How to Create a Vendor List

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A young male shop owner works on his laptop computer
A young male shop owner works on his laptop computer (Image: Szepy/iStock/Getty Images)

As a business owner it’s important to carefully select vendors that are capable of providing the product and/or service you need to secure the success of your business. There is value in taking the proper steps to ensure that you get the best quality your budget can buy.

Determine your business needs

Create a map of your business processes and operations and how they currently are or should be supported by a product. This will help you to discover what areas need extensions or additions.

Identify the areas of business that require a product or service that your in-house resources can’t provide. This will present a clear picture of what type of vendors you need to secure for the success of your business.

Build the right team. Include staff personnel from all business units that the new product will affect. Assign your strongest team members from all relevant departments. This will ensure that you are able to produce a clear picture of how you need the product and to function in your business to successfully meet your organizational needs. Also, consider the needs and requests from your customers. Knowing what they need and their suggestions for improvement can help you focus your company needs.

Design a scorecard. Create a list of requirements by which to evaluate potential vendors. It is best to separate the requirements by categories like business, technology, the financial health of the vendor, usability and pricing. Also, consider certain things such as; the customer service the vendor provides during the selection process, how long they have been providing the product and their current customer base.

Isolate a portion of make-or-break requirements. Prioritize the importance of each requirement you have listed on a scale of 1-5.

1 = Most Important 2 = Very Important 3 = Somewhat Important 4 = Important 5 = Least Important

Requirements rated 1 and 2 should represent your make-or-break requirements. These are things that you absolutely must have in a vendor and without them you would not select them to provide your needed product.

Select your vendors

Keep the field wide. Consider both vendors you know and vendors you may not know. Review buyers’ guides, attend trade shows and read journal articles. Also, contact your business colleagues and industry associations. You might even consider enlisting the help of a consultant. Create a list of vendors to consider. This list should include their name, address, telephone number and a business contact.

Interview each potential vendor. Use your scorecard to design questions for the vendor. Challenge them to not just provide yes or no answers, but rather fully expounded answers. You can also structure the questions so that they have to rate their own product as they think it will fit your needs.

Perform reference checks. Always perform the reference check, even if you believe the results will be positive. This will help you determine your vendor finalists for all your business needs.

Schedule product/services demonstrations. Only schedule demonstrations after you have narrowed down your list to a few finalists. Your time is valuable and should not be spent watching demos of products that you never intended to purchase. This will help you determine which of the finalists will become your company’s new vendors.

Make your vendor selections. Contact your chosen vendors and confirm that they have accepted you as a client. Then contact the vendors that were not chosen, letting them know that you do not need their product at this time but you will keep their information on file for future company needs.

Maintain your vendor list. Your chosen vendors become your current vendor list. Your non-chosen finalists become your alternative vendor list in the event that you loose a current vendor. Your non-finalists become your potential vendor list in the event that you require other products that they may be better suited to provide based upon your requirements relative to the new product or service needs.

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