Women underestimating their net worth

Discomfort with money keeps women from growing firms and raising capital

San Francisco Business Times - September 22, 2006

Najib Joe Hakim
Eileen Gittins raised $14 million for online vanity publisher Blurb.
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Insecurity is expensive.

From accountants and caterers to housecleaners, women business owners typically charge less than their male counterparts, according to consultants working in the Bay Area entrepreneur community.

The price difference, which can be as much as 50 percent, occurs mostly when women lack confidence in their skills and are uncomfortable discussing money. And that inability to charge full price is costing women business owners big time.

"We don't charge what we're worth because we don't value what we're doing. Men with self-esteem issues also have this problem, but usually it's women," said Simma Lieberman, a Berkeley-based consultant who has taught classes on power living and other topics to Fortune 500 companies and business groups. "I've taught the Charging What You're Worth class probably 100 times over the past 14 years. In my classes, it's 80 percent of the women who have this problem and 20 percent or less are men."

Staying small

The net result? Many women-owned businesses stay small.

Just 6.6 percent of businesses nationwide with more than $1 million in annual sales are owned by women, according to the most recent study by the Center for Women's Business Research.

"The ingredient that holds a lot of women back is they think too personally. They think about creating a job for themselves, not a business," said Candice Brown Elliott, who has raised $21 million in venture capital to transform her research on pixel technology into Clairvoyante Inc., a Sebastopol company which licenses the IP to Samsung and other flat screen manufacturers.

Hobby or a business?

One of Lieberman's clients was a Berkeley woman who wanted to start a catering business. She was passionate and confident about the actual work involved, but nervous about charging for it, according to Lieberman. She initially said she would charge $1,500 for a job because that's how much she thought her client would be willing to pay.

Once Lieberman coached her through the math however, she realized ingredients were going to cost $1,400, leaving her $100 profit in exchange for six hours of preparation and clean up, gas and other costs. Lieberman asked her, "'Is this a hobby or a business?'" The woman ultimately charged $2,500, the customer agreed to pay it and the woman now runs a successful catering business.

Lieberman has other examples. From a San Francisco accountant who charges 30 percent less than her male counterparts to a dog sitter who was only going to charge $10 a dog per day, women owners typically undercharge for their services.

One Oakland woman was earning $500 a day as a subcontractor for a national training organization. Then a local tech company who she'd been working with asked her to do an all-day workshop for them independently and asked what her fee was.

Her first response, according to Lieberman, was to charge the same $500.

After Lieberman discussed the preparation time and other work which the job would involve -- and reminded her the training company billed her out a higher fee -- she agreed to charge more.

Said Lieberman: "We finally got her fee up to $2,000. She just couldn't get the words out to say 'I charge $2,500 a day.'"

Fear factor

Part of the problem, according San Francisco's Gwendolyn Wright, is many women's discomfort with numbers and money.

Wright, who launched Wright Consultants in 1995 to help small businesses with financial and strategic planning, has helped about 250 entrepreneurs obtain more than $14 million in small business loans. She has assisted a handful to secure another $3 million in small business loans during the first half of 2006.

She said her male clients are more aggressive and "have an attitude of entitlement when it comes to getting a loan or financing their business."

She added: "Women are taught not to talk about the numbers. There's a small percentage who get it and say, 'I can reach for $1 million or borrow $100,000.' It's a fear factor."

The same dynamic of thinking small and timidly, is apparently at play when women seek venture capital.

Amy Millman, president of Springboard Enterprises, which coaches women on gaining access to venture cash, said: "I don't know whether it's a DNA thing, but women leave off a zero and men add a zero."

Women seeking a couple hundred thousand dollar investment get a lukewarm response from VCs who are seeking opportunities for a 10- to 25-fold return on their investment.

Gender gap noticed

Tim Taylor of Taylor Inc. in San Francisco coaches entrepreneurs on how to pitch their companies to VCs and score funding. He's coached about three dozen people every year for the past four years -- roughly 20 percent of them women.

He said the women who succeed notice the gender gap (most VCs hearing their pitches are men) and don't complain about it. The women who are successful in securing outside investment focus on execution and don't get too wrapped up in the specific products or take it personally.

And, like Eileen Gittins, they think big.

Gittins, a former investment banker who has also held C-level positions at Kodak and Personify, has raised more than $60 million in venture capital. She most recently raised $14 million for Blurb, a creative book publishing service in San Francisco just now emerging from stealth mode.

Canaan Partners, Anthem Venture Partners and a handful of wealthy individuals are banking on her ability to cash in on the growing segment of writers and photographers eager to publish their efforts.

Said Gittins: "The amount of capital you seek is a function of what you're trying to accomplish. You can't be an effective CEO if you don't measure results. And measurement is mathematics. You have to be comfortable with that."