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Best Places for Women Entrepreneurs

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MagnifyMoney researchers analyzed the 50 largest U.S. cities to determine where women business owners are seeing the most success. Cities were scored in four categories relating to income, business earnings, rate of incorporation and entrepreneurial parity between men and women.

The results show women on the West Coast are most poised for success, though our top cities represent a range of regions.

What we considered in our analysis

Income for self-employed women. We looked at both median and average business income for self-employed women in each city. In an ideal scenario, both numbers are high. However, a wide gap between the two could indicate more opportunity for potential earnings for self-employed women in a certain area.

Business earnings for self-employed women compared with wage earners. We compared income for self-employed women to earnings for women who work for wages. Self-employed women generally make less than those with earned income. A smaller difference between the two amounts could imply that women may benefit from going into business for themselves.

The rate of self-employed and incorporated women. The rankings reflect the percentage of self-employed women, as well as how many of those women have incorporated their businesses. A high rate of self-employment may suggest low barriers to entry for women entrepreneurs. A large amount of incorporated businesses could indicate women are seeing enough success to consider legal and tax implications of business ownership.

Parity of business ownership between women and men. We analyzed the percentage of women among all self-employed people and owners of incorporated businesses in each city. Places with higher percentages could have a more even playing field for women.

Key findings

  • San Francisco ranked No. 1 for the second year in a row. The top two cities belong to California’s Bay Area, as San Jose isn’t far behind on the list.
  • Several other California cities cracked the top 10, including Los Angeles, Sacramento and Riverside. Business incomes tend to be high in these cities, though exorbitant costs of living could present a challenge to women entrepreneurs.
  • Across all metro areas, women own about 30% of incorporated businesses. Women are better represented among self-employed workers, which could include women with small ventures that don’t require incorporation. On average, about 37% of self-employed people are women.
  • Buffalo, Cleveland and Indianapolis are the lowest-ranked places on our list. Women in these cities are less likely to pursue entrepreneurship, and those who do have lower incomes than women who work elsewhere.

Top places for women entrepreneurs

Women in our top places earn decent average income from their own businesses and make up nearly half of self-employed workers in their respective locations.

1. San Francisco

San Francisco took the top spot with a final score of 76.5 — a few points lower than 2018, but still high enough to hold on to first place. Nearly 11% of working women are self-employed, and 21.5% own an incorporated business. Business income for women is $27,840, on average, about 35% of what women earn when working for wages. Of all self-employed people in the city, women make up 42.3%, and they comprise 32.6% of all owners of incorporated companies.

Women’s entrepreneurship groups throughout San Francisco host regular networking events and panel discussions. The local government is also supportive of women-owned businesses. For instance, the San Francisco Office of Economic and Workforce Development provides grants through the San Francisco Women’s Entrepreneurship Fund.

2. San Jose

San Jose moved up from its previous No. 3 ranking receiving a final score of 75.9 this year. Women business owners earn an average of $28,891 – more than women in San Francisco – and that income is 35.7% of women’s income from earned wages. Slightly more than 8% of women in the city are self-employed, and 23.8% run an incorporated business. Those women comprise nearly 42% of all self-employed workers in San Jose and 33.2% of owners of incorporated establishments.

Women business owners in San Jose can turn to numerous local groups for support and resources, such as the local eWomenNetwork chapter and the Women’s Networking Alliance. The AnewAmerica Women’s Business Center, which also operates in Oakland, also provides training and counseling to help women grow their businesses.

3. Hartford

Hartford jumped from No. 18 to round out our top three best places for women entrepreneurs with a score of 67.4. On average, women business owners earn $27,534, which is 43.7% of women’s earned wages, a higher percentage than the first two cities. Although just 5.9% of women are self employed, 25.5% own an incorporated business. Of all self-employed people in the city, 34% are women. Additionally, women account for 24.8% of incorporated business owners in Hartford.

Hartford saw an improvement in business earnings for women entrepreneurs in this year’s ranking, which contributed to its rise on our list. Women business owners can find support from Greater Hartford’s chapter of eWomenNetwork, Innovation Destination: Hartford and the Women’s Business Center at the University of Hartford.

Bottom places for women entrepreneurs

The cities ranking lowest in our study generally have lower business income for women entrepreneurs than the top cities. Orlando, at No. 45, has a median business income of $809, meaning at least half of self-employed women earn that amount or less.

