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Heather McGuire

Instructor Dennis Wilson


ECON-2010-400
24 July 2015
Term Paper
Women Finding Equilibrium to Start Their Own Business
In the world of business, female owned companies increased by 20.1% between 2002 and
2007. According to the National Womens Business Council (NWBC), this represents 7.8 million
female business owners out of the 157 million women in the United States (Census Bureau). As
of 2012, nearly five percent of all American women owned their own business, and it has
become both inspirational to other women and more socially acceptable. As with anyone who
aspires to start their own business, women must carefully consider the added benefits associated
with entrepreneurship, and weigh the perks of self-employment against all costs that come with
running a business. Whether or not an entrepreneur has the greatest idea that one could imagine,
a business will not be economically successful if the costs of operation outweigh the revenues.
For a woman to be successful in owning her own business, she must find the right balance
between costs, both business costs and time opportunity costs, and the benefits or profits she may
gain.
All businesses, whether for profit or nonprofit, acquire certain monetary and capital costs.
These costs can be adjusted to a certain extent depending on how competitive the market is. It is
typical for most startup companies to begin with costs before they can begin to make enough

revenues to pay operational costs. These costs can vary from business to business, but according
to the blog article How to Estimate the Cost of Starting a Business from Scratch written by
Caron Beesley, a writer for the U.S. Small Business Administration (SBA), startup costs include
Expenses are the costs involved in preparing to open a business and may include things like
market research, the mileage costs involved in researching a location, advertising, training,
wages, and any fees paid to professionals or consultants such as a lawyer or accountant, and
Capital Expenditures [are] one-time costs to purchase assets such as inventory, property,
vehicles, etc. Beyond startup costs, a business incurs a risk cost. This cost is the amount of
uncertainty and liability that a person may or may not have to take on when starting their own
business. Each stage of life and personal feelings towards risk must be taken into account in
order to determine the risk costs associated with starting a particular business. Whether the cost
is calculable, including capital expenditures, wages, cost of goods or inventory, or the cost to
lease a workspace, or it is incalculable, such as risk, the danger of losing out on something else,
or potential bankruptcy, these economic costs must be carefully considered prior to becoming an
entrepreneur.
After a woman considers the startup costs associated with entrepreneurship, she must
then take into account all operational costs that come with running a business indefinitely.
According to the Wikimedia article Operating Cost, there are two types of costs related to
keeping a business operational over time. These two types of costs are fixed cost and variable
costs. Fixed costsare the same whether the operation is closed or running at 100% capacity.
Fixed Costs include items such as the rent of the building (Wikimedia). Often, fixed costs also
include labor wages, salaries, and other costs that must be paid on a regular basis in order to keep
the business open. On the contrary, it is asserted that variable costs include expenses that a

company incurs that fluctuate depending on the amount of production the business is
experiencing at a particular time. Such diverse variable expenses can create an unpredictable
total cost, or combined fixed and variable costs. This is a form of risk that must be deeply
considered by any entrepreneur who desires success, including women in business.
More importantly, many business owners would argue that some of the most extensive
costs of business are not related to the business venture at all. In fact, the substantial difference
between business owners and non-business owners resides in their ability to risk a steady salary,
fringe benefits, and time with family and friends for the potential profits that they may earn from
starting, owning, and operating their own company. A key questions that the SBA (U.S. Small
Business Administration) suggests entrepreneurs ask themselves before entering a business is
Am I prepared to spend the time and money needed to get my business started? Because it is
difficult for many people to balance time and careers when they work for someone else, it
becomes especially tough for entrepreneurs to do the same. Many women in business also plan to
spend time with relatives, go on vacations, or take some time off to start a family. While it is not
the case for all women to want to start a family, it is a time opportunity cost that must be
evaluated prior to starting a business. These important life decisions affect an individuals ability
to operate a company successfully. If extended periods of time off are required, the personal
costs of owning a business may be extremely high. On the other hand, if a career is the main goal
of that person, the personal costs may be much lower.
Even though there are many costs and risks associated with starting a business, owning
and operating a company can produce enormous benefits for an entrepreneur. A successful
business can turn revenues into a normal profit in a purely competitive market, and a slightly
higher than normal economic profit in a monopolistically competitive market. If economic

profits are normal, the company is effectively producing at, or near, the equilibrium between
demand and supply (McConnell). This equilibrium, where economic profits are normal, means
that there is an economic profit of zero. However, this is not a negative factor; it simply means
that marginal costs of operating the business are equal to the marginal benefits received by
customers for the product or service provided. For the female entrepreneur, this means that the
company she owns is most likely making the optimal accounting profit, and effectively utilizing
her business resources. By balancing marginal costs and marginal benefits, she has maximized
her profitability, and is reaping one of the monetary benefits of owning her own business.
Additionally, she may experience a sense of accomplishment, pride, and success in her venture to
start, run, and manage a business. These are social and emotional benefits that result from being
profitable.
Beyond monetary, social, and emotional benefits that come from succeeding in business,
an entrepreneur may benefit personally from starting their own company. Personal benefits can
include an increased ability to vacation or spend time with family and friends because they have
more flexible schedules than a typical nine to five career may offer. Furthermore, a female
entrepreneur may feel a stronger sense of pride and accomplishment at home because she is
successful at her company. This may resonate with her family, and may encourage them to
pursue their own economic ventures in the future. Another personal benefit for successful startup
business owners is that they eventually feel more secure financially at home as their career and
business ownership grows stronger. This sense of security can encourage and motivate both the
woman and others who observe her success. Finally, if the business is successful, she may feel
happier with life and in her career. Although these benefits are intangible and therefore difficult
to measure, they are essential in motivating strong potential business owners.

In the end, a hopeful woman who aspires to own her own business must evaluate the
conditions surrounding a startup company and the potential perks of accomplishing her dream.
By weighing the startup and continuous operating costs of the business, both fixed and variable,
with the potential to become profitable over time, any potential entrepreneur can form an opinion
as to whether the financial expenses will be below, or at most equal to, the earnings gained.
Additionally, a business holds a certain amount of personal risk both in investments and in
emotions, so it is essential to determine, for oneself, whether or not the investment will equate to
long term success. After balancing the tangible risks of starting a business, a female entrepreneur
must understand her personal goals and her career goals. When she understands both, she can
then determine whether her desire to own a business exceeds the benefits of other personal
ventures including, but not limited to, raising a family at home or working a steady job with
fringe benefits elsewhere. To be and feel successful in owning a business, the marginal benefits
must either equal or surpass the marginal costs associated with ownership of the business. If the
costs outweigh the benefits, it is not a business opportunity that should be considered.

Works Cited

"20 Questions Before Starting." Thinking About Starting A Business? U.S. Small Business
Administration. Web. 24 July 2015.
Beesley, Caron. "How to Estimate the Cost of Starting a Business from Scratch." U.S. Small
Business Administration, 26 Jan. 2015. Web. 24 July 2015.
Mabrey, Wendy. "Should You Start Your Own Business?" Women In Business 56.3 (2004):
16. Biography Reference Center. Web. 24 July 2015.
McConnell, Campbell R. Microeconomics, 20th ed. New York: McGraw-Hill. 2015. Print.
"Operating Cost." Wikipedia. Wikimedia Foundation, 5 Mar. 2015. Web. 24 July 2015.
United States Census Bureau. Facts for Features: Women's History Month: March 2012. The
United States Census Bureau, CB12-FF.05, 22 Feb. 2012. Web. 24 July 2015.
"Women-Owned Businesses." Women-Owned Businesses | National Women's Business Council.
National Women's Business Council, 2012. Web. 24 July 2015.