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Supplier Intelligence

Help MBEs Overcome Their Supplier Diversity Obstacles

help-mbes-overcome-their-supplier-diversity-obstacles.jpgIs your supplier diversity program designed to help minority- and women-owned businesses succeed?

MWBEs face challenges that majority-owned businesses do not, including lack of access to capital; insufficient business networks for peer support, investment, and business opportunities. If we are to grow as a country, create jobs, and make progress on correcting income and wealth inequality, we need to help minority and female entrepreneurs succeed.

Here are four ways you can help MWBEs blast through obstacles on the road to success

Certification

To access resources and qualify for certain types of loans and initiatives, MWBEs must be certified by a third-party such as the National Minority Supplier Development Council (NMSDC), Women's Business Enterprise National Council (WBENC) or National LGBT Chamber of Commerce (NGLCC). Certification is also necessary to be included in diversity spend reports for the federal government and most public and private companies.

What you can do: Encourage your diverse suppliers to obtain certifications from one or more of these councils.

Access to Capital

Majority-owned businesses have access to traditional forms of capital—investors, equity, low-interest business loans—that many MWBEs do not. Minority- and women-headed households generally have lower levels of household wealth, which in turn can make internal investment and external borrowing more difficult. Other barriers minorities may face when seeking capital include lower average credit scores and education levels. Geographic or societal isolation from other communities and persistent discrimination may also impede entrepreneurship among women and minorities.

Data collected from a survey conducted by the Ewing Marion Kauffman Foundation, a nationally representative cohort of businesses that began operations in 2004 and were followed until 2010, shows that African-Americans, Hispanics, and women all began their businesses with about half the financial capital of white men. What's more, these differences widened as their businesses matured. Additionally, minority- and women-owned start-ups received less in loans and equity capital in their early years (Fairlie and Robb 2010; Robb 2013).

Fear of rejection plays a critical role in the inequity of business loans. According to one survey, among minority businesses expressing a need for credit, over half reported not applying for loans because they feared being denied (Bates and Robb 2013). This fear is not unfounded. Minority-owned businesses are approximately three times as likely to be denied loans as comparable non-minority businesses.

What you can do: Help MWBEs identify small business loan programs designed for them (e.g., guaranteed business loans with the Small Business Association, microloans through local chambers of commerce or other Community Development Financial Institution (CDFI) organizations like Kiva); use a supplier locator tool to identify potential new suppliers for new contracts; host workshops detailing how to bid on opportunities.

Access to Networks

Established business networks can help any company build its customer and supplier base, improve access to debt and equity finance, and provide useful advice and support. New businesses in particular can benefit from networks because they generally have fewer contacts. Peer networks can also be especially valuable for entrepreneurs who need help solving common problems. Unfortunately, MWBEs often find established business networks to be impenetrable.

Local diversity councils and chambers can be a tremendous resource for building these networks. Most hold regular mixers and networking events for members, often attended by entrepreneurs as well as representatives of larger companies.

What you can do: Host networking summits; encourage MWBEs to join relevant diversity councils and participate in networking opportunities; use a supplier portal to alert diverse suppliers to upcoming networking opportunities.

Access to Skills & Training

Many non-minority business owners have attained a higher level of education than their minority counterparts, better preparing them to lead and manage a company. Many minority and women business owners are running a business that provides a product or service they know intimately, but it’s possible they lack basic business management skills. These entrepreneurs need access to skills improvement, but often training initiatives are not focused enough on their actual needs and time constraints.

There are many training approaches. Intensive programs like the Tuck School of Business Building a High-Performing Minority Business Program at Dartmouth, Kellogg Executive Programs at Northwestern and Stanford LGBTQ Executive Leadership Program are designed for busy entrepreneurs and executives who want to improve their leadership and management skills.

Sometimes MWBEs will benefit tremendously from sitting in on a larger company's leadership and management training seminars and/or having access to internal training materials. Mentoring programs that provide access to individuals with relevant skills and knowledge can also be invaluable.

What you can do: Sponsor deserving suppliers with scholarships to leadership and management training; launch a mentorship initiative pairing entrepreneurs with successful counterparts in your company; provide suppliers with access to your company's internal leadership and management training resources.

MWBEs are increasingly important to our economy in terms of job creation, innovation, and economic impact. Increasing access to capital, networks, and skills improvement can help ensure that MWBEs are able to overcome obstacles to entrepreneurship and contribute to economic growth.

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For over a decade CVM's mission has remained unchanged: lead the transformation of Supplier Diversity program management and support Supplier Diversity programs. CVM helps corporate supplier diversity programs in every stage of their evolution; from those that are just getting started, to the most advanced, world-class programs. Equipped with unparalleled data intelligence, superior technology and expertise guidance, businesses can effectively establish and advance their Supplier Diversity initiatives.