Fewer women in these cities have ventured into business ownership as well. With a smaller number of women entrepreneurs in the area, it may be harder for business owners to establish professional networks or find mentorship among other women — this kind of support is often essential to emerging startups.

However, the data could indicate the entrepreneurial climate is poor for self-employed people in general, not solely women. Although it may be possible to operate a successful company in these cities, women may want to proceed with caution before starting a new venture here.

How women business owners can beat the odds

Living in one of the best cities won’t guarantee success any more than starting in one of the worst cities will ensure failure. Wherever they live, women entrepreneurs must chart their own path to self-employment. If you have a financial advisor they may be able to provide the investment advice necessary for starting a business.

For women ready to take their first steps toward entrepreneurship, these tips could help them get further faster.

  • Explore the business landscape of your specific city. Research local regulations and bylaws that could be pertinent to your business idea. For example, you can start checking out everything from business licensing laws to local small business tax breaks to help build out your business plan. You can also research nearby small businesses to see which are doing well to get insights into how to set your own venture up for success.
  • Seek out local resources for women entrepreneurs. Many cities recognize the important role small businesses, startups and self-employed workers play in fueling local economies. And some have responded with support systems designed to foster growing businesses — and women entrepreneurs who lead them. One example is the San Francisco-based nonprofit Girls in Tech, which seeks to empower and educate women (including entrepreneurs) in the tech industry. Even bottom-ranked Buffalo, N.Y, has local organizations focused on supporting women entrepreneurs, such as the Allstate Minority and Women Emerging Entrepreneurs Program from the University at Buffalo.
  • Network with other self-employed women. Don’t underestimate the power of meeting, working with and learning from like-minded, entrepreneurial women. The local organizations mentioned above can be the perfect way to connect with other women entrepreneurs in your area. You can also look for co-working spaces, entrepreneurship-centered meetups or social events for local businesswomen to grow your network.

Methodology

Each of the 50 largest metropolitan statistical areas (“MSAs”) was scaled against one another, so that the most positive result for each factor was 100 and the most negative was 0 on the following eight factors from the U.S. Census Bureau’s American Community Survey for 2017 available through FactFinder or calculated from microdata housed in IPUMS USA. The results for each factor were then weighted according to the notation below, and the sum was divided by eight (rounded to one decimal point), for a highest possible score of 100 and a lowest possible score of 0.

  • Median business income for self-employed women (double weight)
  • Average business income for self-employed women (double weight)
  • Ratio of median business income to median earned income for the metro (double weight)
  • Ratio of average business income to average earned income for the metro (double weight)
  • Percentage of working women who are self-employed (single weight)
  • Percentage of self-employed women who are incorporated (single weight)
  • Percentage of self-employed people who are women (single weight)
  • Percentage of incorporated people who are women (single weight)to become business owners.

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Small Business

How Tariffs Affect Small Businesses

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Tariffs are duties charged on imports, and U.S. buyers pay the costs. Small businesses that bring in imported products can either absorb the expense or pass it along to their customers. When tariffs increase, as they have on certain goods imported from China, as well as the import of steel and aluminum products, countries often retaliate by increasing their own tariffs on American goods arriving on international shores.

Small businesses bear the brunt of tariff hikes and the resulting trade wars. “Small businesses are especially hard-pressed because they don’t have the reserves to tap into to wait for more stable circumstances,” said Davidson College economics professor Shyam Gouri Suresh.

We’ll help you understand how tariffs affect small businesses and what you can do to protect your firm when unexpected costs threaten growth.

What is a tariff?

A tariff is a tax that a country levies on imported goods and services. Tariffs increase the price of imports, potentially making them less competitive or desirable compared to domestic goods and services. 

A tariff is typically charged as a percentage of the value of the product that a buyer must pay a foreign exporter. In the U.S., importers must pay tariffs at 328 ports of entry, which the U.S. Customs and Border Protection controls. Companies that pay the tariffs to bring goods into the country likely pass that cost on to customers. The paid tariff goes to the Department of Treasury and makes up a portion of the federal government’s revenue.

Tariff increases

A country may introduce a new tariff or increase existing ones in order to restrict trade from particular countries or reduce imports of specific types of products, which is what the U.S. Trade Representative decided to do to combat unfair trade practices with China. The U.S. Chamber of Commerce implemented tariffs of its own on certain imports of aluminum and steel for national security reasons. Trade talks continue between the United States and China as of press time, but at least $300 billion worth of Chinese imports face tariffs, some as high as 25%.

