In recent years, enterprise organizations have made initiatives to further diversify their supply chains and work with a larger number of minority-owned businesses. However, a looming challenge can often stand in the way of suppliers gaining new contracts and buyers finding the right suppliers to hit diversity goals—certifications.
While official certifications offer many benefits on both sides of the procurement process— suppliers gain the visibility they need to stand out against competition and buyers have increased confidence that a supplier will fit into goals—the process of getting those certifications is not always feasible or simple. This is especially true for minority-owned companies, which have historically faced additional barriers to growth.
It’s high time we acknowledge the difficulties minority-owned businesses face, address the MBE certification challenge, and take steps to provide easier access to new business opportunities. By doing so, enterprise organizations can gain a better view of potential suppliers, grow supplier diversity programs, and make a difference in their communities.
Minority-Owned businesses face additional struggles
It’s no secret that starting any small business comes with the risk of failure. However, of the estimated 30.2 million small businesses in the United States, CNBC reports that black-owned businesses seem to be struggling the most, with eight in ten closing within the first 18 months of business. Why is it that these businesses seem to have a harder time staying afloat?
Inequity in business opportunities
Black-owned businesses, in particular, tend to start off at a disadvantage compared to white-owned enterprises. For starters, black-owned businesses are more likely to be located in areas “with business environments that are more likely to produce poor business outcomes.” Additionally, the same report states that, while an estimated 15% of white Americans hold business equity, Black Americans hold on 5%.
Combine those factors with the fact that black-owned businesses tend to experience a larger gap in business activity and the fact that their business tends to be statically focused in only 20% of industries, these companies have an uphill battle in being successful.
Difficulties from the pandemic
While the pandemic adversely affected businesses across the globe, minority-owned businesses took an even harder hit when it came to being in a financially stable place and receiving financial help when the pandemic began.
Not only were a larger number of minority-owned businesses considered “financially at-risk” before the pandemic, but more minority-owned businesses struggled to receive PPP loans at the beginning of the pandemic. Many minority-owned companies were rejected during the first and second rounds of funding, even though some went through the process of applying to multiple banks. Some businesses were unable to get banks to respond to their applications in the first place.
When we look at all these existing difficulties, where does certification come in?
The MBE certification challenge
While earning a certification does not automatically equal increased revenue for minority-owned businesses, it does open the door for additional opportunities and contracts. The thing is, getting those certifications isn’t a walk in the park.
Requirements for diversity certification
There are a number of different diversity certifications a small business can apply for. In order to qualify as a Minority Business Enterprise, a business must meet the following standards:
- Be a for-profit business located in the United States
- Be majority-owned (51%) or run on a daily basis by someone who belongs to one of four ethnic groups:
- African American
- Asian American
- Native American
- Hispanic American
The cost of certification
The cost of certification can vary depending on the agency — federal, state, or private sector— with which a company tries to certify within as well as the business’ size and location. Typically, the financial fee for an MBE certification from a private sector can range from $350 to $1,000.
While there is often a monetary cost associated with earning a Minority Business Enterprise certification, the process also requires a lot of time and effort. According to the National Minority Supplier Development Council, there are nine steps to MBE certification that require a slew of documents and include:
- Completing a full online application
- Uploading proper documentation
- Having the application go through an audit for accuracy
- Submitting to a site visit by an NMSDC Certification Specialist, and more.
Missed business opportunities
Diversity certifications bring a new level of visibility to small businesses, allowing them to show up in more supplier discovery searches done by larger enterprises. They also help provide a more equitable procurement landscape that allows small and diverse businesses to compete for bigger contracts. Without those certifications, suppliers can be missing out on potential business opportunities.
From a buyer’s perspective, trying to build and grow supplier diversity programs can be especially challenging when you don’t have a full scope of all viable suppliers that can help meet goals. When searching for diverse suppliers, procurement teams may not discover certain suppliers that meet their needs if a lack of certification causes that supplier to be absent from a search.
Organizations can end up missing out on countless opportunities to meet diversity goals, create competition within their supply chains, and achieve higher cost savings as a result of not discovering those suppliers.
How TealBook solves MBE certification challenges
To combat the difficulties suppliers and buyers face when it comes to diversity certifications, TealBook allows suppliers to self-certify within our supplier data platform.
As an organization looking to expand your business with suppliers who qualify as small and diverse, you’ll be able to granularly search for suppliers who have an MBE certification within the TealBook platform and discover suppliers who would otherwise not appear on manual searches.
How to self-certify
Suppliers can spend less than 15 minutes per year certifying their profile within the platform and get in front of organizations looking to do business with minority-owned and other diverse businesses. Self-certification is as easy as these five steps:
- Go to your TealBook profile and click “Add a Certification” in the Qualifications section.
- Select the certification category you are wishing to add.
- Click “Self certify” and the certification type.
- Choose your certification.
- Add the details of your certification and click “Add”.
Working toward a more equitable supply chain
Your supply chain should look like the world around you. Once you have a better understanding of the challenges minority-owned businesses face, you can work toward achieving that. Having the tools needed to find these suppliers with ease, even those without official certifications, can help unlock opportunities that positively impact both organizations.
TealBook helps organizations, both large and small, connect through the power of strong supplier data and diversity search capabilities. Contact our team to learn how our enhanced supplier discovery capabilities and self-certification feature can help you connect with the diverse suppliers you need to make a difference across your organization.
