In a nutshell: Third-party vendors give you the freedom to focus on your core business functions. Here’s how to get started.

Every organization focuses on its strengths — that’s how you set yourself apart from competitors, hire the best talent, produce amazing products, deliver exceptional service and maintain strong connections with customers. But there are many aspects to running a business that aren’t related to the things you excel in. That’s when it’s time to consider hiring a third-party vendor, an outside company that provides expertise and experience in an area that isn’t related to your core business mission, or that your company might not have in the first place.

A third-party vendor can be a multinational company (such as Amazon or Microsoft), a local business or even a sole professional. Hiring one isn’t always simple, as it requires you to look at whether the vendor can provide the services you need while fitting into your company’s established processes and procedures.

Here’s an overview of things to think about when you evaluate and hire vendors.

[Related article: Getting Started with Fulfillment by Amazon (FBA) and Other Third-Party Fulfillment Providers]

Do You Need a Vendor?

Before you begin searching for a third-party vendor, decide if you need one. Start by looking at your company’s vision and mission statement. If the business function is directly related to any of your objectives, you should probably keep it in-house so that you can retain control over it.

But what about those functions not related to your core business? Those are candidates for outsourcing to vendors.

Your size and growth rate might also dictate whether to take on a vendor. For example, a large organization might require enough legal guidance and support to justify hiring a full-time attorney, but an outside consultant will probably suffice for a smaller organization. If your company is big enough, you might even need a third-party vendor to manage your relationship with all your other third-party vendors!

Sometimes, vendors are unavoidable are because they specialize in products and services that would be impractical for your company to provide internally. Good examples of this are internet security services, employee training and video production.

Finding Vendors

Before looking for a vendor, it’s important to know exactly what you want the vendor to do. If you only have a vague notion of what your needs are, you’ll have a hard time explaining your requirements to other companies. If there are products or services you need, describe them accurately. If there’s a process to be followed, map it out.

Depending on your needs, vendor searches can be informal or exhaustive. For simple needs, you might be able to ask your peers, friends and employees for recommendations — they may know people through their professional networks for you to consider. If your needs are complex, you might go through a formal process and solicit written proposals from vendors. According to an article by the Young Entrepreneur Council in Forbes, a request for proposal (RFP) should include the following:

  • Background information about your company and the challenge you are trying to address
  • The purpose of the RFP
  • A description of what you want the vendor to do
  • Your goals for the vendor partnership
  • How vendors will be evaluated

RPF templates and examples can be found by searching the internet.

Evaluating Your Vendors

When evaluating different proposals, try to remove emotion from the equation as much as possible by using qualifiable, weighted criteria to determine a score for each potential vendor. For example, you might put more emphasis on pricing and less on innovation depending on your needs.

RFP365, a company that produces proposal automation software, describes a helpful weighted scoring method on its website. The company writes: “You need to have the right information to make the right decision. Namely, data that is as objective as possible. To get that data, you need to have a game plan not only for whatyou’re asking, but for howyou’re going to make sense of it.”

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