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CVM Supplier Diversity Blog

What We Learned About Diverse Suppliers: Minority-Owned Businesses

Minority Owned Businesses 2018

Minority business enterprises (MBEs) are a cornerstone of supplier diversity. Companies partner with these third parties to provide important opportunities to the community, secure government incentives, and, ultimately, increase operational efficiency to boost their bottom lines.

Much of the supplier diversity thought leadership available is from the supplier diversity program point of view and not from the MBE suppliers themselves. Last year, CVM Solutions set out to change that with our first State of Supplier Diversity reports. We followed that up with an even more comprehensive survey for 2018. This year, we interviewed 380 diverse suppliers, 48 percent (182) of which identified as minority-owned businesses. What they told us was again fascinating. Here are some highlights from our research:

92 percent of responding MBEs are certified as such

The results to this question impressed us last year, and they again are significant: More than 9 in 10 minority-owned businesses answering our survey are formally certified by an agency such as the National Minority Supplier Development Council (NMSDC). In fact, the 92 percent statistic is up two percentage points from 2017. Although our survey draws more participants that are active in the supplier diversity (and thus more likely to recognize the importance of becoming certified), the high—and increasing—number proves that for MBEs, certification is practically a requirement rather than optional.

[Download the Reports] The 2018 State of Supplier Diversity

MBEs comprise a bigger share of larger companies

Minority suppliers come in all sizes, and indeed, 44 percent of respondents were from companies of 10 or fewer employees (this was the same as last year). However, MBEs also delivered the highest percentage of organizations of more than 100 employees: 22 percent of participants were from businesses you wouldn’t consider small.

MBE respondents are well established

Our survey found that 61 percent of minority-owned businesses have been in business 11 or more years (coincidentally, this is the same percentage reported by women’s business enterprises, or WBEs, for 2018). The overall result for all of the most-established diverse suppliers was 62 percent—MBEs are following the supplier diversity trend that success can be found in the long term.

Two-thirds of MBEs seek government contracts

In a slight increase from last year, 67 percent of MBE respondents said they actively pursue government entities as clients (up from 66 percent). This is six percentage points higher than WBEs, and although not as high as some other categories (for example, veteran-owned businesses checked in at 87 percent, though with a smaller sample size), it shows that minority-owned businesses are going after government opportunities—and that those opportunities are out there.

For number of business partners, MBEs are on both ends of the spectrum

We asked survey respondents how many business partners designated them as a diverse supplier, and the results for MBEs were quite interesting. Although responses showed a somewhat even range, 21 percent said zero, and 22 percent said 10 or more. We didn’t see these high numbers on both ends of the spectrum for any other diversity category in our report (WBEs, for example, came in at 18 percent for both choices). Is this all-or-nothing result an indicator that best practices are hyper-important in deciding whether a minority supplier thrives or struggles? Or is it just a statistical anomaly? After all, 57 percent of respondents still came in at 1-9 suppliers. This will be an area we pay careful attention to in future reports.

Networking is still king

When asked to list the top three ways MBEs find suppliers, networking led the pack at 73 percent. This is a six-point increase over 2017, yet slightly lower than non-MBEs (of which 75 percent picked it). Surprisingly, other top MBE choices varied significantly from other diversity categories. Registration sites were cited by 52 percent of MBEs (which is a drop of five points from last year), as opposed to 40 percent for non-minority differences. We also saw a disparity with emails (49 percent for MBEs versus 37 percent for non-MBEs) and RFPs (49 percent versus 42 percent). Alternately, only 33 percent of MBEs picked cold calls in their top three, less than the 38 percent of other diversity categories.

MBEs are also certified in other diversity categories

A majority of MBE respondents—58 percent—also identify themselves in another diversity category, and 24 percent belong to three or more. Forty percent of minority-owned businesses are also WBEs, 29 percent are small businesses, and 8 percent are veteran-owned.

As consumers, supplier diversity matters to MBEs

Once again, our survey asked this question:

As a consumer, does an organization with a supplier diversity program influence whether or not you will buy from them?

With MBE respondents, 38 percent claimed a supplier diversity program strongly influenced their decision to buy from an organization. Another 38 percent said they were slightly influenced. These numbers, though outpacing other diversity categories (WBEs came in at 72 percent for at least a slight influence), are down from last year, when 48 percent said they were strongly influenced and a combined 84 percent said they were strongly or slightly influenced. The open-ended questions we posed in our survey brought back some candid, frustrated answers on the state of supplier diversity, and that frustration may be manifesting itself in these numbers. To read these responses, and to delve further into the comprehensive survey data we compiled, download both reports from our website.

Which statistic in this report surprised you most?

2018-state-of-supplier-diversity-reports

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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.