How To Make Your Life Easier With Effective Vendor Selection & Procurement

June

14

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Buying the wrong things and working with the wrong vendors can create significant headaches in our businesses. Yet many of us, we just don't have a process or a system to help ensure we make great decisions in this department. That's why I've got a vendor selection and procurement expert with me today. He will share some tips with us that you do not want to miss.

Join Tim Fitzpatrick and Gregory Klein-Hertzel for this week’s episode of The Rialto Marketing Podcast!

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How To Make Your Life Easier With Effective Vendor Selection & Procurement

Tim Fitzpatrick
Buying the wrong things and working with the wrong vendors can create significant headaches in our businesses. Yet many of us, we just don't have a process or a system to help ensure we make great decisions in this department. That's why I've got a vendor selection and procurement expert with me today. He will share some tips with us that you do not want to miss. Hi, I am Tim Fitzpatrick with Rialto Marketing, where we believe marketing shouldn't be difficult, and you must remove your revenue roadblocks if you want to accelerate growth. Thank you so much for taking the time to tune in. I am super excited to have Greg Klein-Hertzel from Connectiv Tech with me. Greg, welcome, and thanks for being here.

Gregory Klein-Hertzel
Hey, Tim. Thanks for having me.

Tim Fitzpatrick
Yeah, I appreciate it, man. So when we connected before, we are both math majors, which is pretty rare for me to come across another math major. So it's always nice to connect with folks that love numbers.

Gregory Klein-Hertzel
And have personalities. It's a rare combination.

Tim Fitzpatrick
Yeah, exactly. Gosh, yeah. Most people think us, math majors, hide away in a dark place. Man, I'm excited to dig into this because honestly, I have never had somebody on the show to talk about vendor selection and procurement. But obviously, it is something that we are doing in our businesses all the time, but I think it's overlooked a lot of the time. So I'm excited to have you share your experience and your knowledge with us. But before we do that, I want to ask you a few rapid fire questions to help us get to know you. