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Are women more risk-averse in business?

Women can have a heightened awareness of risk. This does not mean we are ‘risk-averse’ – what it means is that we consider risks much more carefully. And this actually is a very useful trait to have in business as it supports business sustainability.

Research shows that it’s not unusual for women to have a longer thought and assessment process before making business decisions – we tend to look at a lot more information and take longer to analyse it before making decisions. It’s back to our different approach to risk.

This is generally a very good and sensible approach to take. But it can sometimes come across to others as a lack of confidence and there comes a point when our risk-awareness can potentially hold us back a bit. This is particularly evident when it comes to taking on external money to help grow our businesses.

For example, women can be ‘debt-averse’, which means that we may be reluctant to take on debt funding such as a loan from a friend or a bank, and even more reluctant when that lending is ‘secured’ against something like our family home. That’s just a step too far for many women – it’s too risky to gamble with the family home and risk the safety and security of our families. If you have ever felt this way about taking on external funding, it’s not just you. Many women feel the same way. The problem is, if you don’t have enough money at the right time to grow your business you can get a bit stuck.

Secondly, when we have assessed the risks and taken the decision to get some more money in to the business, we ask for less than men do. This is partly due to us being much more careful with our costings and budgeting, but it can also be a bit of a confidence issue too. And, despite our belief and ambition, unfortunately it always takes much longer and costs much more to get to where we want to be (a rough rule of thumb is that it will take you twice as long and cost you half as much again as you originally think). The key is to work out how much money you need and add more onto it – how about asking for that third more that men do? If you think you need £15,000, ask for £20,000. For the right people, with the right plan, money will be available…let’s just make sure it’s you that gets what you need.

Many businesses start up and grow very well without taking on any funding from banks and investors, such as Jeanette Forbes OBE, owner of Grape and Grain in Aberdeen, who self-funded her new business: “I founded one of my recent business ventures, a high-end wine bar, entirely from the revenue generated by my other businesses.”

Again, this is a super-sensible approach to self-fund, but if you really need the money to grow your business, for example to fund a new piece of equipment or move into premises and you simply don’t have the cashflow to do that, you may be a bit stifled without getting some external funding.

Now you know about risk-awareness and both the positives and potential negatives of it, thinking about your own approach to risk is worthwhile. Understanding your ‘risk appetite’ can help you work out how best to raise funding for your business, if you decide to go down that route to speed up your growth plans a bit. Are you super-cautious and maybe need to take a little more carefully managed risk at some times?

Now for the good news! Debt funders (e.g. banks) and equity funders (e.g. Business Angels and Venture Capital) are becoming much more aware of the distinct challenges women face in finding money to develop their businesses. Many financial organisations have committed to improving women’s access to finance by signing up to the Investing in Women code.

In Scotland our Government and economic development organisations (such as Business Gateway, Scottish Enterprise, Highlands & Islands Enterprise and South of Scotland Enterprise) are taking great strides forward in delivering support that is better tailored to women. And other entrepreneurial support organisations such as the national company creation programme for Scotland’s academic community, Converge, and the entrepreneurial talent competition Scottish EDGE run funding competitions that offer terrific support for businesses owned or led by women, with women securing more and more funding.

Claudia Cavalluzzo, Director of Converge, says: “At Converge we are seeing very encouraging results in this space. Nearly half of last year’s Converge cohort were women, and 50% of Converge prizes were awarded to female-led businesses. These stats have come a long way from those recorded in the early days of the programme. Year on year, we strive to ensure that gender balance is not an exception but the norm.”

Evelyn McDonald, the CEO of Scottish EDGE 2020, notes: “Over the last two years of Scottish EDGE, during which just over £4m has been awarded to start-up businesses throughout Scotland, I’m encouraged to note that almost £2m of that funding was awarded to female-led businesses. Whilst the application numbers from female businesses to the EDGE competition stands at an average of 30% per round, the amount being taken away by female businesses outperforms this at 34%.”

And here’s what Amanda Pickford of ThermaFy, awarded a whopping £100,000 by Scottish EDGE in the 2019 round, had to say about her Scottish EDGE journey: “It means so much to me, not only winning the money but the fact that everyone believed in the business enough to support it with the maximum amount you could award. The kudos and support that comes from winning, I know is really going to help the business grow. I would encourage other women-owned businesses to apply for opportunities like Scottish EDGE. It can take time to refine a pitch but there is help out there and the more you do the better you get”

If Amanda can do it, so can you!

In summary, if you are looking for external funding for your business, think about the following:

Be aware that women can have a different approach to risk and it can be very helpful

Think about your own approach to risk in everyday life and how that might impact your decision to take on external funding for your business

Do you need to push yourself out of your comfort zone just a wee bit more to get what you need?

Ask for more – you need to ask for the right amount of money

Speak to other women in business about their experiences of raising money – they are always happy to give a bit of sage advice


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