Hispanic businesswoman

Programs for Small Minority Businesses

The goal of any business is to increase sales and get the highest possible return. A way to achieve this outcome is to attract large companies and federal and state government agencies as clients. These are the entities that have multi-million-dollar budgets. And they keep buying in high volumes despite the condition of the economy. Getting this type of customer is not easy and the competition to be their provider is fierce. Often the small Hispanic entrepreneur is competing with large, established companies with a unique ability to compete on price.

To combat this disadvantage, there are special programs to promote the sales of small businesses whose owners are members of certain groups such as Hispanics, African Americans, descendants of indigenous groups, women, veterans and the disabled. If you belong to one (or more) of these groups, you can benefit from these programs.

Benefits for Minority Businesses

There are several ways to benefit from these programs. First, sales are reserved for companies that qualify, known in English as ‘set asides.’ This means that only companies whose owners are part of one of the above-mentioned groups and having sales below a certain level can supply the order. This greatly limits competition.

Second, there are other programs where one competes with all kinds of business, but small minority businesses are given an advantage when evaluating the price offered. The buyer ‘allows’ the qualified company to submit a higher price (typically to a 10% or more) without being penalized. So if your bid is $50,000 and the offer of an unqualified company is $48,000, the buyer evaluates your offer as if it were $ 45,000 ($ 50,000 – 10% or $ 5,000 = $ 45,000).

The third available option is for the small minority business to participate as a subcontractor. Certain contracts are too big for a company to take them. In these cases, the buyer of the contract requires the winner to spend some part of the contract value on minority businesses that assume the role of ‘subcontractor.’ This is one of the most successful ways to begin participating in large contracts. Sometimes the large companies that win the contract are desperately seeking a qualified minority business to keep the contract.

The Small Business Administration is responsible for certifying your company as a small minority business.

To qualify as a minority business a company must go through a complex qualification process. The Small Business Administration is responsible for certifying your company as a small minority business through its ‘Small Disadvantaged Business’ and 8A programs. The state governments also have their own qualification programs. And big companies often have their own requirements as well. But they typically accept the qualifications of the SBA or a recognized council such as the National Minority Supplier Development Council.

Many minority businesses often do not feel comfortable participating in these programs. They prefer to win sales on merit and not because they fall within a certain group. I share this feeling, but if there are programs for which your company qualifies and can benefit, it is your responsibility to take advantage. If not, the competition will.

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About Mike Periu

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Hispanic business leader with experience in the areas of finance, business development, marketing and business management. Mike's goal is to put within the reach of the Hispanic Community financial knowledge necessary to succeed in the United States. Using a clear, simple and direct communication style, Mike has helped thousands of Hispanic entrepreneurs better manage their money. He debuted in Abasto explaining to Hispanic Entrepreneurs why they must accept credit cards at your business.

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