Vendors will play a key role in your startup’s success level, so selecting the right ones is important. But knowing what to look for and finding vendors that are the right fit can be challenging. This article provides a step-by-step vendor selection process you can depend on to make the best choices for your startup.


What are Vendors?

By “vendors,” we mean the people or companies that provide the products and services your business needs to run efficiently and meet your customers’ needs effectively. They can be manufacturers, distributors, importers, or independent consultants or craftspeople. 

Advantages of Strategically Choosing Vendors

Though a vendor’s primary role is providing your startup with the goods and services it needs, that isn’t all they do. A solid partnership with a vendor can also provide other advantages like industry information, market insight, and opportunities. Vendors can also help you reduce your costs compared to hiring full-time staff and can offer alternative purchase options.

The key to getting maximum benefit from your vendors is building a win-win partnership. If you understand your vendors’ businesses and they understand yours, you can look out for each other to your mutual advantage.

What Makes a Good Vendor?

Most people consider price to be a top factor for evaluating a good vendor. While it’s important for a startup to spend wisely, price is only one vendor selection criteria, and it’s often far outweighed by others. It’s important to keep in mind that you’re seeking a long-term relationship that’s mutually beneficial.

What to Look for with Vendor Selection

The following list includes some important criteria to consider, along with questions to ask yourself to help you determine if the fit is right. These questions can be used to evaluate new vendor relationships and existing ones.


Does the vendor deliver on time, and do they have what you need available when you need it? Can you count on them?

Mutual Understanding

Do you each know what the other’s values and goals are? Is the organization a cultural fit, and does the vendor have a positive and realistic attitude towards your relationship?


How long has the vendor been in business? Do they provide consistent quality?

Experience and Expertise

Does the vendor an experienced professional, or do they have well-trained employees with expertise in the organization’s products and services?


Is the organization well-respected, and can you find companies that enthusiastically recommend them?


For physical products, is does the location offer the speed of delivery that you need and reasonable shipping costs?


Is the vendor open about their pricing structure? How much time will they spend supporting your organization if you need help with implementation? And do they offer flexibility when they can and a variety of financial terms?


Are they willing to partner with you and your organization for the long-term? 

Expect the same questions in return—mutually-beneficial relationships work best. If you receive ready answers and feel comfortable with the responses, then it’s a good bet that this vendor is a good fit for your startup.

Vendor Selection Process

We recommend seven steps in the vendor selection process. Depending on your needs, you may scale back certain steps where it makes sense. For example, if you are looking for internet service, you may decide one round of vendor review is adequate. If you are seeking a higher-impact contract, you may want to go through two full rounds of review.

1. Document Your Needs

Take the time to write down your specific needs for the contract. This will help vendors tailor their proposals and also helps you to ensure your needs will be met. Clearly define what’s important to you and include your selection criteria.

2. Define Your Process

What exactly do you plan to do in the selection process? How long will you take? How do you plan to make your final decision? 

3. Identify Potential Vendors and Suppliers

Talk with trusted people for referrals and look online. Read reviews, and check ratings sites such as the Better Business Bureau. If possible, speak with a couple of the vendor’s customers to learn their experience firsthand.

4. Contact the Vendors

Provide vendors with information about your business and what your needs are, and ask to learn more about how they work. Also, share your timeline for receiving a proposal.

5. Review Proposals and Schedule an Initial Discussion

Give each vendor you’re considering the opportunity to present their proposal and explain how they’ll meet your needs. Don’t rely on a written proposal only—speaking with the vendor will give you much more insight into whether the relationship will be a fit. Be prepared with any questions you have. If you have policies and processes in place that govern vendor relationships, share them. And ask about the vendors’ own policies and procedures in order to align expectations. 

6. Evaluate the Proposals, and Determine if You Want a Second Conversation

Is there a clear decision at this point, or do you want to have another conversation with any of the vendors? What questions are unanswered?

7. Make Your Vendor Selection

After a thorough review of the proposals and your notes from the meetings, make your decision, and notify everyone of your decision.

Taking the time and energy to do your homework and follow a strategic process for choosing vendors will help you establish the vendor relationships you need to grow and thrive as a startup. 

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