The effects tariffs have on small business

These increased tariffs and resulting trade wars have cost American businesses big and small $38 billion, according to Tariffs Hurt the Heartland, a coalition of businesses and trade groups that oppose the tariffs. Automakers, tech companies and agricultural producers have been especially hard hit, but the National Retail Federation has also compiled profiles of affected small business owners from music teachers to gift shop owners.

“They have to either swallow this increase in price, or they have to pass that price increase on to the end consumer,” Gouri Suresh said.

Passing on the costs of tariffs: A closer look

Big businesses are in a better position to absorb higher costs than small businesses. Large companies can operate on smaller margins, while small businesses don’t have as much of a cushion and eventually must raise prices.

“As they increase prices, they may start losing their customer base,” Gouri Suresh said. “It’s a really difficult bind to be in. It favors bigger businesses that have deeper pockets who can ride out this trade war.”

Some firms may not be able to pass costs onto customers if they compete with businesses unaffected by high tariffs, said Katheryn Russ, an economics professor at the University of California, Davis. Small businesses likely have to take a blow to their profit margins if competitors don’t have to make similar price increases because of tariffs.

“If all businesses are having to raise their prices in a particular product space, then that’s different,” Russ said. “And this does seem to be a broad-based cost increase for U.S. firms.”

U.S. producers facing Chinese tariffs conversely have had to drop prices to remain competitive in China. For instance, soy farmers in the U.S. significantly reduced prices to avoid passing on cost increases to Chinese consumers.

Businesses that stand to benefit from tariffs

Tariffs on foreign goods should benefit domestic producers making similar products, as their products would be less expensive than those taxed at a high rate. Those producers may be able to raise their prices knowing the demand is higher, Gouri Suresh said.

For instance, American steelmakers are reportedly seeing bigger profits from higher demand, increased prices and a boost in production. But the rush to production may backfire as it meets a global economic slowdown.

How to prepare your business for economic changes

The U.S. government’s actions have been unpredictable, which makes it challenging to plan and prepare for increased tariffs, Gouri Suresh said. Tariffs have historically been implemented slowly, but the recent increases have not reflected the gradual nature of past rate hikes.

“The problem with what’s happening with the most recent trade war is the numbers are flying every day,” he said.

Tariffs have also affected industries differently, making it difficult to compare the impact across companies, Russ said. “It’s hard to offer specific advice. We just don’t know right now what’s going to happen,” she said. “I guess…just be ready for anything.”

Despite the unpredictability of the trade war, there are steps you could take to better position your business for economic changes.

Cut back where you can.

To minimize the price increases that you’d have to pass on to customers, consider cutting back your operating costs as much as possible. This could allow you to run the business on a tight budget when needed.

Consider an industry change.

If you can easily alter your business concept, you may find that an adjacent industry is less affected by tariffs than the one in which you currently operate.

“Being nimble is going to be a really big boon for businesses if they can turn on a dime and reconsider what they’re buying and what they’re selling,” Gouri Suresh said.

Apply for a tariff exemption

Several categories of goods are exempt from tariffs, such as items that are necessary for health and safety. Goods are exempt on an industry-wide basis, and large groups of lobbyists and business owners must typically work together to seek exemptions.

Companies affected by recent tariffs may request to be excluded from Section 301 tariffs on Chinese goods and Section 232 steel and aluminum tariffs. Thousands of companies have filed exemption requests with the Office of U.S. Trade Representative, claiming they are unable to find comparable goods outside of China or that it would be extremely costly to do so. Approvals for these requests, so far, have been low.

The bottom line on how tariffs affect small businesses

U.S. tariffs on Chinese goods are hurting some American firms more than the intended target, Gouri Suresh said. The widespread impact on U.S. businesses and consumers may not be sustainable and tariffs could soon decrease. But if not, high prices on imported goods may become the new normal.

“In the long run, either the tariffs end and the trade war ends…or everybody learns to live in this new world,” he said.

In the meantime, small businesses will likely continue to feel the effects of tariff increases. It may be best for entrepreneurs to hunker down and operate as efficiently as possible until stable conditions return, Gouri Suresh said.

“When things go bad, they’re the ones who are going to suffer first,” he said. “But they are also the ones who will benefit the most when things turn for the better.”

