For entrepreneurs, it is difficult to find cash to invest outside of their business.

Catherine Graham spent nearly a decade running two businesses in parallel. But as she grew those companies, Graham was acutely aware of what she wasn’t building: her personal investment portfolio.

“Everything else was put on hold while we built these two companies at the same time,” says Graham, who, with her husband, co-founded Rightsleeve, a Toronto-based promotional products company, and Commonsku Inc., a software company spun out of a platform they developed internally to address Rightsleeve’s product management and customer relations needs. “We were up to our necks in mortgages; we had borrowed money from family and were raising three kids at the same time. There was no money for anything other than growing those companies.”

This meant many years of not being able to save for retirement, adds Graham, who sold Rightsleeve in 2019 and remains the CEO of Commonsku. The latter has since grown into a sales and marketing software provider serving around 1,000 distributors and suppliers in the promotional products industry.

“The compound interest lost during those years when you don’t contribute anything to those investments is something you can never get back,” Ms. Graham says.

Many entrepreneurs face the challenge of trying to save and invest while growing their business. But the problem appears to be more common and acute among female business owners who, studies show, are often unable to obtain financing and tend to pay themselves below-market incomes.

According to a report by Leading Retirement Solutions, a Seattle retirement plan management consultancy, only 43 percent of female entrepreneurs regularly contribute to a retirement plan, compared with 50 percent of male entrepreneurs. The report also cites an increase in the percentage of female entrepreneurs who said they were not saving for retirement at all — 14 percent, up from 4 percent the year before.

However, female entrepreneurs are also more likely to turn to savings and investments to fund their retirement. A report released last February noted that RRSP assets play a larger role in the retirement plans of female entrepreneurs than men. This can be attributed in part to women’s greater propensity, compared to men, to contribute to an RRSP. Female entrepreneurs also tend to own service-related businesses and cannot always count on company equity to fund their retirement, the report stated.

These challenges have shaped how some female entrepreneurs choose to invest. Laurel Steinfield, an adjunct professor of entrepreneurship at Western University’s Ivey Business School in London, Ontario, notes that female business owners who later become venture capitalists tend to be “very precise about how they invest money” and apply a deeper level of due diligence to their investment decisions.

“I think it’s because they’re trying to make really good decisions to try to catch up,” Ms. Steinfield says.

Women who have been business owners also tend to seek out female-led companies as investment targets. While they look for high-growth unicorn companies, some are also willing to add lower-growth women-owned companies to their portfolio if they see a viable business model.

“They understand the realities that women face [entrepreneurs] they face when trying to obtain financing and are willing to [accept] “Investors prefer lower growth because they know they can create a funding option that will actually help them achieve the social justice initiatives they’re looking for,” Steinfield explains. “The world of capitalism is run on a profit motive, but if you get a group of investors who understand that there’s more to it than just profits and that at the end of the day you’re making enough to put your kids through college, then that’s OK, right?”

Shelley Kuipers, CEO and founder of The51 Ventures Inc., a women-backed venture fund that provides capital to entrepreneurs who are women or identify as women, says there is a strong case for female entrepreneurs investing in women-led businesses.

“When a woman is part of the investment team, women entrepreneurs have a better chance of getting funding than if there are no women on that investment team,” she says. “And even though they are underinvested in, women as an asset class outperform, so we see it as a very opportunistic financial opportunity.”

Ms. Kuiper notes that when women entrepreneurs invest in other women entrepreneurs, they often contribute more than just financial capital.

“They also bring human capital: their experience as entrepreneurs and their willingness to advise and share their knowledge,” he says. “In our community we have successful operators with a huge amount of experience and knowledge that can be leveraged along with that financial capital.”

Investing in a woman-led company has turned out to be a good move for Sarah Prevette, founder and CEO of Future Design School, a Toronto-based educational consulting firm that works in more than 65 countries. Among the angel investment investments she has made over the years, one of the most successful is a woman-owned company: Ruggable LLC, a Gardena, California-based company that sells machine-washable rugs.

“The data shows that women-led businesses tend to generate higher revenues and profitability,” says Prevette.

But even when their businesses are successful, female entrepreneurs often don’t pay themselves enough — an oversight that can impact their ability to grow their personal investments. Ms. Prevette says it’s a good idea for female entrepreneurs to talk to their peers about compensation to make sure they’re earning an income that aligns with the pay of chief executives at similarly sized companies in their industry.

While entrepreneurs typically have most of their money invested in their own company, it is also wise to diversify it with other assets, Prevette adds. In addition to investing in startups and venture capital funds, she and her husband, who also has his own company, have invested their money in real estate.

“It has turned out to be a really great investment for us – the properties are increasing in value and we have rental properties that generate a steady stream of income,” explains Ms Prevette.

Still, she adds, the best investment has been her own business. It is a sentiment echoed by Ms Graham, who says the sale of Rightsleeve allowed her and her husband to pay off debt and put some funds into their investment portfolios. She has made some investments as angel investors and limited partners. When it comes to capital markets, she prefers to invest in exchange-traded funds.

“I think the key decision for me was that it’s not a good use of my time to think about what stocks I’m going to buy,” says Graham, who worked in banking – including financial planning and mortgage lending to high-net-worth clients – in the early years of his career. “My time is better spent continuing to grow the business.”