In a nutshell: Gaining Minority-Owned Business Enterprise status can help businesses bidding for government contracts.
Governments at all levels have made efforts for decades to ensure that minority-owned businesses get a seat at the table when companies bid on public contracts.
Becoming a certified Minority-Owned Business Enterprise (MBE) is one way of securing that seat.
Certifications to become an MBE are issued by the National Minority Supplier Development Council (NMSDC). The organization has more than 12,000 MBE-certified organizations among its membership.
Becoming an MBE has many advantages. Governments typically are under mandates to hire a certain percentage of MBEs as contractors. MBE status also provides an opportunity to start joint ventures with other MBEs.
There are also networking opportunities, business fairs where a minority business owner has access to hundreds of businesses in one location, and education from NMSDC for chief executives at minority-owned businesses.
Certified MBE Criteria
To become an MBE, a business must meet strict criteria. The first is that it is owned, financed, operated and controlled by someone who is a member of a recognized minority group. This typically means Asian, Black, Hispanic, East Asian Indian and Native American.
The minority owner must have at least 51 percent ownership of the company, or 51 percent of the stock should the company be publicly traded. NMSDC certification requires the owner have at least one-quarter minority heritage.
The company must also be for-profit and have its headquarters in the United States.
Certifications are done at the regional level. The NMSDC operates 23 regional affiliate councils who handle certification in each region.
Simply being a member of a minority group does not guarantee certification. Depending on the industry, companies may have to meet criteria in areas such as amount of sales and the size of the company.
Steps For MBE Certification
The NMSDC has a clear set of steps to apply for MBE status.
Meeting criteria. The first step is meeting the criteria for minority status.
Collecting documentation. A variety of documents are required. These include articles of incorporation, a history of the business, minutes of board of directors’ meetings and all agreements on ownership and control of the company.
Completing application. The MBE certification application is available online. This includes uploading all the pertinent documentation.
Scheduling a site visit. A certification specialist with the NMSDC will schedule a visit to the company site and an interview with the owner.
Waiting. At this point, the process is out of the company’s hands. They must await a decision on certification from NMSDC committee and board members.
Beyond the MBE
Once obtaining status as an MBE, a minority-owned business can consider other steps to help in further enhancing visibility and opportunities. One is seeking status as a small business, should that apply.
The U.S. Small Business Administration offers designation as a small business, which opens the door to becoming a government contractor. Typically, the criteria for small business designation involves the number of employees over the preceding year or the average revenue for the past three years.
Criteria in these areas can vary by industry.
As with the MBE, status as a small business requires a U.S.-based, for-profit operation. The business must also contribute to the nation’s economy by hiring American workers or using American products.
Taking these steps can help a minority business owner put themselves into a position to receive government contracts targeted for small businesses. While they must also meet the criteria, other bidders meet, they are ensured a fair chance to win the bid.
Both MBE and, if applicable, small business designation are smart steps for the savvy minority-owned business owner.