Choosing a Vendor: Six Steps to Find the Best Supplier

Sometimes choosing a supplier or service provider is as simple as asking a friend who they use in their business. Other times you need to go through a formal selection process. To make sure the vendor you choose is the best one to provide the service or product you need, use these six steps.

Selecting a service provider is something we all do on a regular basis – sometimes without even realizing it or thinking about it. As homeowners, we select pest control companies, phone companies, home security companies, homeowner’s insurance and car insurance providers, and probably a thousand other possibilities.

Many of those same companies provide service to our small businesses as well. And in this market especially, where we’re trying to cut every corner and save every dime without forgoing necessary service, it’s important to make our selections carefully in terms of who is going to provide these services to us and for us.

We can go about finding a service provider in one of four ways…

• Select a provider from the phone book or internet or use a friend of family member
• Use who we’ve always used – if it’s a current service
• Get advice from a trusted resource or friend
• Go through a formal selection process

The worst thing we can do is #1 – it takes no thought or comparison and rarely leads to the best provider…unless it’s by pure luck. If it’s a relatively small dollar service, then #2 or #3 is an ok route to take. #2 means you’ve used them and like them – that’s half the battle (price being the other), and #3 means a friend or colleague has used them and likes them.

However, if you’re buying something – a service or contract or large item for your business – then #4 is a smart way to go. These organizations want your money – ask them to show you why your money should go to them. I’ve outlined a six-step process below to go through in selecting the best vendor to provide whatever service you need to you and to your organization. It’s important to your bottom line to analyze the options available to you and make the right choice.

Step 1 – Document Your Organization’s Need

Before you can do any kind of selection of the potential vendors to provide the service you need, you must first document in detail – or at least at some high-level – what it is you need. This will help you out greatly later on when you look through your notes and the vendor material and realize that their offerings aren’t the same. When you meet with potential vendors, you need to be able to judge what they can do for you against what you really need them to do and make sure that there’s a good match.

Step 2 – Identify the Potential Sources

Whatever service or item it is you need provided, your best next step is to do your own research and identify which organizations seem to do the best job in supplying what you need.

Once you’ve done that, contact each vendor by phone and/or by email and state your needs and that you would like them to participate in your selection process. Understand that if this is a fairly small dollar item, they won’t be too interested in going through a lot of effort and resource hours and dollars to acquire your business. But if you’re, say, looking for a new building to rent for your business, then you’ll likely be able to make realtors scurry around like rodents to gain your business – especially in this economy.

Provide each identified service provider with the following, if possible:

• An introduction of yourself including your contact information
• A summary of your business need
• An invitation to participate in the selection process
• A proposed date/time for a one-on-one discussion

Step 3 – Initial Vendor Discussions

This is where your potential service providers come to your site – separately, of course – and present their offerings and discuss how they are going to meet your needs. They need to sell you on why they’re the best provider for your organization. Typically, it’s ideal if you can select up to 8-10 vendors to participate initially – especially if this is something you are going to end up spending serious money on.

Step 4 – Weed Out Vendors

You’ve completed Step 3 and can see that several vendors just don’t quite cut it. They have an offering somewhere in the ballpark, but based either on price or specifics of service, they’re just not going to be able to meet your needs. This is where you weed those providers out – hopefully getting down to a reasonable 2-4 final vendors to hold discussions with. Price has likely already been discussed during Step 3 – vendors want to give you prices – but not necessarily the best and final price yet. That’s what you’re going to get from them in the next step.

Once you’ve weeded out the vendors who aren’t competitive enough to make it any further, invite the remaining providers in for one more discussion.

Step 5 – Final Vendor Round

This is the final chance for each of the finalists to make their offer stick and to win your business. Bring them back in separately again and have final discussions about price and your needs from their offerings. Now is when you may want to get even more specific about any special needs your organization has. You’re looking for ways to pick the absolute best vendor, both in terms of price and service, so give them all the information possible for them to sell themselves on or trip themselves up. You’re looking for the differentiators in this step.

Step 6 – Make a Decision and Stick With It

Now it’s time to review your material and notes from the two meetings with each vendor and make a decision. Hopefully it will be based both on cost and ability to meet your requirements, but how you make that final decision is up to you. The key is to make it and stick to it.

Changing providers again quickly can lead to extra costs for you. After all this effort, it’s unlikely you’ll make a really poor choice. However, if you realize at some point that you should have picked Vendor B over Vendor A, make the switch, but be careful to not incur extra contract back-out fees over the decision. You may need to ride it out a year or so.