Is business enterprise certification right for your rental business?

Since becoming government certified as a woman-owned business enterprise four years ago, Ventura Rental Center, Ventura, Calif., has been able to obtain rental contracts for which the company otherwise may not have been selected.

“All things being equal, the certified business has a leg up on a competitor without it,” says Suzette Cook, owner of Ventura Rental Center. “This gives people one more reason to say, ‘Yes’ to you.”

Certification also can be an effective way to bring in more business over the long term. In addition to hundreds of government contracts that are set aside specifically for certain business enterprises, some large companies also are required to spend 23 percent of their subcontracting dollars with small businesses and they often prefer working with certified businesses. Cook found that the immediate benefit of certification was retaining the customers she already had, while new contracts took more than a year to come in. “You spend the first year learning how to use the certification,” she says.

Getting the required paperwork and documents together for submission took Cook more than eight months. While she says certification is anything but a quick and easy process yielding immediate results, she endorses the importance of third-party certification. Self-certification is an option, but she says going through a third party such as the Women’s Business Enterprise Council (WBEC) West lends more credibility to certification and many agencies prefer it.

“This is not a piece of paper that’s easy to get,” she says. “Going through [a third party] is grueling, but it is the best, most respected way to do it.”

After submitting a nearly 14-in. stack of documents and passing the required site visit, Cook gained her certification, which is reviewed every year in order to keep her certificate as a woman-owned business enterprise current. Cook found value in the process of seeking certification because it helped her become more organized and efficient in the corporate structure and record-keeping of her business.

“I had to do a lot of digging to come up with all the documentation they were looking for initially,” she says. “Now I have a better system for keeping things in order for the future.”

After receiving her certification, Cook says she was somewhat disappointed to find that the job of putting it to good use was just beginning. While current customers stayed in part due to her certification, she had to spend significant time seeking out and marketing to new customers.

“This is not a silver bullet. Seeking out the contracts and maintaining your presence on their websites is a nearly full-time job,” she says. She finds it well worth her while, though, because “it does help. It does work. It just takes a lot of time.”

Several types of businesses are eligible for government certification if they meet certain criteria, including:

Women-owned small businesses (WOSB)

• At least 51 percent of the business is unconditionally and directly owned and controlled by one or more women who are United States citizens.
•  A woman must manage the day-to-day operations, make long-term decisions for the business, hold the highest officer position in the business and work at the business full-time during normal working hours.

Historically Underutilized Business Zone (HUBZone)

• At least 51 percent of the business is controlled by U.S. citizens, a Community Development Corporation, an agricultural cooperative or an Indian tribe.
• The principal office must be located within a “Historically Underutilized Business Zone.”
• At least 35 percent of the employees must reside in a HUBZone.

Minority businesses enterprise (MBE)

• At least 51 percent of the business is owned by a minority.
• At least one minority owner controls the management and daily business operations.
• The term “minority” includes African Americans, Hispanic Americans, Asian Americans or Native Americans.

Veteran-owned or disabled veteran-owned

• At least 51 percent of the business is owned by one or more veterans or service-disabled veterans.
• Management and daily business operations must be controlled by one or more veterans or service-disabled veterans. In the case of a veteran with a permanent and severe disability, the spouse or permanent care-giver can control management and operations.

Organizing the business correctly is crucial to successfully completing the process. Vicky Miller, director of the Illinois Procurement Technical Assistance Center (ILPTAC) at Black Hawk College, Moline, Ill., stresses to her clients that ownership and structure requirements are extremely important to successful acquisition of the desired certification.

“The woman or veteran or minority is not only owner in name, but is in control of the company in every way, including hiring, firing and cash flow,” she says.

The paperwork and record-keeping involved in applying for certification also can be intense. “You need to have your house in order,” says Cook. “Get yourself organized. They’ll want to see things like your bylaws, minutes from the last board of directors meeting, stock certificates and three years of tax documents.”

The cost associated with pursuing certification includes a fee based on the gross income of the business, as well as costs incurred for hiring legal and financial consultants. Cook recommends having professional help to ensure that the paperwork is in order and everything is in place. “If you are missing anything, they will deny you without question,” she says.

Common issues that can exclude a business from certification include:

• Legal ownership. Involving spouses, parents, siblings or children in legal ownership can jeopardize the 51 percent ownership necessary to qualify for these programs. For example, a 50/50 husband-wife partnership does not qualify as woman-owned. A 50/50 partnership between a veteran and a woman does not qualify for either distinction. However, a 50/50 partnership between two veterans does qualify. In addition, a business in which a husband simply grants 51 percent to his wife for the purpose of gaining certification will likely be excluded.
• Company structure. The composition of the board of directors, the voting structure of the company, and the method and amount of capital contributions must be carefully structured to ensure that appropriate ownership and oversight is maintained.
• Day-to-day operations. Close attention must be paid to the level of expertise and day-to-day involvement of the primary owners and the amount of control given to non-qualifying owners or employees. If the owner is involved with outside employment or other business ventures, certification can be withheld.
• Lack of experience. Black Hawk College’s Miller recommends being in business for at least three years before exploring this option. “The government marketplace poses unique challenges that can overwhelm a company that lacks significant maturity or resources. This should be what you do when you’re prepared and positioned to be a resource and offer help to those in the community,” she says. “For example, with the recent weather in the South, opportunities are coming up for small businesses to get in on government contracting for rebuilding, but they have to already be prepared.”

The local Procurement Technical Assistance Center (PTAC) office can help determine whether certification is right for a specific business. Counselors can be found at www.aptac-us.org and are available at no charge to discuss the benefits of these programs and determine if this is an appropriate course. After guiding a business through the certification process, they also can help make sure the business is registered with the databases necessary to give a small business the greatest exposure to contracting opportunities, and help with marketing research and networking.

Certification resources

Additional information, guidelines and assistance can be found by visiting any of the following:

• The Small Business Administration: www.sba.gov.
• Association of Procurement Technical Assistance Centers:www.aptac-us.org.
• U.S. Department of Transportation Office of Small and Disadvantaged Business Utilization: osdbu.dot.gov.
• Minority Business Development Agency: www.mbda.gov.
• Women’s Business Enterprise Council-West:www.wbec-west.org/home.htm.