Understanding The Process Of Hiring Vendors

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MBA 19 | Hiring Vendors

 

The process of hiring vendors is one that you shouldn’t be taking lightly because these people—their reputations and the quality of their work—will reflect directly on you and the company you’re running. Be slow to hire but quick to fire in order to make sure that you’re cutting any losses as quickly as possible. Solomon Ali runs you through the most important things to remember when hiring vendors. It’s a much more delicate process than you might think. Make sure you’re always at the top of your game when you’re hiring out!

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Understanding The Process Of Hiring Vendors

One of the most fun times of my day is when I get to do the show and share the knowledge and the wisdom that I have accumulated over the years from all the books that I may have read. From all the things that I may have done and the people that had been a part of my life, and that have allowed me to be a part of their life. This is exciting to be able to share and give back so that people like me, people who look like me, know that you can do it. It doesn’t matter if you’ve gone to Harvard, Yale, Princeton or where you’ve gone. Those things are extremely important, to go to school and things like that, but I’m not talking to those people. I’m talking to the people like me who haven’t gone to school, who had to learn it the hard way, or is looking to learn it the hard way or who may have felt like, “I’m going to jump out here and do it.”

We know over 80% of the billionaires in the world do not even have a college degree. Let me share with you, you don’t have to let not going to school or attending a great university be your handicap or excuse for not getting this done. What you have to do is believe in yourself. You have to find some egos. You have to find some people smarter than you and not be intimidated or threatened by them and the things that they can do. That’s the first thing. Have some self-esteem for yourself. Get rid of all that phony pride and things like that.

Selecting The Right Vendors

On this episode, what we’re going to talk about is hiring vendors. How do we go about the process of hiring vendors and selecting the right vendors and things of that nature? That’s a difficult task because it can cause you to lose a lot of money if you don’t get this right. It can cause you to lose a lot of time if you don’t get it. We’re going to talk about some different types of vendors and things of that nature. We’ll go through some different stories and hopefully these stories that I share with you will be stories that you could relate to. Maybe you have a little experience yourself, and you can say, “That’s where I went wrong. Let me not do that.” Maybe you haven’t gotten to that point yet and you can say, “I remember Solomon saying this. Now let me be a little bit more thoughtful on my selection of a vendor to help me accomplish this.”

In other words, what I’m saying is be very slow to hire, and be very quick to fire, but you do have to vet your vendors and everything out. I’m going to share my first story about hiring a vendor. I’m going to try to tell a complete story. I’m not a great storyteller, so you’re going to have to bear with me a little bit as I try to fumble my way through this and hopefully, I won’t mess it up too bad. I’m going to hire an accounting company that’ll do my books and my records and everything like that. When I hire that accounting company, in my early years, what I did is just went on and hire an accounting company. I didn’t vet the accounting company and compare it with other accounting companies. All I did was based it on price.

I said, “That fit my budget. In fact, their price was a little bit lower than my budget.” They showed me everything that they would do on their brochure and everything like that. I was like, “We can get this done.” The relationship started out well in the beginning when they were doing basic stuff for me. I noticed as we got more complicated, they want to woe me with their expertise and their knowledge. My other professionals and my years of business experience was telling me inside my gut, they were wrong. They were wrong about the things that they were telling me and how they were guiding, but I said, “They’re the professionals. They know. Let me follow that.” Bad mistake. If your gut tells you something, call people on the mat for that and call them out.

You can lose a lot of money if you don't select the right vendors. Click To Tweet

The things that this company was telling me was, “We need all your records to do this and all your records for these various reasons.” We went back five years to do some accounting work and everything like that, and the reasons that they needed all the information never added up or made sense. We went back through five years of bank statements, our receipts, old transactions, contracts, things of that nature. We went back through all of this information. They were preparing all the new tax returns that may have been made to be reamended and stuff like that because the previous guy did them wrong and everything. After that we came to find out they did it wrong as well, but we didn’t find that out until much later because I didn’t listen to my gut.

