I Finally Cracked the Code on Choosing a Business Partner With This Helpful Rule How do you choose and keep the right vendor as a service company? I've found success with the "rule of 50."
By Serge Baidin Edited by Micah Zimmerman
Key Takeaways
- Build strategic relationships with vendors for long-term, mutually beneficial partnerships.
- Interview vendors as the buyer, focusing on communication and adaptability.
- Approach vendors beyond your budget; flexible terms can offer valuable expertise.
Opinions expressed by Entrepreneur contributors are their own.
Choosing a vendor usually looks like this: you talk to two or three companies, and they explain how they work. They may seem like a good fit, but those conversations often leave you hesitant about whether you're making the right decision.
You might feel like you need more information, but haven't these companies told you enough?
Finding a vendor, especially in an unfamiliar niche and as a service business yourself, can be tough. Those few conversations don't provide the full picture and can lead to wasted time and money down the line.
After my video editing company decided to scale, we realized we needed more help and additional vendors to keep up with the demand. That's why we developed a structured system to guide our vendor selection.
This approach has been very helpful, allowing us to choose the right partners and build long-term relationships. Two vendors we've selected through this system have been working with us for years.
Let me walk you through the process step-by-step.
1. Find 50 companies that can provide the service you need
The first step in our process is to identify 50 companies that can fulfill our requirements. For example, if we're looking for social media management or content creation services, we specifically search for 50 agencies in that field. We call it "The Rule of 50." Then, we approach them with our specific task to see if they can handle it.
While not every company specializes in our exact needs, the responses we receive help us better understand the market. They allow us to assess what's realistic, tweak our task, and learn what the industry typically offers. This method also clarifies our own needs and shows whether our request is practical.
Although selecting and analyzing 50 companies takes time, we've found that this number is ideal for evaluating the market and achieving the best results. Once we gather the responses, we move forward with those candidates who can do the task and go to the interview stage.
2. While interviewing, remember that you're the buyer
This is especially important if your business is also a service provider. It's easy to fall into the habit of showing initiative and providing the best experience, as we do for our own clients. However, in this case, it's important to shift your mindset. You're the one evaluating and making the decision, so leave room for the vendors to show what they are capable of.
Pay attention to visible green flags. Do they go the extra mile? Do they follow up with you or send thoughtful summary messages after the interview? One of the good signs is that they focus on your needs rather than talking endlessly about how great they are. The ideal vendor will be attentive to you and show that they can adapt.
Another key green flag is their ability to clearly explain their services, especially if you're unfamiliar with the niche. The best vendors can break down what they do in simple, understandable terms, not jargon. This shows not only their expertise but also their ability to communicate well. If they can simplify complex concepts for you, it's a good sign they know their field well and can meet your needs without overcomplicating things.
3. Don't be afraid to approach vendors who seem out of your budget
When you're looking for vendors, you may come across a team or a business owner with whom you immediately connect, knowing they're the perfect match for your company. You might want to pay them all the money in the world, but sometimes, it's just not in your budget.
However, don't dismiss them too quickly, and definitely don't hesitate to continue the conversation. These vendors are often leaders in their field and can offer valuable expertise. They can share their knowledge and high standards with you, which will help you understand the market and its top players. Even if you can't afford their full-time services now, there are still ways to work around that.
For example, you might be able to negotiate different terms that are beneficial for both sides. They could work with you on a part-time basis, maybe 80 hours a month instead of 160, or even as a consultant for just a few hours a week. Think creatively and be open to new possibilities when it comes to building a relationship with these vendors.
Related: 3 Steps You Can't Miss When Growing Your Business
To sum up
While you are the one paying for the service, it's important to remember that working with vendors is still a two-way street. If you want your vendors to stay with you long-term and for the partnership to be productive, focus on building a strategic relationship rather than a vertical, transactional one.
You can, for example, recommend them to other clients or refer them to your network. This will naturally make them more appreciative and, in many cases, more motivated to deliver their best work. Treating vendors as valued partners rather than just service providers leads to a long, mutually beneficial relationship.
