Leveraging MBE (minority business enterprise) status

April 23, 2023

by a searcher from Harvard University - Harvard Business School in New York, NY, USA

Does anybody have experience (or know anyone) that used the designated minority business enterprise status to win new business with government, state, or corporations, specifically within a healthcare services context.

Have heard of others bidding on contract opportunities reserved for WBEs and MBEs, and also using it to win new business with large corporations who have allocated a percentage of supplier spend to diverse suppliers

Reply by an investor
from University of Missouri in Austin, TX, USA

The above is spot on, be very careful as you think through this strategy. There are many other considerations that come into play that you should also think about, but would keep in mind that by taking on one of these designations, you exclude a massive buyer universe when you go to exit.

The most simple explanation - most potential buyers will not qualify for the designation and will eventually lose it, and the corresponding revenue. You do not want to put yourself in a situation where you are convincing a potential buyer that "you would still win all this business in the future without the designation".

Reply by a searcher
from Northwestern University in Plainfield, IL, USA

If doing this in a search fund context, I've been told a concern here comes when preparing to make an exit. Your valuation may be impacted based on how much of your business is dependent on that certification.

+1 more reply.

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