That’s why I say you’ve got to call them on the mat. If your gut is telling you something that you feel is not quite right. How do you know it’s not quite right? You may have had experienced in the past where other professionals have asked you or given you different reasons for what you were doing and why you were doing those things. You have to be mindful because we all learn, and we all hold and retain information. You have to be mindful of what it is that you have learned in the past and how those applications and things was used.

Long story short, that relationship ended in a disaster with me having to pay them a lot of money. I didn’t get the job and the work done that I needed to get done because in the beginning, I hired the wrong people for the job. They couldn’t do the job, but I thought they could do the job because they had a very impressive brochure or some might be résumés or whatever. At the end of the day, as we started scaling and getting larger and things like that, they couldn’t keep up with the tasks, and they start making professional excuses. The reasoning that they were asking for various paperwork and things like that was because they have gotten above their scope. They didn’t know what they were doing at that point. It was beyond them.

It was like a high school kid and a professional. The high school kid is learning some very rudimentary stuff and that professional is an expert as an authority at some stuff. I’m dealing with a high school kid and when we move towards the level of college, the high school kid is beginning to get lost. That’s what these accounting people were. They were like high school kids and as we kept moving and shifting, they were beginning to get lost and I needed to graduate my team as I was moving, scaling, growing, and the transactions and things of that nature are getting complicated.

Show Enough Respect

I say all that to say, “Don’t just hire people based on a price and based on what they can do for you now.” Look at where you truly believe your business is going, your shortcomings, your strengths, and believe that you’re going to get your business to where it’s supposed to go and that there is a right fit as a vendor, as a professional to be able to help you get there. Also, if you need to have them accompany you to a meeting, do they have the right presentation? What do I mean by that? We all know what presentation means. I hate to say it this way people but I must say it, “Do they have the right look?” The right look is, if you’re coming to a meeting with me, you’re suited up. You don’t get to come in some jeans, penny loafers, and a buttoned-down dress shirt. You’re suited up. You’re going to have on a suit jacket. You’re going to maybe have on the vest, a nice tie and shirt. You’re going to have on the pants as well. That’s suited up.

MBA 19 | Hiring Vendors

Hiring Vendors: Don’t just hire people based on a price and on what they can do for you today; look at where you truly believe your business is going.

 

Women, you’re going to be dressed. The best way I can describe it very professionally is like you’re going to church. That’s for men and women. Dress like you’re going to church. Get suited up. I’m not going in a meeting or taking someone in a meeting with me that their hair is not done. Women, your makeup’s not done. Their clothes are sloppy. Their shoes are not clean. I’m not doing it because that is a representation of me. That is a representation of my business. That reflects on the quality of work and our standards. If every person is not going to put on a suit to go to the bank, to meet their attorneys or a potential client, then that’s a problem because you’re being judged at all times. You want people to judge you based on your work and on your performance. If you come in and your shoes are running over, not polished or clean, and your clothes are hanging off of you, guess what they’re judging you on before they even give you the opportunity to do the work?

You don’t ever get the opportunity to be judged on being a professional because you’ve already been judged by your appearance. They figure if that’s your appearance, that’s how you look, and you don’t take the time to bring and represent, that’s the kind of work you’re going to do. Don’t get mad at me for saying, I’m telling you what they’re thinking and that’s what they’re thinking. They’re thinking that based on your appearance, it is the representation of the work that they’re going to get. We all judge people. Don’t get all holier than thou and act like, “That’s wrong. You shouldn’t judge people you don’t know.” You’re right. The guy could look like a transit, clothes aren’t clean and could be a genius. He could do the work in his sleep, but the first thing for him to be able to do the work for anyone is he has got to get beyond the gatekeepers. He’s got to get beyond and get a chance and opportunity to do the work.

Enough of that. If you don’t get it, you don’t get it. If you go in there and you think it’s okay to dress how you want to dress, and think that you don’t need to wear a suit, if you’re a man. If you’re a woman, you don’t need to dress up and put on your makeup and things of that nature, then that’s on you. I’m going to tell you, and I’m going to say it right now, your ship will burn. You’re not going very far. I don’t care if you are in this generation, previous generations, or the generations to come. Everyone judges the person based on how they look in that first glance. In about three seconds, you have been judged and I have determined whether or not you’re capable of doing the work. The rest is just supporting the information to reaffirm the decision that I have made based on your appearance. I hope everyone understands that and everyone gets that.

