How to Vet a Potential Vendor for Your Small Business

by Megan Sullivan

4 min read

In order to get work done, you’ll need to partner with other companies, large and small, to provide services or materials that are essential to your business. It’s important to note, however, that working with any partner is inherently risky. You’re entrusting someone else with your company’s name, reputation or money. Here are some tips on how to vet potential vendors to be sure that you’re working with partners who are ethical, qualified and a great fit for your business.

1. Start at the Better Business Bureau

The Better Business Bureau (BBB) is the place to find out details about different businesses. As much a consumer resource as a professional one, the BBB provides accredited statuses to businesses that are above reproach and evaluates businesses based on their integrity and performance.

If you live in a metropolitan area, chances are you have a local BBB office that focuses solely on businesses in your region. The BBB also offers online programs to help businesses figure out everything from social media management to mobile websites. Whether you’re looking for a vendor to do business with or looking for tips and tricks for your own business, the Better Business Bureau is a great place to start.

2. Make Sure Your Vendor Is Not on a Government Watch List

The U.S. Patriot Act requires that all businesses are in compliance with the Foreign Corrupt Practices Act and the UK Anti-Bribery Regulations. Obviously, you want to steer clear of any vendor that has been found to violate either of these acts or ends up on a government watch list. In the long run, the headache of working with them will not be worth it.

3. Interview Multiple Vendors

Similar to hiring an employee, choosing to work with a vendor is determined by a variety of factors, including personality, quality of work and cultural fit. Especially if you anticipate entering into a long-term relationship with a vendor, ensuring that they are a good fit is important. Bring in a few different vendors that you have identified as candidates, and ask them the same set of questions.

If possible, have one or two other employees sit in on the interview so you can get a second opinion. In the case of how many to interview, at least three seems to be the magic number.

4. Ask for References

You can either ask for references from all of the vendors you interview, or seek references from only your list of top choices. Vendors should have a list of references at the ready, including name and contact information, for current clients who are willing to speak with you directly.

5. Take Them for a Test Drive

If you’re buying an e-ticket item, such as a customer relationship management (CRM) software program or even just high cost supplies and materials, ask the vendor for a trial period. Try to avoid signing a twelve-month contract until you’ve used the vendor one or two times. The information you gather during this testing phase is invaluable, as it will help get a real-world idea of how said vendor operates and responds to any issues.

6. Verify Their Licenses and Insurance Policies for Yourself

Don’t just take the vendor’s word for it that they are compliant with insurance and licensing requirements for their industry. Again, the Better Business Bureau is a good place to start when looking for this information. You also want to search public records to see if there have been any complaints filed against them.

Lastly, it might be worth a Google search to see what the buzz on the internet is about the vendor. Of course, take anything posted to a public forum—especially if it’s posted anonymously—with a healthy dose of salt.

7. Review Their Security, Especially Their Digital Security

Chances are that the information you’ll share with the vendor will be somewhat sensitive. Whether it’s bank account information, Social Security Numbers or technical specifications, you want to know this information will be secure. With the number of data breaches on the rise, especially among businesses, make sure to ask the vendor what security measures they have in place.

8. Ask for Your Service Level Agreement (SLA) in Writing

Then go over it carefully. A service level agreement is a contract with open-ended dating between you and the vendor that outlines what is and what is not included as part of their scope of work. It also outlines your responsibilities regarding payment, and how you and the vendor will dissolve your working relationship when the time comes.

Working with a vendor can greatly expand your business’ capabilities and response times. Make sure, however, that you’re striking up a partnership with a trusted business. That way, your business can avoid the pitfalls of entering an agreement with an unethical or ineffective vendor.

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