As a small business owner, you need to wear a lot of hats. But, if you want to build a successful business, you’ll need a team of people to help you get there. That might even mean working with external vendors for some of those areas of your business that you aren’t an expert in.  You could spend a month learning to build your own website, only to end up with a final product you aren’t totally happy with, or that doesn’t have the functionality that you were hoping for. You could learn the ins and outs of managing your own finances, only to end up pulling your hair out when tax time rolls around, buried in a mountain of receipts. But your time isn’t “free”,  and some things are better left to the experts. You could put that time to better use in building your business or team, strategic planning for the upcoming quarter or year, or building relationships within your network.

Throughout your business journey, you’ll likely need to hire contractors or vendors to work with. In fact, you’ll probably hire many. And some of those relationships may go south, costing you money, time, and energy dealing with predicaments that could have been avoided. In this blog, we’ve outlined 5 key things to consider when procuring and hiring vendors, so you can avoid costly mistakes.

1. Do your due diligence during the selection process

Ask for references

When hiring a new employee, candidates are asked to provide a list of professional references. You can (and should) do the same thing when hiring vendors. When seeking proposals or quotes for a project, ensure you clearly outline what you are looking for, including references or other clients they’ve worked with on similar projects. You’ll want to speak to those other clients and ask them what their experience was, if the project was within scope, budget or the original timeline, how issues or conflicts were approached, what communication was like, and whether the final product lived up to their expectations.

Working with vendors
Ask about which specific staff you’ll be working with

During the selection process, you’ll also want to ask questions about the specific staff members you’ll be working with. What is their background and experience? Have they worked on a similar project before? Who do things get escalated to if there are concerns?

Look at reviews

You can also look at company ratings and reviews, but be warned – anyone can write a review and sometimes businesses pay for positive reviews, have friends and family write them, or can be the victim of fraudsters who threaten the business with bad reviews if they don’t pay up.

Verify that the vendor is a registered business

You’ll also want to verify that the vendor is a registered business. In Canada, you can use the Canada Business Registries website to do a search:

Ensure that the vendor has adequate insurance and policy in place

Ensure that the vendors you are considering have adequate insurance for errors and omissions, general liability, and WCB, if applicable. Finally, request information about company policies around IT (things like using personal devices), data protection practices, and whether the vendor will be utilizing outside systems or vendors when providing services to you.

2. Test the waters before you dive in

If possible, see if you can start with a smaller contract or month-to-month service. Contracts are almost always negotiable, so don’t be afraid to ask for what you want. Sometimes a vendor is not the right fit, and it’s better to find that out before you commit to a long-term contract or take on a big project.

Working with vendors

3. Pay attention to the fine print

You’ll want to make sure you pay attention to the details when it comes to the contract. A few important questions to ask:

What happens if the project goes over budget? Is there a clause built into the contract so that if the project goes over budget(in general or by a certain percentage) the project is paused and approval is required for any further work? Will the vendor absorb any costs that exceed the originally agreed-upon budget or will they fall on your company to cover?

What happens if the timeline is extended? If the timeline is not flexible, you’ll want to ensure that you communicate this to the vendor and get clear on what happens if there are indications that the project won’t reach certain milestones on time.

Who owns intellectual property produced as a result of the project? When you work with a vendor to design software or develop documentation, do you have the right to use it over and over? Can you re-use it in another application? Does your vendor have the right to re-sell it to another customer? These are all questions you will want to ask early on. If there’s still some uncertainty, you can reach out to a lawyer (our friends at Goodlawyer have affordable rates for small businesses) to get clarification.

Are there laws and regulations from other jurisdictions that you need to follow when working with an out-of-province or out-of-country vendor? You’ll want to make sure you are compliant with any local laws and regulations when working with vendors that are not in the same jurisdiction as you.

What is the payment schedule? Do they require a deposit or a portion of payment upfront? Is there flexibility in what their payment schedule looks like?

4. Ensure you and the vendor are on the same page around deliverables and expectations

It can be difficult to know every detail of what needs to be done in a project before you actually start, but it’s worth spending time trying to figure out as much as possible. Doing this will ensure you avoid costly scope increases. Meet with key members of your team, or with someone from your network that has worked with a vendor for a similar project, to get an idea of all the specific tasks involved in the project.

Working with vendors

A good vendor will outline exactly what is required of your company for them to get the work done in an SOW (statement of work). This gives you an idea of what your team needs to provide to the vendor (and by when) in order to keep the project on track.

You’ll also want to ensure that you and the vendor are aligned in what you expect for the final product. If you are working on a design project with a marketing agency or contractor, send them examples of the sort of designs you like and are inspired by for your project. Provide as much direction as possible. If you’re working with a bookkeeper, what sort of information do you want them to share with you on a regular basis? What format should they provide it in?

Invest the time in ensuring a vendor fully understands your expectations and goals. You won’t regret it.

5. Talk about what happens when the project ends

It’s important to consider what happens after a project ends as well. Does the vendor provide a warranty on their work? If there are issues post-launch, how will they be resolved? Determining a rate at which post-launch issues will be addressed could save you headaches later.

For example, if you’re building a website with a vendor, who will manage the website after it goes live? If they build you a site on something like Squarespace or Shopify, will you or someone from your team be trained on how to do updates yourselves? Will you still be able to seek support from the vendor when you require updates on the website? If so, what is the turnaround time for issues to be resolved and how much will it cost?

Another example: If you stop working with an HR consultant, what happens with your confidential client information? How will it be transferred back to you or to another vendor? What information do they need to provide you with?

Working with vendors

Working with external vendors is inevitable for small business owners looking to build a thriving business. Still have questions? Reach out to one of our trusted business strategists for answers. With more than 25 years of experience in the small business community, if we don’t have the answer to your questions, we’ll connect you with someone who does.

Other ways we can help

Resources for small business owners

Connect with a small business strategist

Upcoming events and webinars

About the author: Shay Wall

Shay is our Director of Marketing and Communications at Business Link. She believes that small businesses are not only the backbone of the economy but the backbone of our communities. She sees first-hand how invaluable the support Business Link provides in helping small businesses and entrepreneurs and is excited about being able to communicate that with the world. Since graduating from the University of Alberta, Shay has worked in a number of interesting roles: research, starting and running her own wellness consulting business, interactive marketing lead, and working with small businesses building their brand and digital presence. Shay found herself on the marketing team at Business Link in 2019 and is proud to work on a team that has a lasting positive impact on communities across the province.

Outside of work, Shay organizes and facilitates community meditation classes, spends time in the Rockies, indulges in Edmonton’s incredible food scene, and spends as much time traveling as possible.