Electronic Design
Supplier Diversity A Boon To Small Business

Supplier Diversity A Boon To Small Business

Area51, a southern California-based distributor of electronic components, was in business for about two years before it pursued becoming certified as a small, minority-owned business as a way to get its foot in the door of some of the larger corporate customers in its region.

Seven years later, the distributor credits its certification as a small disadvantaged business through the government’s Small Business Administration (SBA) and as a minority-owned business through the National Minority Supplier Development Council (NMSDC) for some of its largest contracts.

“It means quite a bit,” says Area51’s senior sales director Steve Stamatis, specifically pointing to the company’s minority-owned business certification. “It enables us to approach companies that have diversity programs. Not all companies do, but the larger ones typically do and military always have them.

“It has helped us get contracts from companies like Northrop \\[Grumman\\] and Boeing. Northrop is our largest customer.”

Small businesses argue that they need every advantage they can get these days. As supplier diversity programs gain popularity in more and more industries, designation as a small, minority-owned or woman-owned business can help them stand out among a sea of potential suppliers. And although such certifications are no guarantee that a firm will get new business, executives like Stamatis say it helps open doors that might otherwise be closed to many small businesses.

“Usually, anybody who’s doing business with the government typically has \\[diversity sourcing\\] programs because the government encourages it,” adds Stamatis. “But a lot of other large companies are doing it because they think it’s the right thing to do, which is great.

“Hopefully, this gives us a little advantage over companies not in our category to get new business.”

Seeking A More Diverse Supplier Base

Depending on a company’s ownership status, it can take advantage of a variety of different certification agencies, and each has its own set of qualifications and criteria to which firms must adhere. The NMSDC, the SBA, and the Women’s Business Enterprise National Council (WBENC) are three of the most well-known certifying groups. In addition, some companies have their own certification programs, and there are state-level certifications as well.

California-based Steven Engineering, led by CEO Bonnie Walter, became a certified woman-owned business through the WBENC last year. The distributor soon learned that some of the companies and organizations it wanted to start or increase business with had their own separate certification programs that suppliers must go through to qualify as a woman-owned business. Still, vice president of marketing Paul Burk says the company’s effort to pursue business as a certified women’s business enterprise, or WBE as it is known, has been more valuable than he initially expected.

“It has become a bigger deal than I thought,” Burk says. “We have a subset of customers that deal with government project work, so we knew this would be meaningful to them and their \\[diversity sourcing efforts\\]. But we have found that it’s important to a lot of our OEM customers as well, especially those in the medical field.”

Gan Arnold, president and CEO of New Jersey-based Brothers Electronics, agrees that certification as a small, minority- and/or woman-owned business has become more important in recent years.

Arnold joined her family’s business, which is certified as a woman-owned business through the state of New Jersey, 22 years ago after having worked for some of the industry’s larger distributors for several years. Back then, few customers ever asked whether or not Brothers was a certified small, minority-owned, or woman-owned business, she says.

It’s a different story today.

“Having that certification today definitely helps us,” says Arnold, noting that the certification process is more labor-intensive now than it was 20 years ago. “In the last five to 10 years, in particular, it seems that there are more contractors and subcontractors paying attention to it.”

The heightened interest in diversity sourcing mirrors the growth of minority-owned and women-owned businesses in the United States over the last several years. Earlier this summer, the Census Bureau reported that the growth of minority-owned U.S. businesses in particular far outpaced the growth of all U.S. businesses between 2002 and 2007. Minority-owned firms numbered 5.8 million in 2007, a 46% increase compared to 2002 and more than double the 18% increase in the number of all U.S. businesses during the same period.

In addition, women-owned businesses numbered 7.8 million in 2007 and veteran-owned businesses, another ownership category many companies and purchasing organizations are seeking to build business with, numbered 2.4 million. This was the first time the Census Bureau estimated the total number of veteran-owned businesses in the country.

All of this translates into some sizable opportunities for business-to-business suppliers these days.

The NMSDC tracks the dollars its 3500 corporate members spend with the more than 16,000 certified minority-owned businesses it represents nationwide. In 2010, the NMSDC’s corporate members purchased more than $100 billion in products and services from NMSDC-certified minority suppliers.

An Opportunity, Not A Given

Stamatis, Burk, and Arnold emphasize that the opportunity associated with being a certified small, minority-owned, veteran-owned, or woman-owned business is just that—an opportunity. You still need a strong business model, a good service program, and competitive pricing if you want to win new contracts or expand business with existing accounts.

“It helps you get into a certain category, but it’s not a cure-all,” Stamatis explains. “It doesn’t automatically mean you get the business.”

“Price is big,” adds Arnold. “But it’s not just a matter of having a cheap price. You have to have the quality, too.

Arnold takes it a step further, noting how tough it is for small businesses to compete on all levels these days. In many cases, it comes down to fighting for the business you really want. And while being a certified woman-owned business is a nice weapon to have in waging that battle, it’s far from the only advantage Brothers Electronics brings to the field, she says.

“More than anything—more than being small, more than being woman-owned—I want to be known for my morals and my integrity. I want people to know that I can be trusted,” Arnold says. “I learn about the companies we do business with—what they do, what size they are—and I will approach the owners and say, ‘we’re a small business, too, and it means a lot to us that you will give us this business.’”

That emphasis on “relationship selling” is the hallmark of many small businesses, no matter what their ownership status.

“I think that definitely makes a difference, too,” says Arnold.

Minority Business Development Conference Set For September

Largest federally sponsored conference for minority businesses, government procurement officials, corporate buyers, and others will be held in Washington, D.C., Sept. 27-30.

Thousands of business leaders will head to Washington, D.C., this September for the Minority Business Development Agency’s 29th Annual National Minority Enterprise Development Week Conference. To be held Sept. 27-30 at the Marriott Wardman Park Hotel, the event is billed as the country’s premier minority business networking conference, attracting minority businesses of all sizes from all industry sectors across the country.

The theme of this year’s conference is Emerging Industries and Markets: A Blueprint for Success, recognizing globalization and the growth potential of the energy, environmental, and health care sectors. MED Week, as it is known, helps minority-owned firms grow both domestically and internationally through a series of educational, training, and business-to-business networking events, according to conference organizers.

This year’s conference will include:

  • Business-to-business matchmaking sessions
  • Embassy-sponsored market access events
  • Educational workshops
  • The Business Expo
  • The MED Week Awards Gala
  • Global business networking opportunities

The Minority Business Development Agency is a bureau of the U.S. Department of Commerce. The MED Week Conference typically draws about 2000 attendees and in the past has made more than $30 billion in contracts and financing opportunities available to participants. Event sponsors include Raytheon, Northrop Grumman, and United Technologies Corp.

For more information, go to www.medweek.gov.

For more information on small business, minority-owned businesses, and women-owned businesses, visit the Small Business Administration at www.sba.gov/, the National Minority Supplier Development Council at www.nmsdc.org/nmsdc/, and the Women’s Business Enterprise National Council, at http://wbenc.org/.

For information on veteran- and service-disabled veteran-owned small businesses, visit the SBA’s Office of Veterans Business Development at www.sba.gov/about-offices-content/1/2985.

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