Please take it from Solomon. Dress appropriately for all business meetings, with your attorneys, your accountant, your potential clients, or with your already existing clients. It is very important because you don’t need to overcome any more things than what it is that you have to do, and working with them in a professional relationship. The very next thing in hiring a vendor is this, if your vendor comes to you, and he doesn’t dress, as I just described for you to dress, what are you going to do? Cut it short. Thank them for coming and send them right back out the door. Don’t waste your time. If they didn’t have enough respect for you to dress appropriately to come to a meeting, to meet you to get your business, or even if they’re already an existing vendor to come to meet with you to share what’s going on, and the services that they have been providing and where they are, they’re not professional. Therefore, you want to go on to cut it short. Maybe they started out that way and now they’re down here because as we know, sometimes companies can start out at ten and end up at a three.

Sometimes they can start at three and end at the ten. You never know, but wherever they are, be slow to hire, and be quick to fire. If they started at ten and they dropped to a three, you’ve got to go ahead and know that their days are numbered. That you may be needing to look for a different relationship. You’re going to say, “Solomon, you’re going to do all that just based on the way they’re dressed?” Yes, indeed. Here’s the reason why. If you don’t show me enough respect to come appropriately to a meeting dressed accordingly, then you’re not going to show me enough respect in doing my books and my records, my legal work, my printing and my manufacturing. Your job is to continue to sell me on your company, its service, and why it’s a value to me, not to take our relationship for granted. We are professionals. We are in a business relationship. The moment you begin to take that relationship, or you allow someone else to take that relationship for granted, is going to be the moment your business starts slipping off. I don’t take people to any business meetings that are not dressed appropriately. I don’t go to any business meetings not being dressed appropriately. That’s first and foremost.

Don't waste your time if people don't have enough respect for you. Click To Tweet

Do Your Research: Contracts And Procedures

Next, do your research. When hiring a vendor, do your research. You need to learn as much about that particular vendor and their competition. I always like to pick 3 to 5. If I’m hiring a law firm, I’m going to pick 3 to 5 law firms that’s pretty much the same level, and then I am going to find out as much about those different law firms as possible so that I can select the best quality law firm to represent me. Sometimes that representation may be determined based on where I am now. Sometimes that representation may be based on where I’m going. Every once in a while, it may be based on where I have been, because we might need to have corporate cleanup and things of that nature to get us to the present, that things need to be tightened. It’s not that they didn’t do a good job or the previous one didn’t do a good job previously.

It’s that sometimes you’ve got to tighten things up. When rules and regulations and things of that nature change, moving forward in the present, you’ve got to know like, “We need new rules. We need new policies, procedures and things like that.” You’ve got to tighten things up. It’s the same with accounting. It’s the same with anything. Be aware. Hiring vendors is a very tricky thing. When you hire a vendor, a lot of times you are entering into a contract. Think of the contract as a marriage. If I enter into a contract with you, it’s easy to get in the contract, but it’s no more difficult to get out of a contract. What are we saying? A lot of people get married, it’s easy to get married, but it’s very hard to get a divorce. What does it take to get a divorce? People are turning around and they have to split their assets. The husband has got to get an attorney, the wife’s got to get an attorney.

All of a sudden you’ve got to start dividing up all the property. Who are the kids going to stay with? Who gets this house? Who gets this car? How much money is in the account? You didn’t have to do all that when you got married. All you basically have to do is give some blood, do a marriage license, a marriage certificate, stand in front of a person and say, “I promise to obey both ways, cherish, honor,” and everything of that nature. It’s simple, but it’s a little more complicated to get a divorce. It’s the same in business. When you hire a vendor, a lot of times you’re entering into a contract. When you enter into that contract, you need to understand what’s in that contract. You need to make sure that your law firm looks at the contract. Don’t just take the contract that it’s a standard contract and the vendor says, “Everybody uses it. This is the standard contract that we use.”

