The Exit Gap: Why Women Receive Less Selling Their Business

According to our newly released 2024 Insights Report , less than 1% of businesses that sold were female-founded, and these businesses were, on average, valued 30% lower compared to their male-founded counterparts.

Imagine building a successful business, only to sell it for 30% less than a male founder would with a similar business in the same industry. If that doesn't sit right with you, you're not alone. The Exit Gap—the gender disparity in business exits—is a reality that many women entrepreneurs face today.

Understanding this gap is crucial because it directly impacts the financial success and legacy that female founders can create from their hard work.

The Data on Gender Disparities in Business Exits

Over a 10-year research period, Buzzacott, a London-based accounting firm, found that less than 1% of businesses that sold a majority stake were female-founded. In the U.S., this figure was 1.37%, and in Europe and the rest of the world, it was just 0.35%. These statistics highlight the significant underrepresentation of women in business exits, especially compared to their male counterparts.

Moreover, male-founded businesses in the Technology, Media, and Telecommunications (TMT) sectors were valued 1.5 times higher on average compared to their female-founded counterparts. In the consumer sector, male-owned businesses were valued 18% higher than female-owned businesses.

For every $1 million a female founder receives, a male founder might receive $1.5 million for a similar business, reflecting a significant disparity in exit outcomes.

Valuation Biases

The report underscores the systemic undervaluation of female-founded businesses. Despite identical businesses being run by a man and a woman, the male-led business is likely to be valued and sold for more. This discrepancy highlights the systemic biases that persist in the business valuation and exit processes.

As Lien De Pau, founder of The Big Exit, mentions on the Women On A Rise podcast:

"The undervaluation of female-founded businesses is a significant issue.

Despite identical businesses being run by a man and a woman, the male-led business is likely to be valued and sold for more".

Steps to Overcome the Exit Gap

To bridge this gap, several steps can be taken:

1. Independent Valuations

Obtaining an independent business valuation is crucial to avoid biases that can occur when brokers or other invested parties over- or undervalue a business based on gender. Understanding the strengths and weaknesses of the business can help female entrepreneurs negotiate better deals and prepare their businesses for sale more effectively.

2. Seeking Female Investors and Seller/Buyer Networks

Connecting with female-led private equity (PE) firms and communities of women who have successfully exited their businesses can help female entrepreneurs navigate the biases and challenges in the exit process.

3. Taking Ownership of the Exit Process

Women should educate themselves about the exit process early, well before they plan to sell. Knowing how businesses are valued and what factors drive valuation can help them better prepare for negotiations and avoid being undervalued.

Awareness and Preparing for Your Big Exit

Carrie Kerpen, CEO of The Whisper Group, underscores the importance of awareness. When she sold her company for an eight-figure sum, she learned that women business owners have different experiences when it comes to exiting their businesses than men.

"People react when I mention that. Men hate it. Some women hate it, too. We want to believe that we all have the exact same opportunities, and that there are no differences in what we are capable of.

And while women certainly are capable, our journey is unquestionably more difficult".

For female entrepreneurs, the key takeaway is to prepare early and strategically. Begin with an independent valuation to understand your business's worth without bias. Next, focus on building strong networks, particularly with experts like women owners who've exited their businesses, female-led private equity firms, and communities of female business owners looking to exit.

Resources for Deeper Understanding

To explore these trends further, read our The Gender Exit Gap Report [2024 Insights], visit the Buzzacott Exit Gap Study, check out the Exit Gap Report by Carrie Kerpen or listen to "The Surprising Truth About Female Business Exits" episode on the Women On The Rise podcast, where Jen Blandos is interviewing me about the exit gap.

For practical tips on getting exit-ready and selling your business for maximum value, subscribe to our “Master Your Business Exit: Weekly Insights” newsletter below, as this is what I write about.