How to Choose Service Providers

Be diligent when you are picking outside professionals to help your business grow.
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When selecting a service provider for their business, some people don't perform the due diligence the task requires. They just take a friend's referral, call someone in an advertisement or hire someone they met at an event. Selecting someone that you met through a referral or event is a good way to get started, but it shouldn't be the only step in a search for a service provider.

Selecting the wrong type of outside professionals can cost the company money and credibility in the investment community. You need to be selective and thorough in your evaluation and choice of key outside professionals.

Most companies need four types of professionals: an accountant, a banker, an insurance broker and a lawyer. The following are 10 questions you should get answers to before you hire service providers.

1

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Do they have experience working with Internet companies

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All too often, businesspeople hire outside professionals based on personality or a friend's recommendation. Those kinds of references are a good start, but what you really need to know is whether they have ever worked with an Internet-related business. Do they understand how much money it takes to be successful on a national or international basis? Do they have contacts that can speed up the time it takes to get to profitability?

2

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How many years have they been in the business

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Experience is very important to any business, but it could mean the difference between success and failure in a start-up. You want professionals who have been around long enough to have personally experienced the unavoidable ups and downs of business. You should look at professionals with 10 to 15 years of experience, because those people have gone through ups and downs and have learned most of the tricks of their trade.

3

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Have they ever worked with a start-up e-commerce company

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Any manager who has been involved with a distressed company knows the psychological and financial issues management has to deal with. You need professionals who are calm and experienced at advising and servicing troubled companies.

4

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Are their fees reasonable

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You shouldn't be shy about asking for service providers' fees upfront. Make sure the charges are comparable to what others charge in the area.

5

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Will they work with you financially if you can't afford their full fees in the beginning

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If you do a good job of selling the company and its focus on e-commerce, most professionals will work out suitable payment arrangements.

6

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What do their clients say about them

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Ask service providers for references, and contact those references to make sure the service lives up to its billing. Ask other service providers to recommend professionals outside of their field. Professional service providers have experience working with one another, and they don't want to make a bad recommendation. The best groups to ask for referrals are private investor groups, venture capital trade associations and venture funds.

7

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When clients have left them, what were the reasons

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Always try to find and speak with the clients who have left service providers that you are considering. There are many reasons clients leave, and a lot of them don't have anything to do with performance. Personalities and the ways of doing business may not have meshed.

8

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Can they grow with your business

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If you are trying to grow your business larger than a couple of million dollars in sales and hope to go international, your company will need a firm that has experience in larger businesses and has an international department or affiliations with other firms around the world. Your company doesn't have to be large to consider selling abroad.

9

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Will a seasoned executive be assigned to you, or will you be used to allow a junior executive to cut his teeth

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Most firms of any size will assign a partner to handle complex issues and an associate to handle the smaller issues. Many times, the associate will have developed an area of expertise that the partner doesn't have and can be more valuable. It is important to know that an experienced executive who has handled problems such as the ones you will be facing will be available.

If you want an idea of the level of service, look at the providers' business cards and see whether they list their home telephone, pager or cell phone numbers. If they list their pager or cell phone numbers, you know they provide superior service.

10

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Will they introduce you to their other clients who can potentially bring you business

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All good service professionals should have a large and diverse database of contacts. Such a contact source is an extra value that they can provide. If all else between professionals under consideration is equal, you should choose the one who can open doors for new business as well as provide advice and capital.

Note

: If you are pressed for time and plan to delegate to someone on your staff the interviewing and hiring of various service providers, make sure you take the time to interview the lawyer representing you. In a start-up that is raising money, the lawyer is the most important outside hire you will make.

Kramer is the author of five business books on topics related to venture capital, management and consulting. He is a faculty member at the Wharton School of Business at the University of Pennsylvania and the veteran of over 20 start-ups and four turnarounds.