What I always say is, “I understand that. My team and I will have to look at the contract and go through it.” Why do I say that? Because there’s no such thing as a standard contract. Contracts are between two parties. Just because you have a contract that you use, that’s a boilerplate with all your customers, I don’t fit that mold. I may have special needs. I have to make sure my special needs will be covered in that contract. I may want to pay you on different pay dates or things of that nature. If you don’t deliver on time, I may want to turn around and get a discount. I need that in the contract and I’m sure it’s not going to be in the vendors’ contract that they give to typical customers.

This is where you start separating yourself from other people. The other customers didn’t know how to do that. They have a contract and they buy a service and the service delivery comes later, whatever, cost them money, but they don’t know they’re forced to pay under the contract of that particular obligation. That’s crazy. That’s totally insane. Why would you do it? What I feel you would want to do is negotiate that contract. That’s your team. When a vendor gives me a contract, I say, “Thank you for the contract. My team and I will take a look at the contract.” I look at that contract and I say, “I want to do business to business net 30 days.”

MBA 19 | Hiring Vendors

Hiring Vendors: The best thing to keep in mind is, be slow to hire and be quick to fire.

 

A lot of times a contract might say once they deliver the service you get, you’ve got to pay them in ten days. Nope, don’t do that. Why? For us, it makes it an accounting nightmare. It’s a lot easier to write a whole bunch of checks and send out a whole bunch of wires at the end of the month. In their contract, we’re going to turn around and we’re going to put in our rules because that’s how we run our business. We’re not allowing anyone else to run our business. When I’m hiring that vendor, I’m mindful of what my rules are. My rule is, “We pay at the end of the month. The cutoff for you to get a check with us is the 27th of the month. Your check or your wire goes out somewhere between the 3rd and the 5th of the month.” That’s important. Now, I’m not wasting labor costs. All of this can be done at one simple time very easy, quickly, but if I got ten different vendors, and they get paid all throughout the month, my labor costs will go up.

You’ve got to be very selective when you’re hiring your vendors. If a vendor says, “That’s not how we do it.” “I understand. Thank you very much for your time.” Give him a pat on the shoulder or the back. Good luck. I’m not the company for you. I’m not the guy to work with you. It’s very important. Every single contract is negotiable, and it must be with your rules and you must understand what those rules are. Let me repeat that. Joe Supply wants to be our supplier. I like Joe Supply and I want Joe Supply to be our supplier. Joe Supply gives me his boilerplate contract and Joe Supply says, “In 3 to 10 business days, you have to pay us.” I say, “Joe, I understand what your contract says, but my team and I need to take a look at the contract.”

Now, my team and I are going to look at our rules. What are our policies and procedures? How does his contract violate our policies and procedures? This is very important because what I don’t want to do is set a precedent that our company does not follow its own bible. If I ever get sued, people will be able to show, “They don’t even follow their own rules.” I don’t want to establish a precedent like that. I go back, my team and I, we look at our policies and procedures, and we say, “No, we pay everyone net 30 business to business.” I’m going to have to take out what he said. “I’m going to have to suggest that we pay you net 30 and our cutoff for your invoices to be in to us is by the 27th and you will get a check or a wire, whichever you prefer, between the 3rd and the 5th. Do you understand?”

His contract may say once the goods or the supply are delivered, no matter what the shape is, the money is still owed. Our team may say, “No, we don’t pay for things that have dents, scratches or stuff that is late. If it’s late, we expect a 25% discount because we’re going to have to wrap up either our labor costs or it’s going to cost us somewhere down the road so we’re prepared for that.” I’ve got to go back and say, “Just because you delivered it to me. I’m not okay with paying you that when you delivered it late because now, I may be late on a contractual obligation that I have with one of my customers that may cost me money.” I think you’re starting to get the point right now. I’ve got to go back and say, “If you are late on any deliveries, we’re going to deduct 25% from the cost, do you understand?” They’re going to say, “I don’t like that.” “I understand that, Joe. You may not like that. However, that’s how we do business and either you would like to do business with us or you don’t. We will shop and find someone else.” It’s that simple.

