Very many small business owners overlook the opportunities that may be available through business certifications. Even if you aren’t a large business or corporation, you business may still be able to attract and land contracts from the government, or even private firms and corporations. If you meet certain qualifications, these certifications can be the extra boost you need to get your foot in the door.
Government agencies, and some public and private corporations allocate a certain amount of business contracts for businesses that have one or more of these certifications. They do this to promote what is known as “supplier diversity”. Supplier diversity basically means that these organizations want to be sure that the outside contractors they use are a diverse group of people.
While there are some other factors that come into play when trying to land one of these types of contracts, having a business certification may make the difference in whether or not your company gets overlooked.
Before we get started in the benefits and disadvantages of the certifications, let’s review the various types of certifications that you may want to apply for.
Types of Business Certifications
- Woman Business Enterprise (WBE) certification is gender specific certification for woman-owned businesses.
- Women Owned Small Business (WOSB) certification is required for a specific federal purchasing program that has a set-aside a quota for woman-owned businesses.
- EDWOSB certification is required for the federal purchasing program mentioned above for disadvantaged businesses.
- The 8(a) designation is actually a business development / mentoring program offered by the Small Business Administration for a company that is considered disadvantaged. The 8(a) certification is part of that program.
- Small Disadvantaged Business (SDB) certification is for businesses that are 51 percent owned by one or more individuals who are both socially and economically disadvantaged but not participating in the 8(a) program.
- Disabled Veteran (DV) certification is for the business owner who is an U.S. Armed Forces veteran that was disabled in action.
- Minority Business Enterprise (MBE) certification is race-based for minority-owned businesses.
This list is pretty inclusive, however you should keep in mind that there is no one nationally recognized certification. Before you decide which one you want to apply for, do some research (your local Chamber of Commerce, Small Business Development Center, and any other entrepreneurial resources, not just Google) to find out which one would be most beneficial to you in your region.
Business Certification Process
Each of these certification processes are intense, have pretty lengthy applications, require lots of documentation to prove that you actually meet the qualifications. There’s also a cost associated with each of these applications, which varies depending on the actual certification, the agency that you select to do your certification, and sometimes, the geographical location of your business.
Generally your business is eligible to apply for a particular certification if the company is at least 51 percent owned by one or more people who fit the minority description. In the case of a publicly owned business, at least 51 percent of the stock has to be owned by one or more of the minority, and the management and daily business operations must be controlled by one or more people that are of that particular minority. For example, for a business applying for the WBE, at least 51% of the business must be owned by women.
The federal government has a goal of awarding 5% of the value of all of its contracts to women-owned companies. When the federal government enacted those goals, it inevitably spread to state and local governments, and eventually private sector corporations got on board as well. There are similar percentages for minority owned business, disabled businesses, and disadvantaged businesses. There is no limitation on the number of certifications you can have. If you are both women and minority, you can apply for both certifications. However, keep in mind these are separate applications.
The Benefits of Certifying Your Business
So, what exactly are the benefits of certifying your business?
Getting the certification is really just the beginning. There are other variables you have to deal with to make it happen. Do not think that business is just going to drop in your lap. It’s not. There are some business owners that go through the certification, and see a drastic increase in their business revenues. Many of these owners have landed better and higher paying clients, even if they weren’t government or private sector contracts, just by having the certifications. In the long run, a business certification can provide a real competitive edge when you are looking to grow and advance your business. Any business certification is really just another tool. You can use it to market your business to a different type of client, so ultimately it has the potential to add money to your bottom line.
Many business owners think unless they are going after huge government or corporate contracts, it’s useless to obtain certification. You couldn’t be more wrong.
The government and every large corporation have the same business needs that small businesses have, but multiplied. The government buys everything from light bulbs to kitchen supplies like coffee and paper towels, to public relations services, to travel, food, and more. There are a variety of opportunities for your business. Also, some business owners make the mistake of focusing solely on government opportunities. The private sector has lots of opportunities for businesses that meet certain qualifications.
If you are looking for ways to diversify your business, increase your marketing opportunities, and get larger clients to take you more seriously, a business certification is definitely for you.
Tips for Certifying Your Business
There are a few tips I think you should know about applying for a business certification:
- Remember the process is tedious and extremely invasive. Be prepared to share financial information, incorporation information, and in some cases, have someone visit your office. If your business is not 100% legitimate yet (wink, wink), I do not recommend that you apply until it is.
- The process does not happen overnight. Someone has to review your extensive application, and verify your responses. That takes time. If you are aware of a contract that requires certification, and you’ve not yet started the process, you probably will not be certified in time to bid.
- If you are a new business or have a limited staff, you may want to give yourself a month or more to complete the application. No matter which certification you go for, it will require a lot of information and documentation. If you’ve been in business for less than 3 years you may want to consider waiting until you have at least 3 years of financials to avoid denial.
Again there are lots of benefits to applying for a business certification, but it is an investment that must be carefully considered before you do. The process is not one you should just jump into. There is a huge financial and time investment that will be required of you. While there is no clear answer to whether you should have a business certification, since every business is different, but there are some definite financial benefits to being certified. Once you receive your business certification, you could see massive increases in the types of clients and customers you are able to attract, and ultimately, your bottom line.