Erin LaCombe found a specialized niche for her firm, but it’s far from a safe harbor. Like many small business owners, she gained a competitive advantage by earning an official stamp of approval validating her firm’s status as woman-owned.
Now, the value of such stamps — known as certifications — is being challenged by abrupt shifts in federal policy rippling through the small business economy. Small business owners must reassess the importance of completing the expensive and time-consuming certification process. Meanwhile, the organizations that operate the certification machinery are seizing on new ways to stay relevant.
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Twenty years ago, LaCombe founded CV Strategies, which concentrates on complex and technically challenging communications surrounding utility, construction, water districts and other high-profile projects. Her 20-person team helps clients make their cases to the public, regulators and public officials.
Even in that rarified category, competition is “brutal,” LaCombe told Straight Arrow News (SAN). “You’re one of hundreds of competitors that ‘fit the qualifications,’” she said. “I have to stand out. Once I’m in the room, our work carries it, but I’m looking for the differentiator, and this is a big one.”
The “big one” is a certification from the California Public Utilities Commission validating that CV Strategies is, in fact, owned and operated by a woman. With that certification in hand, she is a favored partner for bigger companies that don’t have status as a woman, ethnic or other type of minority business.
For decades, corporations and governments at all levels have aimed to level the economic playing field by granting a competitive edge to small, presumably disadvantaged businesses. Certifications have been pivotal, as they ensure that small companies’ claims are valid.
Behind the scenes, the certification process has been a cornerstone of status and revenue for a few nonprofits. But new data from the National Minority Supplier Development Council found that in 2024, small businesses that didn’t renew their certification had higher revenues than peers. Overall, the NMSDC reported in its just-released annual report, diverse small businesses accounted last year for nearly $600 billion in production and supported 2.2 million American jobs.
Diversity in the bull’s-eye
Dismantling long-running diversity programs has been a hallmark of the Trump administration’s first year. On Jan. 21, the administration ordered the Office of Federal Contract Compliance Programs to stop enforcing regulations that required federal contractors to follow certain supplier diversity directives by April 21. At the Small Business Administration, programs intended to help small, disadvantaged and women- and minority-owned businesses are on hold, as ordered by the administration.
Now, small business owners and the nonprofits that certify their diverse status must figure out if and how certification can continue to be a mechanism for growth. Business owners are learning whether certification was as valuable to clients as they had assumed. Aspiring entrepreneurs must assess the likely value of certification, as it may or may not be as meaningful to potential clients as it once was. Meanwhile, the nonprofits that reap revenues from the complicated, lengthy certification process are exploring ways to widen the gates to the communities they’ve created.
The abrupt shift has whipsawed small companies that count on their status as a diverse supplier to catch the attention of potential customers.
Carol Houston founded BaysMartin Consulting to convert her decades of experience in managing regulatory approvals for biotech firms to entrepreneurship. She had just landed certifications as both a woman-owned and minority-owned company, and was on the brink of hiring employees when the federal supplier diversity infrastructure crumbled. The abrupt cancellation of many federal health projects was a second blow.
Now, with momentum stalled, Houston is scrambling for a fresh approach. She has just patented a process for improving laboratory workflow, and isn’t sure if her hard-won certifications will help her gain entry to companies and universities to pitch her services.
The agencies and nonprofits that have long gained revenue from certifying companies might want to adapt to the new environment and find fresh ways to assist small firms, Houston suggested. “They need to be bigger advocates for capturing a return on certification,” she told SAN.
Business owners often report mixed feelings about certifications. The process is famously convoluted, detailed and time-consuming. Bearing an official minority label is often an uneasy fit for entrepreneurs dedicated to competing on the strength of their abilities. Yet, in a stagnant economy, small companies need every advantage.
“Why did I pursue certification? It’s literally math,” said LaCombe. “Some of these agencies score you. If I can get a few extra points, because I’m a woman-owned business…do I love that conceptually? No. Do I need the extra point? Sure. It’s a practical and strategic choice.”
Traditional certification as a woman-owned business comprises a competitive advantage, if only because the lengthy and complicated process comprises a barrier to competitors.
“We’ve had it for three years,” Rebecca Gonzalez, founder of Orange Marketing, a tech marketing firm, told SAN, “and it was not easy to get. No one would believe the rigorous process they put you through.”
Owners must provide proof of the relevant identity — gender, ethnic, veteran and so on — and furnish copious financial and legal evidence of ownership and operations.
Now that she has the seal of approval, Gonzalez hears from both staffers and clients that the certification signals a deeper alignment of perspective and values that strengthens the relationship.
