Business 401(k) Services / Plan Administration
Vetting Process For Vendors
Choosing a vendor for goods or services is one of the more important decisions a small business owner can face. A sound and consistent evaluation process can help a business owner judge the general viability of the vendor’s business, as well as give them insight into how they and the vendor will work together. Often, this vetting process has to take place within a specific project timeline, or with considerations to a specific budget, so outside stresses can cause the evaluations to be less than comprehensive.
By closely evaluating the criteria outlined below, business owners can quickly and efficiently determine which vendor is a good fit for their needs.
Expertise and Self-Presentation
Perhaps the most important characteristic of any vendor is their experience, both in terms of its complexity and its length. Depending on the need the vendor is meeting, it may not be essential that they’ve handled complicated scenarios, but knowing they have can give you faith in their expertise. If they have only managed to retain short-term contracts, or if they simply haven’t been in business that long, those are facts to consider deeply. KJ Henderson of the Small Business Chronicle agrees, and points out that if the vendor is a publicly-traded company, information about their financial solvency is public record and easy to access.
The vendor’s communication about their experience must also be critically evaluated. Even if they’ve been in business for decades and achieved great outcomes, if they can’t communicate effectively about the best practices and strategies that got them to success, they may not be able to replicate those outcomes for your business. Ask questions not only about the best projects they’ve worked on, but also what procedures they have in place to make corrections and adjustments when things start to go off track.
Reputation and Testimonial
However, the business’s representation of themselves is just the beginning. Vendors of quality goods or services will have clients willing to endorse them to prospective new contracts. Ask each of the vendors you’re considering to connect you with current or past clients to discuss their service or products. This due diligence may reveal valuable information you wouldn’t be able to discover from any other source about the vendor’s workflow, customer service, or other factors.
You should also take the time to check with the Better Business Bureau and any important accrediting bodies to determine the vendor’s qualifications and business history are in line with your own goals and values.
Digital and Physical Security
The vendor’s digital security may not seem extremely relevant, and depending on the service they’ll be providing, it may truly not be. Still, even if you’ll be doing something as basic as paying the vendor online, you need to know how your payment information is secured when it’s entered. This concern becomes critical when the vendor will keep their own records of your financials or any other information central to the success of your business. Keeping that digital information secure should be one of the vendor’s top priorities (as well as your own).
Physical security is another important consideration. If the vendor has access to important information in hard copy, like taxes or employee personal data, how will they be storing it? You also need to know what process they go through to vet their employees. For instance, a cleaning company will have full access to your office, likely when you aren’t there. If that maintenance services vendor doesn’t do their due diligence in screening their employees, your entire organization could be at risk.
Pricing and Terms
The cost of a vendor’s services is often the first thing a business owner considers when evaluating if they are the right choice. It’s certainly critical to understand up front if they fit your budget, and how the charges for the vendor’s help will be determined. But Fara Francis, CIO of the Associated General Contractors of America, warns against making cost too much of a sticking point. “Let vendors see that you’re not trying to nickel-and-dime them,” she advises. “I think vendors respect a client who is willing to be flexible when it comes to the workload, cost, time, and so on.” 1
If charges will be hourly, make sure you understand the cost and when or why it might go up. If you’re paying a flat rate, make sure you understand what that includes, and what additional services could raise the fee. It’s also important to understand the terms of payment and provision of good or services. Do you need to pay in advance, or keep them on a retainer? Will they bill you once a month, or will invoices be delivered upon completion of work? How much time do you have to remit payment? What happens if you make a late payment or can’t pay? A clear understanding of these answers is essential to truly understand if a vendor is right for you. Simply choosing the cheapest option without more inquiry can mean you’re entering into terms and conditions you normally wouldn’t accept.
Partnering with an excellent vendor is often a decision that empowers a business owner and accelerates the growth of the business. Business owners seek out vendors to resolve pain points or reduce their own stress and workload. But if the vendor isn’t what they appear on the surface, those partnerships can quickly turn sour. But with the right amount of due diligence, and a special focus on a potential partner’s history, security, and pricing, any business can enter into valuable and productive vendor relationships with confidence.
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