Surprise! Women started more firms than men.

Before the recession, women were starting twice as many firms as men. Now, they may do even better.

By , Correspondent

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    Kathy Doherty (l.) and her tennis and business partner, Ruth Marvin Webster, started a small business after Ms. Webster was laid off. Net Wit markets tennis shirts with clever sayings on them.
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Ruth Marvin Webster and her tennis partner, Kathy Doherty, spent years making puns at their racquet club: "Love all," "Get a grip," "Tightly strung," "Yours!" They'd even joked about turning their witticisms into a T-shirt business. So after Ms. Webster was laid off in 2008 from her job as a features writer for a San Diego daily, the pair took the plunge and started Net Wit, a business so new that its website only went up in mid-November.

"The economy is the reason we started the company, absolutely," Webster says. Of course, the sour economy hasn't helped the bottom line. "It's harder to make a sale because it's frivolous," she says. "You can live without a tennis shirt. Maybe not as happily, but you can live."

If opening a business demands courage, opening one in the aftermath of the worst economic downturn since the Depression demands a special steeliness, especially for female entrepreneurs. Because women-owned businesses are concentrated in retail and service industries – think Estée Lauder, Coco Chanel, Mrs. Fields Cookies, even Zipcar – they were among the first to feel the downturn. Now, in a fragile recovery, the business climate requires other qualities, like resourcefulness and patience.

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"They're rediscovering the art of 'bootstrapping' and keeping your overhead low and keeping your operating costs low so you can adjust to these economic shocks and keep adjusting," says Jeffrey Cornwall, director of the Center for Entrepreneurship at Belmont University in Nashville, Tenn. "It doesn't mean they're not growing their business or not starting their business, it means they're finding another way to get there."

Take Mary Frankie Forte, owner of the It's a Grind coffee shop in downtown Oakland, Calif. "Customers are definitely cutting back," she says. Some have downgraded from lattes to drip coffee, which costs half as much; others may get a muffin only twice a week instead of daily. "I'm just trying to make do with what I have…. Loans to pay back, I don't need."

This tendency of women entrepreneurs to take out fewer loans and grow more slowly is well known. "Women tend to be ... more conservative and careful in their financial-management practices," says Susan Coleman, professor of economics at Hartford University in Connecticut. That may be the right strategy for this era, says Dr. Cornwall. "Those businesses that right now are taking on less debt are going to be those that are much stronger coming out of the recession."

Some 10.1 million firms are owned or co-owned by women, 40 percent of all businesses in the United States, says the Center for Women's Business Research, a research group in McLean, Va. Between 2002 and 2007, women created almost twice as many businesses as men, according to data from the Census Bureau. The number of women transitioning from the labor force to self-employment hit a two-decade low in 2007, just as the recession was about to hit, according to the Kauffman Foundation, a Kansas City, Mo., group devoted to entrepreneurship. By 2009, the rate was back to normal.

Borrowing is another matter. More women than men left the already small ranks of those taking out subsidized loans from the Small Business Administration between 2007 and 2009. This year the number of SBA loans jumped for men, but kept falling for women.

"We haven't taken one dime in loans," says Heather Anderson, co-owner of Bulldogg's Jersey Shop in Oceanside, Calif., which sells NFL, NBA, and other jerseys. "The idea from the beginning was to choose something that would still have a market in a down economy.... The last thing people will give up is their team."

The strategy has worked. "I anticipate by Christmas, our business will eclipse our day jobs," says Ms. Anderson, a freelance journalist whose business partner and fiancé is a personal trainer.

"The number of women-owned firms is continuing to increase," says Professor Coleman. "Some of the older literature and research said [that] to be successful, you have to do it the way a man does it. [But] they are not just imitating men, they are creating new possibilities – taking control of their own destiny. It's very, very exciting."

Webster and Ms. Doherty prioritized cost-cutting so that they could grow without loans. "So far, we've just been selling them to our friends," says Webster, but they're moving into e-commerce, "so we don't have to pay great gobs of money to these pro shops or tennis shops – that are all going out of business, anyway."

That patience has paid off. In only two months, Net Wit has broken even. Now, the pair is looking forward to expanding with sales to a women's team, an upcoming launch party, and a website. The other day, Webster says, she heard about two women at a coffee shop saying, "I saw women playing tennis, wearing the cutest shirts – 'Love all‚' 'Get a grip.'" Webster delights in the word-of-mouth advertising. "Our first success!"

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