These are the kinds of things, when you’re hiring a vendor that you must look for. You go to your policies and procedures. You look at their contract. You match it up, make sure that you’re not going to be under any breaches, or anything of that nature of any of your contractual obligations with potential customers or existing customers. That’s very important because a lot of times we hire vendors and we forget that we have a contractual obligation with our customers to perform and deliver. If I can’t perform and deliver for my customer, because Joe Supply failed me, why should I eat the cost because of his failure? This is important because a lot of people don’t even think about something that simple in business. What they do is say, “This is what it is. This is what they want,” and they sign a contract and they go on and they’re happy that they got Joe Supply.

Whoever you're hiring, make sure that you understand their contracts. Click To Tweet

Your ship is going to burn and crash and it’s just a matter of time. You’re starting to make too many mistakes. When your customer holds you to the fire, and they’re going to hold you to the fire because they’re your customer, you’re going to eat it and there’s only so many times you can eat the cost of something. When you eat it, guess what happened? Profits keep going down and it’s only a matter of time before you’re out of business. Hiring vendors is very important. Making sure vendors are able to do the work and deliver on time.

Some people will say, “That’s Joe’s Supply.” Let’s do Martha Accounting Services. If I’m talking to get a bank loan, Martha Accounting Services are doing my books and my records, but they are running behind. Do you think the banker is going to wait for me forever to get my books and records? No, I’m going to time-out. They’re going to be like, “We’ve moved on. Come back and see us in six months or in a year. Your accounting records have to be all the way up to date within 30 days.” As the bank is doing their investigation, it may take them 45 days. If it took the bank 45 days to do their investigation, are you within the 30 days? No, you’re not. You’ll need your accounting people to give you another report. If they take too long to give you that report, you can miss out on your bank loan.

This is how important understanding your own policy and procedures are. This is how important drafting your policies and procedure are so that you can hire the right vendors and people and you know your recourse. If something goes wrong, what’s the recourse? Normally those recourse is going to be within those contractual obligations. Understand and know those contractual obligations. That goes for hiring consultants, suppliers, manufacturers or attorneys. In other words, what I’m trying to say is, whoever you hire, subcontractors or independent contractors, understand their contracts and make sure that you are able to go and create a contract that is beneficial for you and your company. You have customers on your side that you have to prove that you have to fulfill obligations to. You have a duty to fulfill those obligations, and you never want to be in a breach of a contract. That’s extremely important. Please keep that in mind when you are hiring vendors.

Look At Their Reputation

The other thing when you’re hiring vendors is to look at their reputation. It’s very important. Their quality of work and things like that. Their reputation and their quality of work is a reflection of you and your company. That is what the public is going to see, so you want to make sure they have a good reputation. You want to make sure that quality of work is good. You don’t want to hire a vendor and they’re out there, you see him in a restaurant and he’s arguing or fighting with his wife. It’s not a good reputation and that reflects on you because you hired this guy and his company. His marital problems don’t reflect on you, but the mere fact that he’s doing it in public, fighting with his wife, and he is a vendor of yours, that reflects on you. You’ll want to keep that in mind.

It is so important that when you’re hiring people to keep in mind, especially vendors, your contractual obligations. Be very mindful of that with your vendors. Make sure those are suitable obligations and contractual obligations that you and your company can live with. That you will be able to have your customers and things of that nature and still meet your customers’ needs, because you may have contractual obligations with your customers. I want to share that with you. I use an exaggerated husband and wife fighting in a restaurant as your vendor but I think I use that so that you get the point. In other words, you want to pursue a company with a good stellar reputation. If they don’t have a good reputation, it will reflect on you. It will reflect on your business.

MBA 19 | Hiring Vendors

Hiring Vendors: Many times, the reputation and quality of work of the vendors and contractors that you hire will be a reflection of you and your company.