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How to Avoid Pyramid Schemes

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Direct selling can provide a flexible way for you to run your own sales business from home or online, but it’s important to distinguish legitimate companies from pyramid schemes. The red flag is when such a system depends on recruiting an ever-increasing number of “investors” than the selling of a product. We’ll help you avoid pyramid schemes and identify legal direct selling companies worthy of your research.

Direct selling vs. pyramid schemes

Direct selling is a legal business practice conducted through single-level sales (think door-to-door salesperson), host or party-plan sales and multilevel marketing companies, which depend on individual distributors to sell products to the public, often in a group, party-like setting or through catalogs or online stores. Distributors often have the opportunity to earn commission on their sales and those of the salespeople they recruit.

A pyramid scheme may be disguised as a multilevel marketing business, but it is actually an illegal scam that emphasizes recruitment rather than the sale of actual products. Instead of earning most of their income through selling, distributors are heavily rewarded for bringing on new sellers, who may have to pay an entry fee.

“It’s going to take some healthy skepticism and research for someone to recognize that difference,” said Stacie Bosley, associate economics professor at Hamline University in St. Paul, Minn.

As of 2018, direct selling represents $35.4 billion in retail sales in the U.S. and 6.2 million people work full-time or part-time in the industry, according to the Direct Selling Association. Continue reading to find out how to avoid a pyramid scheme if you’re thinking about pursuing a multilevel marketing opportunity.

What is a pyramid scheme?

A pyramid scheme can be defined as a company that requires participants to make an investment in the business in exchange for the opportunity to sell products to consumers. Oftentimes, sellers are highly rewarded for recruiting newcomers, who then make a similar investment in the company.

Many types of businesses provide rewards for referrals, giving customers a small incentive to suggest a product or service to others, Bosley said. But if the recruitment model is the central feature of the company, it may be a pyramid scheme.

“Look for a really strong pay-and-recruit structure,” Bosley said. “If that’s there, I would worry about its legality.”

How pyramid schemes work

Here’s an example of a formula that a pyramid scheme could follow. Let’s say a seller makes a $500 investment to join the business. She is told she would be rewarded $150 per person if she recruits three more sellers, who would also make a $500 investment in the business.

From there, she would earn $30 for each new member that her recruits bring on. All of her recruits are given the same offer.

The original seller stands to make an increasing profit on her $500 investment, depending on how many people her recruits bring into the company. But each new member would make $450 at the first level, $50 short of their break-even point if they only recruit three more people. If they can’t pass the first level, they won’t get a return on their investment. Meanwhile, the company would continue to collect $500 from every new recruit, although it would have to pay commission to those who recruit more new members.

There could be instances where legitimate companies follow a similar model of rewarding recruitment. But if new member recruitment earns you more money than selling actual products or services, then the company would likely be a pyramid scheme.

Why are pyramid schemes illegal?

Pyramid schemes are illegal because they defraud investors who are promised their money back. In reality, money from bottom-level investors is used to pay other investors farther up the pyramid. And products in these schemes are often unsellable.

Pyramid schemes took off in the U.S. in the 1970s. One-on-one selling became popular for consumer items, such as cosmetics, kitchen tools and branded items like Tupperware, and pyramid schemes took advantage of the trend. The Federal Trade Commission began cracking down on scams that emphasized networking over selling actual goods, and the organization has continued to monitor the direct sales industry.

Another wave of pyramid schemes swept through the U.S. in the 1990s with the rise of email and internet access. Such scams still pop up today, though the FTC continues to bring cases against deceitful companies.

“Fraud goes in cycles, just like economies,” said Cheryl Jarvis, marketing professor and department head at Florida Atlantic University in Boca Raton, Fla.

The problem with pyramid schemes is the people at the top of the chain are the only ones who make money, Jarvis said. The majority of participants don’t see a return on their investment and ultimately lose money. Pyramid schemes are often short-lived because eventually, distributors run out of people to recruit and the operation stops growing.

“Mathematically, they’re unsustainable,” Jarvis said.

Report suspicious behavior. In addition to the FTC, state agencies investigate pyramid schemes. For instance, any fraudulent activity in New York should be reported to The New York State Attorney General’s Office. You could also file complaints with the Better Business Bureau.

How to avoid pyramid schemes

In addition to an emphasis on recruitment, here are other indicators that a direct sales opportunity may be a scam.

It’s sold as a passive income or easy money opportunity. As a recruitment strategy, distributors often emphasize how little effort is needed to make an income. In any business, selling enough product to turn a profit takes hard work, so be cautious if the company makes it sound simple.

