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How to Identify Third-Party Vendors to Help You Scale

ByVince Dawkins,
business.com writer
|
May 24, 2019
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> Business Basics
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If you want your startup to beat the business-failure odds, it helps to partner up.

Every business wants to make it, but only about half of them do. According to recent figures from the Bureau of Labor Statistics, 20% of small businesses don't make it to their second year.

After five years, only 56% remain in business.

As they put together the pieces necessary for growth, startups quickly discover that the first step is also one of the hardest – finding the right people. Without a capable and committed team, even the best ideas struggle to get off the ground.

Founders cannot simply find and onboard talent, though. They must also find people who can help build a sustainable, empowering culture and then learn how to keep as many of those people around as possible. As if that weren't enough, founders also have to be able to recognize when someone isn't a good fit. Those hard decisions can make or break startups with limited time and resources.

Product decisions, too, affect the odds of survival. What problem does the product solve? How much is that solution worth, and what are people willing to pay for it? Founders can't rush into implementing their ideas before they truly understand the needs of the audience and the likelihood that the product will fulfill those needs.

Not every organization fits into the same mold. Startups pride themselves on their disruptive and agile natures, yet many founders are afraid to step out and try something truly different – especially when board members and other influential figures advise caution. However, standing out from the crowd might be the most important factor in startup success.

Where partners come into play

With so many challenges to overcome, few startups make it to the fifth year and beyond without a little help. Third-party vendors in a variety of functions can act as valuable extensions of the company's core team. Startup executives should not see these outside parties as a threat, nor should they try to adopt every outside partner that proves useful. By letting the experts do what they do best, young companies can focus on their own strategic development, confident in the knowledge that their partners know what they're doing.

Seasoned vendors also provide perspectives and experience that many founders have yet to acquire. These vendors might not operate in the same industry, but they have worked with plenty of organizations that faced similar challenges and know the most (and the least) effective strategies for confronting them. Founders should not only consult vendors for their services, but they should also listen to what their partners have to say about wider business issues.

Many of the world's biggest operations got off the ground by partnering with outside vendors, even for essential core processes. Airbnb, for instance, created a unicorn startup without any in-house coding talent.

My company, Enertia Software, uses third-party vendors to help with a variety of tasks. From recruitment assistance to destination management for our annual user conference to customer experience analytics, our partners provide invaluable skills that help us grow. When we work with great vendors, the amplification effect spreads to all our internal teams.

Before you go out and hire all the vendors you need, address your company's infrastructure. Startups with messy infrastructures can run into internal conflicts and employee turnover if they bring in outside parties before they're ready. Transitioning to stronger, more scalable business practices can be a challenge in the early days, but the effort pays major dividends as the company grows. Embrace the pain of creating a strong infrastructure early to save time and effort in the long run.

Once you address your infrastructure, you're ready to find the right partners for your business. Follow these four tips to bring in third-party vendors that can scale with you:

1. Be relentless when it comes to research and references.

Thoroughly research the market options that address your needs within your budget. Odds are good that plenty of companies want your business, so do the legwork ahead of time before sales pitches cloud your judgment.

Tap your network to get recommendations from people you trust. It's one thing to read case studies on a vendor's website, but it's another to talk to your trusted colleagues about their experiences. Don't take anyone's word as gospel – experiences can vary greatly – but do treat the advice of people you trust with appropriate respect.

2. Start with small projects.

When applicable, use small projects to reduce risk and learn the methodologies of your potential partner. It's much easier to part ways with a vendor that misses deadlines on a small test project than it is to untangle your company from a vendor that's supposed to handle an entire business function.

As you consider your options, find out which vendors subcontract their work. Not all subcontracting is bad, but if your vendors will use their own vendors to fulfill your needs, you should know what that process looks like.

3. Be clear on wants, needs and expectations.

Great partnerships arise from great communication. Manage third-party vendors as though they're employees. Provide actionable, reachable targets, leaning on the expertise of the vendor as a guide, then hold your vendors to the standards you set together.

Be realistic and clear about deadlines and deliverables. Never make vendors guess about what you want or when you want it. "By the middle of the week" might mean Tuesday afternoon to you, but your vendor might assume Thursday morning is fine.

4. Fail often … but trust your gut.

Get used to frustration in the early stages. Most relationships require both parties to iron out the kinks before the process becomes the smooth, growth-empowering agreement it should be. Work with a variety of vendors when possible, then offer long-term deals to the ones that mesh with your company and work style.

Trust your gut at every turn. If you feel like someone is withholding or misrepresenting information, you don't owe it to anyone to stick it out. It's your business, not a court case. You will know when a relationship is right, and you will know when it's not.

Your business can grow, or it can fizzle. Which path you choose depends greatly on the partners and vendors that help make your success possible. Use these tips to weigh your third-party vendor choices carefully and work with people who have the dedication and experience necessary to help you reach your goals.

Vince Dawkins
Vince Dawkins
See Vince Dawkins's Profile
Vince Dawkins, president and CEO of Enertia Software, has worked with industry-leading organizations, and he has been integral in developing the Enertia application into a resource used by over 150 leaders in the upstream oil and gas industry.
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