Vendor Selection Criteria – 7 Things to Consider

by Patricia Lotich on January 30, 2013

You have held off on making that key investment long enough. It’s now time to upgrade your phone system, redesign your website, or replace the carpet in your office.

The first question you ask yourself: Who do I hire for the job?

It’s important to have vendor selection criteria and a defined selection process when choosing a vendor for your business.

Yes, it’s more time consuming than picking the first name from the phonebook or hiring your brother-in-law. But the effort spent up front can save you from potential disaster. Choosing the wrong vendor can cost your business significantly in terms of money, time, even your reputation.

7 Things to Consider When Choosing a Vendor

1.  Price

vendorYour goal should always be to obtain the maximum value for the lowest possible cost. To accomplish that, you need to receive more than one bid.

Be wary of bidders who submit estimates far lower than others. You may receive less than acceptable products or services, or you may end up paying more than the estimated cost.

Communicate to prospects the full extent of your needs so you receive an accurate bid. Stick to your original goals and needs, otherwise you may end up buying a Ferrari when a Mustang would suffice.

Make sure each bid includes every line-item cost. You should understand if the vendor intends to add travel surcharges, administrative expenses or maintenance fees.

2. Quality of Product or Service

Price doesn’t matter if the product or service is poor quality.

In many ways, hiring a vendor is like hiring an employee. Most people would not employ a worker without checking references, and you should not make that mistake when selecting a vendor, either You should ask each bidder for at least three references. If a vendor hesitates, that should raise a red flag.

Then make sure you call those references and ask questions such as: Was the vendor on time? Were they professional? If something went wrong, did they make it right? Would you use them again?

Where applicable, ask to see samples of the vendor’s previous work.

3. Customer Service

Companies with a reputation for exemplary customer service will more than likely take good care of you.

As mentioned above, references are invaluable. Ask for referrals from people whose opinion you trust. Ask those customers specifically about customer service, especially service after the sale.

Also, take advantage of the digital age in which we live. People who have poor experiences with companies often vent their frustrations on websites and message boards. An Internet search can uncover this kind of feedback.

4.  Ethics and Integrity of Company

Your business integrity is often tied to the integrity of the vendors you use.

A valuable resource is the Better Business Bureau. The organization’s website has a search function that allows you to search businesses by industry or company name. You can see how many complaints the BBB has on file for a particular firm, and if it has been the subject of any recent government action.

An Internet search can also yield a lot of company information, both positive (e.g.–charitable involvements) and negative (e.g.–newspaper articles about lawsuits).

5. Professionalism of Employees

When a vendor represents your organization their employees do the same.  I used a vendor once that sent a technician who made inappropriate advances toward our administrative assistant.

This is perhaps the most difficult factor to check. One suggestion is to read the company’s employment ads. Job postings contain the important qualities a company looks for in a prospective employee and can provide clues as to how their workers conduct themselves on the job.

For example, I recall seeing a television ad from a heating and cooling company looking for new technicians. The ad specifically stated it would only hire polite individuals. This told me they were interested in more than just technical skills, but wanted employees with people skills as well.

6. Recommendations from Others

Word of mouth is always a great way to find a vendor if everything else is equal. This is an area where you should leverage any networking groups to which you belong. Ask the people in your Chamber of Commerce directory, your LinkedIn connections, the members of your professional organizations and the people who you attend church with who they used in similar situations.

7.  Existing Relationships

By the same token, leverage the experience you already have. I still recommend soliciting other bids to ensure that a previously used contractor still provides the best value for your money.

Also look at your customers as potential vendors. If they score well on the other six factors, hiring one of your current clients is an excellent way to enhance your existing relationship. It also provides the opportunity to barter your services in return for theirs.

Asking the right questions and conducting thorough research will improve the chances of having a positive vendor experience instead of over-paying for a half-finished job.

 photo by:  seegulyas2002

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