it doesn't make sense, and you'd go out of business doing that. Every day she has to defend her decision. But she's making millions.

Do you think there are larger implications in this business model for entrepreneurship in general?

What becomes evident is what we're portraying as the "normal" way to run a business is not the only way to do it. Different populations of people with different values can run businesses differently. If we learn from them, maybe they can influence our norms about entrepreneurship.

Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

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