The What, How and Why of Minority Business Certification
They say that every generation must learn the key lessons of life. Similarly, every generation of minority entrepreneurs needs to be made aware of the world of minority business certification.
There are so many official and legal documents that are required for entrepreneurs to maintain and have ready for one certification or another that it is understandably confusing and frustrating for those entrepreneurs who are just trying to make money.
Some minority entrepreneurs just throw up their hands and declare they are going to try to make it without any minority certification; after all who needs the costs, the time required to complete the various certifications, the intrusion into their lives and their business, the potential loss of privacy and sensitive personal and business information, or the potential stigma of being labeled a “certified Minority Business Enterprise.”
All of these are good reasons not to get certified. Yet the reasons and the potential benefits to businesses that do get certified are far greater than these costs for entrepreneurs who use their certifications as an important marketing tool.
My former Connecticut Minority Supplier Development Council (CMSDC) Board of Directors chairman Tom Davis of Cartus liked to say that a minority certification is like a gym membership; having it does nothing for you unless you use it. And even if you actively “use” your certification, this status is not a guarantee of success, nor will it make a bad business a good business.
But before going any further on why ethnic and racial minority entrepreneurs should seek minority business certification, we should identify the complete array of available certifications; the differences of those certifications and purpose of those certifications.
Basically there are three types of minority certifications: private certifications; federal government certifications; and state and local certifications. The Greater New England Minority Supplier Development Council (GNEMSDC) as the regional affiliate of the National Minority Supplier Development Council (NMSDC) offers a private certification.
Both have over 3,500 private corporate members and 15,000 certified MBEs in its network conducting over $100 billion of business with each other. The NMSDC certification is accepted by the corporate members of the NMSDC as proof that the certified minority business enterprise (MBE) is at least 51 percent owned, managed and controlled by members of the African American, Hispanic American, Asian American or Native American population. This certification saves those corporate members time, expense and potential embarrassment.
Think of the alternative of each corporation having its own rules and process of vetting the authenticity of the ownership, management and control of businesses claiming to be minority. It would not only be more costly, it would be a disaster. The NMSDC does this vetting for its corporate members.
NMSDC certifications are done by one of the 37 regional Councils, like the Greater New England Minority Supplier Development Council (GNEMSDC). The process involves an application and the provision by the minority entrepreneur of financial, legal, organizational, and tax information. If you are not willing to share this information with the GNEMSDC, we cannot certify the business.
But business owners who understandably are wary of sharing sensitive personal and business information need to realize that in the world of corporate and public sector procurement, the buying community will demand this information as well. In business these days there really are very few secrets. GNEMSDC certification costs $300 and this must be renewed every year on the anniversary of the initial certification with a payment of $150.
The GNEMSDC certification can be downloaded from our Website, www.gnemsdc.org or by calling the office 888-875-7114.
On the federal level, there are several types of certifications for minority businesses. The Small Disadvantaged Business (SDB) certification was once a time consuming but free certification that required a detailed certification application. Now SDB certification is what is called “self certification.”
SDB businesses are businesses that are at least 51 percent owned and managed by entrepreneurs who are considered “disadvantaged.” There is a presumption that ethnic and racial minority entrepreneurs and women entrepreneurs are “disadvantaged.” In order to get this status, all an entrepreneur has to is claim on a federal contract that they are an SDB.
If the entrepreneur has a net worth, excluding the ownership value in their company and their primary residence, greater than $750,000, the entrepreneur and their business are not eligible for SDB status. SDB’s benefit because federal contractors often have a 5 percent SDB goal and there are 10 percent price preferences for SDBs. The price preference means that SDB bids that are less than 10 percent higher than non-SDB bids are considered superior. To register your business as an SDB, you should contact the Central Contracting Registration site, www.ccr.gov.
To complete this registration, you will need a Tax ID number, a DUNNS number, information about your business including your North American Industrial Codes and the ability to conduct business electronically through Electronic Funds Transfers (EFTs). Without this information, having SDB status is worthless.
The Federal Government, Department of Transportation/Federal Highway Administration also has what is called the Disadvantaged Business Enterprise (DBE) certification. The Federal Highway Administration (FHA) interacts with state Departments of Transportation around the country, like MASSDOT and CONNDOT or related agencies like MBTA.
Minority business owners who want to participate in the hundreds of millions of dollars of MBTA contracts must have the DBE certification if they want a reasonable chance of securing MBTA contracts as either primes or subs.
In order to get DBE certification, a business should visit the Department of Transportation in their state. For information on your state’s DBE program visit (http://www.osdbu.dot.gov/DBEProgram/StateDBELiaisonCertificationOfficers.cfm).
States also have minority small business certification programs. Massachusetts State Office of Minority and Women Business Assistance (SOMWBA) and the Connecticut the Department of Administrative Services are the two organizations that certify businesses as minority or women owned.
These certifications are designed to assist procurement organizations in state government (some municipalities also use State certifications) find minority and women owned small businesses. In many states, including Massachusetts and Connecticut, the state has goals and in some cases set asides, for minority or women small businesses.
In Connecticut, the 6.25 percent set-aside program reads minority “or” women, making the two groups competitors for the same dollars. In Massachusetts, 6 percent of the over $4 billion in state spending is targeted to SOMWBA certified businesses.
The good news is that the information needed on one of these applications is the same information needed on the others. Minority entrepreneurs can speed up the process of applying for these various certifications at the same time.
We recommend that entrepreneurs seek all of these certifications. You never know when you will need one, but rest assured, if you are planning to sell goods and services to businesses and the public sector, you will need them.
Dr. Fred McKinney is president and CEO of the Greater New England Minority Supplier Development Council.