• May 26, 2016

Hiring a Vendor? Don’t Make These Mistakes

Hiring a Vendor? Don’t Make These Mistakes

Hiring the wrong vendor can be devastating to a startup or small business. Let me paint the picture:

You’re a tech startup and your investor tells you that you need to start securing coverage in the media to validate your vision and drive awareness & user acquisition. You know you need outside help but you have no idea where to look or who to work with. Further, you need to start getting results yesterday since the next quarter is around the corner and with that comes reporting.

Worst case scenario: you hire the first PR firm you come across, with little to no time to do the proper research & vetting to make sure they are the best fit for your business. Even worse? They aren’t honest about what type of results are possible for your business, set the wrong expectations, over-promise, and under-deliver. Now you’re 2 1/2 months into the quarter with little to show for your new PR partnership (and money spent).

Sure, it might take more time to truly gain the long-term benefits of a PR partnership. And sure, some vendor experiences are completely subjective. But, on the whole, this vendor experience is not off to a great start.

Vendor horror stories are a dime-a-dozen, but believe it or not, there are some best practices to follow to ensure they don’t happen to you & your team.

I asked some folks from our crew to share horror stories and tips, and also did a quick informal online poll and got some great mistakes/tips from other startup founders:

business services transparency

Esther Kuperman, CEO of Saylii: “I believe when hiring vendors you want people who are super efficient and great at what they do. However for a startup, it’s super important to be surrounded by positive people who believe in what you are doing and are very transparent with their process and hours. You want vendors who will go the extra mile for you – not ones that  won’t perform the minute the waters get rough. I had a few frustrating and hairy situations with engineering vendors, and I learned a lot. It was devastating as it delayed my product launch by months and then I had to start from scratch. Never mind the expense of it all. After almost pulling my hair out, I sat down and put together a system which I follow today and I have a much better track record of hiring vendors: First of all, I try not to pay much attention to recommendations from the vendor. Instead I look to test other software they built to see if I want to work with them based on work they don’t use as references. Secondly, I must test them before I work with them. I can’t trust the sales pitch. Lastly, I give them a small, non-critical project to see the working style – do they delay work? what is their communications style? are they accountable? Only when I see there is complete transparency do I work with them.”

business services recommendations

Sagi Gidali, cofounder and CPO of SaferVPN:“We unfortunately ran into problems with the first lawyer we hired. When you’re choosing a lawyer to work with your startup, you definitely need someone responsive and who you can count on. But unfortunately the first lawyer we hired was often unavailable for questions. Because of this, we clashed a great deal and found that instead of moving us forward, they took us many steps back. When hiring a lawyer for your startup, you definitely want someone who will help reduce any hassle, not increase it. On the positive side, this experience really helped us to choose the right lawyers the next time around. Having learned from our past experience, we interviewed a lot of potential firms and consulted with other startups about their recommendations. Eventually we chose a larger, more well-respected firm that had great recommendations. They’re very responsive and as an added plus, are located right around the corner. The change has certainly lifted a great burden off our shoulders and taught us a lot about how to best hire vendors moving forward.”

business services free trialAlex Hrynkiewicz, marketing manager at Limelight: For vendor relationships to flourish it’s imperative to outline extremely clear deliverables and deadlines with constant work-backs to ensure progress. The truth is that even if every word you hear sounds good your relationship may not be the perfect match. By far the best way to vet vendors is to experience their work. The key is to negotiate a trial period, at a reduced rate with increasing fees as your partnership develops. An opt-out clause at the conclusion of the trial period ensures that if the relationship isn’t working both parties can move on easily. Regardless of your process it’s important to treat every vendor or consultant as a mutually beneficial partnership which should only strengthen over time. This approach will bring far more success when talking to and hiring future contractors.”

business services deferred billingDan Laufer, co-founder at RentLingo: “We’ve had a few experiences that have shaped our vendor hiring best practices: 1.) We hired a lawyer who offered deferred billing. That sounds great when you’re getting started but I had a minor heart attack when I got the bill 6 months later. In hindsight, I’d rather have paid along the way and had a chance to better scrutinize the billing as we went. 2.) Don’t skip references for any vendor that has meaningful impact to your business (either because they’re expensive or are performing an important function). Your instinct is to move quickly and references slow things down but I’ve never regretted doing them. 3.) Try to avoid long term agreements. We’re willing to make other concessions (like pay a slightly higher rate) to go month to month or have out clauses. The reality is as a startup so much is in flux that a vendor that seems critical today may be completely unnecessary in a month. Or you might not hit revenue targets that were going to pay for the project and long term commitments can make you cash strapped if you’re not careful.”

Another best practice for startups? Leverage VentureApp (shameless plug, I know). We handle ALL the legwork that goes into making you feel confident in the vendor selection process. Here’s how it works: we quickly learn about your business, your goals, and the vendor services you’re looking for now & in the future. Then, our team sources the best vendors based on those requirements & needs. We look at a vendor’s:

  • Product or service – is it reputable and well-known? Do we know someone that’s used it or have we talked to the vendor personally to get an understanding of how it works?
  • Price – is the quote within your budget and contract timeframe?
  • References – do they work with reputable businesses in your location or of similar size, stage, or industry?
  • Customer service – are they known for awesome customer support? Is it self-service or do you get a dedicated account manager?

Interested in trying us out? Sign up here – you can immediately submit a request for vendor research & intros.