 

People will only look at the people around you. They’re not just looking at you. They’re looking at the people around you. The people you’re hiring. If I’m hiring bad vendors, people are thinking I don’t know what I’m doing. My work is bad. That’s the perception that you’re giving people if you do that. When you’re also hiring a vendor, it’s up for yourself to have three vendors that provides you the same job. If I’m hiring Joe, the supply company, I am not and cannot afford for risk management to get everything I need from Joe Supply. I’m going to have an A vendor, B vendor and a C vendor, where I am getting my supplies from or getting the things that I need from. Sometimes, depending on how large your company is, you might want to have as many as five because if you lost one vendor, that would represent losing 20% of what they can deliver to you. You didn’t even think about it, did you? You just thought, “I’ll get a vendor. They’ll provide me some supply,” and you’re counting on getting that supply and it doesn’t get delivered. Who’s out of business? You are.

You’ve got to think about these things. It’s called risk management. I’ve got to diversify. I normally use 3 to 5 vendors. For easy numbers sake, I’m going to use five. If I have products or services I need to provide, I have five vendors. If I lost a vendor, and he could not provide a service, I only lost 20% of what I need. Eighty percent of it will still be there on time. Now I still got to do some juggling and stuff like that, but 80% is there. Isn’t getting 80% of what you need a lot better than getting zero? That would be what you would be facing when hiring one vendor. If you hired one vendor and that one vendor, by act of God or something happens, cannot deliver for you, then he rocked your whole world and you’re now running the risk of being out of business, losing a customer or something of that nature. It is very important to have more than one vendor.

It also goes for customers. If you have one customer and that one customer makes up 100% of your business, you don’t have a business. You have a relationship but you don’t have a business. If that customer leaves you, you’re out of business, but if you have twenty customers and one customer leaves you, how much business did you lose? Isn’t that just 5%? You still have 95% of your customers. I want you to start thinking along those lines. A lot of people I hear them say, “I’m in business,” and we get to talk in and everything of that nature and then I find out they have one customer, and they’re all stoked up. They’re all, “I’m in business and business is going great.” I say, “I’m excited for you, but you need to get some more customers and you need to get them quick yesterday. Don’t go home, find yourself some more customers. Don’t go to bed. Don’t go to sleep. Get some more customers.” The moment that one customer leaves, you’re in trouble.

It’s the same with vendors. I know you guys don’t think about this stuff, but I learned this stuff the hard way. If I have one vendor, and he gets his supply from Jack’s Trucking Company, and Jack’s Trucking Company has a logistics problem and can’t get him to supply and he can’t get me to supply, that’s a ripple effect. However, if I have five vendors, they’re probably not all using Jack’s Trucking Company, and I’m going to make sure that not all are using Jack’s Trucking Company because I did my due diligence. If they’re all using Jack’s Trucking Company and Jack’s Trucking Company has a logistics problem, guess who has a problem now? It didn’t matter, I had five vendors. Now I’ve got a problem. If Jack’s Trucking Company goes up on his prices for logistics and Joe Supply has to pay the increase, who do you think Joe Supply is going to pass that cost to? He’s going to pass that cost to me, but if I have four other vendors, that cost may not be getting passed to me because they’re not using Jack Trucking.

I hope everyone understands what I said. That’s how you handle your risk management on that end. That’s why it’s so important to do your due diligence. That’s why it’s so important to stay on top of things and know what’s going on. It’s not sufficient just to say, “I have a contract for Joe Supply to provide me with this.” You need to know about Joe Supply. Who are they getting their stuff? Who’s handling their logistics? Who’s doing this, who’s doing that? You need to know and you need to be diversified enough with your supply so that you’re getting it from different places and knowing that their logistics is coming from different places. Their supply and material are coming from different places as well. That is very important to know. Thank you so much for reading. I appreciate you. I hope you find this to have been of great value and of great substance to you. I know it has helped me in my business career, being successful, keeping me from losing money and things of that nature, especially when I couldn’t afford to lose money. It was a little more time upfront, but it will save you a lot of money as it saved me a lot of money.