Promise of unrealistic returns in a short amount of time. If you’re earning fast cash despite low sales, you’re likely receiving returns on people getting recruited to the company. Generating revenue too quickly could be a red flag.

No buy-back system. Pyramid schemes and legitimate multilevel marketing companies both typically require new members to purchase product to sell to consumers. However, reputable companies should offer a buy-back option if you want to leave the business. A company that doesn’t refund members for unsold product may be a part of a pyramid scheme.

High upfront fees. Be wary if the buy-in fee or initial investment seems high or exceeds the value of the products. High upfront fees combined with the lack of a buy-back program could indicate the business is a scam. Legitimate direct selling companies have a median startup fee of $99, according to the Direct Selling Association.

Abstract language. Take note if the company is unclear about processes or structures within the business. Product descriptions, prices and claims may also be vague or questionable. Recruiters could make inflated income claims as well to attract new sellers.

Do your own research rather than relying on what you hear from distributors, Bosley said. They are incentivized to recruit you and may not objectively present information.

“Of course, scheme operators aren’t going to make it easy for you,” she said. “There are layers of rhetoric and that makes it difficult to see the bones of the scheme.”

One way to quickly check a company’s legitimacy would be searching the Direct Selling Association’s database. Although not all existing direct sales companies are listed, a company that is a member of the DSA could be considered a reputable multilevel marketing business.

How to say ‘no’ to a direct sales recruiter

Social media has become a conduit for pyramid schemes. When people are approached about multilevel marketing opportunities, the sales pitch is often coming from someone they know, which can make it difficult to turn down, Bosley said.

“There’s feelings of obligation, allegiance, [of] not wanting to let someone down,” Bosley said. “We underestimate how powerful those kinds of emotions can be.”

The person asking you to join the company could be unknowingly participating in a pyramid scheme. If you’re skeptical about the operation, it’s best to reject them outright in a way you feel comfortable, Bosley said.

“If you give them any room, their incentives just keep coming,” she said.

First, you should be honest about your suspicions that there may be something illegal in the structure of the company. You could take a more thoughtful approach, communicating that you’re concerned about their involvement and well-being. You may want to point out that they could potentially harm others in the recruitment process.

“It doesn’t just affect you; it affects the person who recruited you and it affects the people you pass it on to,” Bosley said.

Request documentation. You could then ask for company documents, such as marketing plans or audited financial statements. The recruiter may not be able to provide this information, but if they can’t get such forms from someone else in the company, you could use that as a reason to reject their offer, Jarvis said.

“Whenever you get strong-arm social pressure, I’d say that’s a red flag,” she said.

Pyramid schemes vs. multi-level marketing companies

If you’re considering getting into the direct sales industry, here’s how to spot a pyramid scheme compared to a multilevel marketing company.

MLM company

Pyramid scheme

Recruitment rewards may be offered, but product sales drive income.

Recruitment is the primary revenue driver.

Buy-back program and exit strategy available for sellers.

No repurchase plan for unused inventory.

Initial investment cost is relative to the value of products.

Steep fees to join the business and receive products.

There is an actual consumer demand for products.

Product descriptions and claims are vague or misleading.

When direct selling could pay off

Not all multilevel marketing companies are pyramid schemes in disguise. A direct sales business could have a lower startup risk and lower cost of entry compared to other business opportunities, like buying a franchise, said Joseph Aquilina, ethics and compliance counsel for the Direct Selling Association. Although the payoff could be miniscule — as low as 70 cents or less per hour — sellers are usually independent contractors and can work on their own schedule.

“This is a very low-cost and low-risk opportunity for people to build their own businesses,” he said.

People often fall prey to pyramid schemes because of a need to supplement their household income, Aquilina said. While direct selling could provide a solution, scams and illegitimate businesses could turn people off the entire industry.

“It can take only a few bad apples to present a reputation challenge for the whole bunch,” he said.

You could also start a hobby-based business to monetize a personal interest. You would be able to follow your entrepreneurial instincts without answering to a larger organization. But getting a business up and running — and reaching profitability — takes time and commitment, even more so than direct selling.

Keep in mind that multilevel marketing depends on sales, and you have to be willing to put in effort to become successful, Jarvis said. Chasing a quick-fix or easy way to make income would likely land you in a pyramid scheme rather than a legitimate company.

“You’re going to be spending a lot more time than you think to make sales,” she said. “Those who are successful are the ones who make it a full-time job.”