“People notice it,” said Gonzalez, noting that younger staffers at client companies increasingly voice appreciation for her firm’s stance.
Nonprofits pivot
Though supplier diversity priorities are out of favor at the federal level, some states are staying the course: Illinois and New York are exploring ways to streamline the process and expand program reach.
Erica T. Kuhlmann, CEO of the Women’s Business Development Center in Chicago, told SAN that government contracting standards ripple through corporate procedures, shoring up the business case for supporting small business creation and growth through certification and complementary programs.
“We’re still seeing corporates committed to a diverse and inclusive supply chain they view as sustainable,” Kuhlmann explained. “Corporates have changed the way they’re talking about it — they’re calling them ‘inclusive supply chains.’ Ultimately, they’re focused on the impact of investing in the small businesses in which they operate. The discussion has moved from how many diverse dollars they’re spending to the impact in the community.”
Proving the ripple effect of spending with small businesses is a promising service for Kuhlmann’s agency.
“We already track for our grants. For us to go to a corporate and say, ‘we can track the impact for you’ — to a certain extent, it’s an opportunity for us. We have the systems and analytical tools to do that,” she said.
Jill Sasso, COO of the Women’s Business Enterprise National Council, hears that. WBENC is a nonprofit that sets national standards for certifying woman-owned businesses. The actual certification process is enacted by WBENC’s 14 regional partners.
Historically, WBENC has touted its community of 21,000 certified women-owned businesses as a networking opportunity in itself, beyond the major corporate contracts that represent the big win for many small businesses, said Sasso.
During the pandemic, WBENC discovered that conducting its many business skills workshops and networking events via virtual platforms also cleared the way for inviting in a wider spectrum of small businesses. Now, more of its programs are open to all.
Without downplaying its ongoing goals, WBENC also stresses the job-creation plank of its mission, Interim President and CEO Nedra Dickson told SAN. Woman-owned businesses “fill a gap in the supply chain,” she said. “There’s a need. That’s key. The goal is still to create jobs and businesses here in the U.S.”
The Grand Rapids model
Grand Rapids, Michigan, might be showing the way.
Since 1976, the city has boosted small businesses owned by people facing more challenges than most, Amaad Hardy told SAN. He is the business developer for the city’s office of equity and engagement, which runs its supplier diversity program. In the past, Hardy said, Grand Rapids defined challenged businesses by the owner’s gender, race or similar qualities. But the city recently re-framed its effort as an avenue for re-investing its own economy. The Micro Local Business Enterprise certification is available to companies located in the county, regardless of the owner’s identity.
The program centers around contracts with local government, offering a clearly outlined bidding advantage to certified companies, granting them a 5% to 10% advantage. Big companies that can prove they’re including MLBE-certified small companies as part of a project gain an edge, too.
“If a business is following the city of Grand Rapids’ strategic plan, mission and values, we’ll give them a leg up on contracts,” said Hardy. The Grand Rapids model appears to be gaining traction: Of the 114 certified small businesses, 40 have joined the program in the two years.
Like national certification groups, Hardy aims to build a mutually profitable economy among certified firms. One early win: catalyzing the formation of local accounting firms positioned to work with small construction firms enrolled in the MLBE program.
Of course, small businesses must be fully qualified to do the work they are pursuing, certification or not.
“You still have to be a good, productive and qualified business,” said Scott Jensen, CEO of the National Veteran Small Business Coalition. Set-asides for military veterans “basically make up for the time when the vets were serving the country and not getting a business going,” Jensen told SAN. Jensen and others say that preferences for veteran-owned small businesses appear to be a bit more immune to shifting political winds, because veterans represent a spectrum of identities.
“We focus much more at helping veterans be good at what they say they do. Certification should come in after the fact,” Jensen said, echoing a common mantra among certifying agencies.
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Taking the long view
Some believe that the value of the certification is longer and broader than the current political moment and even U.S. borders.
Kate Bashir is CEO of EVCO, a Wisconsin plastics molding company founded by her grandfather. Now that she’s in charge, EVCO qualifies as a woman-owned company, as evidenced by its recent certification.
With 2,100 employees around the world, the company would seem to have already outgrown the value of a certification. But Bashir believes that the stamp of approval signals to global customers that her company’s values are built to outlast any political moment.
“The markets we serve deserve this transparency and accountability. The third-party validation is important, regardless,” Bashir said.
International companies that she hopes to win as customers take the long view, Bashir told SAN. They might not be leading with their diversity efforts, but they aren’t yet abandoning them either. The expectation, Bashir told SAN, is that when the political pendulum swings back, long-running programs will again be highlighted.
When that happens, she wants EVCO to be part of her customers’ stories.