Vendor Selection Criteria – 8 Things to Consider
Estimated reading time: 6 minutes
Successful organizations understand the importance of investing in the business. However, taking that step to spend money isn’t always an easy decision.
As a result, you have held off on making that vital business 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 essential to establish criteria and create a selection process when choosing a vendor for your business.
Yes, it’s more time-consuming than picking the first name from a Google search or hiring your brother-in-law.
But the effort can save you time, money, and unnecessary frustration.
Choosing the wrong vendor can cost your business significantly in terms of time and money – even your reputation.
7 Things to Consider When Choosing A Vendor
1. Price
Your goal should always be to get the maximum value for the lowest possible cost. To be assured that you are getting the best deal, you need to ask for more than one bid.
Be wary of vendors 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 in fees that weren’t part of the quote.
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.
Always read the fine print. That is where you may find some hidden charges or fees.
In the case of very complex contracts, it might be worth investing a couple hundred dollars to have an attorney review and translate the language for you.
2. Quality of Product or Service
Price doesn’t matter if the product or service is poor quality.
Where applicable, ask to see samples of the vendor’s previous work.
For instance, if you are hiring a company to remodel your office space, ask for a list of other projects they completed and take a field trip to see if the finished job meets your expectations.
When hiring for service, ask about employee training.
Service employees should receive training to ensure they provide the level of service your customers are accustomed to.
If the vendor does not put much emphasis on training, you may want to think hard before selecting them.
3. Check References
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.
Require each vendor to submit a list of 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 punctual for appointments?
- Were their employees professional?
- Were you comfortable with the employees who came to your business?
- How would you rate the quality of their products or services?
- If something went wrong, did they make it right?
- Would you use them again?
If you get an answer to a question that doesn’t quite seem right, ask a follow-up question. Most people will be honest if probed.
4. 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.
Request vendor referrals from people whose opinion you trust.
Then, ask those customers about their experience with the customer service, particularly – the service after the sale.
Don’t forget to take advantage of the digital age in which we live.
People who have poor customer experiences may vent their frustrations online. An Internet search can uncover this kind of feedback.
Do a Google search “[vendor name] reviews.” You may be surprised at what you find – both good and bad!
5. Ethics and Integrity of The Vendor
Your business integrity depends on the integrity of the vendors you use.
Try to learn a little bit about your vendors and how much importance they put on operating with high ethical standards.
There are several ways to find out information about a company.
The Better Business Bureau, Home Advisor, or Angie’s List all provide valuable information that can help you find out information on a prospective vendor.
An Internet search “[vendor name] news’ can also yield a lot of company information, both positive (e.g.–charitable involvements) and negative (e.g.–newspaper articles about lawsuits).
As with most things, it is always best to be aware of issues before you sign on the dotted line.
6. Professional 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 explicitly 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.
7. Recommendations from Others
Word of mouth is always a great way to find a vendor if everything else is equal.
Leverage professional 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.
People will share honest opinions and often have the answer to your needs based on a similar experience.
8. Existing Relationships
Leverage the experience and relationships you already have.
If you have a current vendor that you like, I still recommend soliciting other bids to ensure that the vendor is still providing the best value for your money.
Sometimes vendors raise their prices after being with a business for a few years because they feel like they have the business and it’s safe.
Don’t allow yourself to fall into this trap. Keep the relationship professional and rebid the job every couple of years to ensure you are getting the best value for the money.
Look at your customers as potential vendors.
If a company that you already have a relationship with scores well on the other seven factors, you might want to consider hiring one of your current clients as a way to enhance your existing relationship.
It also provides the opportunity to barter your services in return for theirs.
It is never easy to make a significant financial investment in your business.
However, if you spend the time doing your homework and ask the right questions, you will improve the chances of having a positive vendor experience instead of over-paying for a less than adequate product or service.
