7 Vendor Management Tips for Startups

By Chris Pantaenius

My wife and I recently purchased a new “old” home, meaning it was one that would need some work. Our goal was to complete as much of this work as possible before move-in day, so getting the right contractors in place as quickly as possible was a must. I couldn’t help but picture Tom Hanks and Shelley Long in the movie The Money Pit (one of my favorites) and think, “Is this us? What are we getting ourselves into? Will our house really be ready in two weeks?” (That’s a joke.)

I guess I’m lucky that I’ve been dealing with service provider relationships throughout most of my adult life. I’ve delivered consulting services in vendor risk management. I’ve engaged contractors and suppliers of all shapes and sizes for my own businesses. And recently at Onspring, we’ve developed a Vendor Management software solution that helps our clients evaluate, onboard and monitor their vendors and suppliers. All of these combined experiences have taught me a great deal about what to look for in third-party relationships…and how to avoid getting fleeced by bad operators.

Vendor management isn’t just for large organizations. Startups and small businesses need to be thinking about it, too—both in the way they select their vendors (buy side) and the way they deliver services to their clients (sell side).

Here are a few of the vendor management principles I follow in my own tech startup:

1. Figure out what you truly need and look for vendors who scale

Buy side: As a startup, you’ll want to focus only on your immediate needs. It can be tempting to grab the larger item, because it’s such a great deal! This is why my wife once revoked my Costco privileges. Unfortunately, my strategy of “we’ll use it all…eventually” did not align with our budget. When you’re in startup mode, cash is scarce. You’ll need to make sure your vendors can scale with your business to help you get full value out of the purchases you make as you grow.

Sell side: Do your best to match pricing and packaging options to your customers’ needs. It’s better to have them repeat-buy (and tell their friends) over a series of value-based deals than to have them feel like you gut-punched them for all they had on one deal.

2. The best vendor might not have the largest billboard

Buy side: While Google Apps for Work is a wonderful service for startups, the best option is often not the dominant player. New companies are forming every day that do things better, faster and at a lower cost than their well-known counterparts. Don’t be afraid to check out the latest offerings, and be sure to take advantage of any free trials. We gave companies like Expensify and Harvest a try in their early days, and they continue to do their jobs brilliantly. I also recommend finding a good local accounting firm. In Kansas City, Fortiviti, helped us save at least 10-15 hours per week on invoicing, payroll and tax reporting. Having that time back in your day to devote to your own product or service is immensely valuable.

Sell side: This is a good time to assess your own marketing efforts. If you were searching for your product or service, how easily could someone find you? And if they find you, will they like (and understand) what they see?

3. Make sure your vendors provide good support and maintenance

Buy side: This one seems like a no-brainer. While everyone appreciates and expects good customer service, few companies are truly great at providing it. Knowing the day will come when you have a question that cannot be answered on your own, you need to also know that you can contact a human for support. And, given our global economy, you’ll want to consider time zone differences in the event your vendor does not offer 24×7 support. If your server dies, it’s probably not going to happen during business hours.

In the software world, take a look at the frequency of prior releases (typically found in social media or the “News” section of the vendor’s website). Does the vendor provide new features and upgrades regularly? Are maintenance windows a huge ordeal, or does the vendor take care of everything?

Sell side: Are you following the Golden Rule when it comes to support? At Onspring we treat our clients like family. It’s the right thing to do, and it’s good for business. (If you’re interested, Katie describes our support process in more detail in her last post.)

4. Consider vendor risk management…if you don’t, your customers will

Buy side: As we’ve been reading in the news, the activities can be outsourced, but the responsibility cannot. Regulators today expect companies to know and understand their third parties and the services they provide. Even as a startup, it’s a good idea to start assessing any risks associated with your critical vendors.

Sell side: For us, this has come in the form of SSAE 16, SOC 1 and SOC 2 compliance. If it’s something you will depend on to provide assurance to your own clients, it’s best to put the appropriate processes in place early.

5. Leverage social media

Buy side: Social media can be an excellent source to help you understand the relationships your current and potential vendors have with their clients. Look them up and see what types of articles they post (i.e. what is important to them) and how people respond.

Sell side: Social media also provides one of the most effective and lowest cost means of reaching your customers. It can be challenging to keep things fresh and relevant, but it’s typically worth it when you do.

6. Be local

Buy side and sell side: People love to support local brands. Whether you’re buying or selling, first consider your local market. It’s a great way to build relationships and referrals in your own community and help create what might become a regional, national or global following for your products and services. Most metropolitan areas have resources to help you connect with local groups and markets, but a few who have helped us include The Ewing Marion Kauffman Foundation, 1 Million Cups, KC SourceLink, ScaleUP! Kansas City, Tech Cocktail and the Access for Entrepreneurs program supported by the KC Chamber of Commerce.

7. Follow the data (shameless plug)

As they say, you can’t manage what you don’t measure. Managing multiple vendors and related data can be an arduous task. You may be living in a world of disjointed Word docs, PDFs, email attachments and spreadsheets. That’s where we come in. We help our clients manage vendors, contracts, vendor relationships, due diligence and even external surveys from clean dashboards. If any of this sounds good to you, check out our Vendor Management solution and see what people are saying about us. 🙂

Featured Resource:

Vendor Management Solution Brief

Learn how you can manage vendor risk, contract review, onboarding and performance evaluation with flexible, cloud-based software.

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