Starting and running a business means you need to establish a vendor selection process. It’s not just a matter of choosing the nearest vendor or the cheapest vendor. Your vendors are the lifelines of your business, so good selection is important.
The Vendor Relationship
Once you start your business you will receive visits from friends and family members who either think they have what you want to sell or know someone they want to refer. Never think of the relationship with your vendors as a friendship and too often, those family and friend-referred vendors may not be your best choice.
You might want to help a vendor you know by allowing them to be your supplier, but consider what they are offering, is it really what you need? For your business to run smoothly, your vendor selection process should include an analysis of products offered, pricing, reliability, quality, and inventory controls.
Tips on the Vendor Selection Process
Your vendor relationships will help your business grow, but only if you choose them wisely. Follow these tips for finding the right vendors that will supply you with what you need.
- Inventory Desires – Because you are the business owner, you above all, know what you want to sell. Make a list of low, medium, and high-line products you plan on selling. If you’re a new business owner, you may want to do some market research to see what is popular with your competitors.
- Choose Vendors – Now that you have a list of inventory, choose at least five vendor suppliers. Find out what you can about them first through their website and check with your local Better Business Bureau to see if any vendor on your list has any unresolved complaints. If they do, take them off the list.
- Interviews and Quotes – Invite vendor district representatives to your place of business and let them know your inventory needs. To begin, it’s best to allow them to quote what you have on your list. Once vendor relationships are established, have your vendors earn their money be suggesting products that sell well in stores similar to yours. Do listen to suggestions, however. A vendor may be the first to spot a product on your list that has outlived its consumer value.
- Get References – Ask vendor reps for references and call each reference to see how well the vendor performs not only on price, quality of product and delivery.
- Evaluate – Take a look at the quotes from your vendors and choose ones that offer bulk pricing, a weekly or monthly stock order discount day, and displays. Look at invoicing terms and vendor agreements. Does one vendor have a better return policy than another? Which vendors have the highest restocking charges?
- Vendor Agreements – If you’ve never signed a vendor agreement, take time to read it and ask questions. Beware of items such as personal guarantees, often; these can be waived if asked. Make sure the vendor terms, shipping promises, and supply of inventory is as originally quoted. Look for any fees the vendor may be charging that weren’t disclosed. Vendor agreements, if disputed, are considered legal agreements so make sure your agreement includes a mediation or arbitration clause to avoid lawsuits.
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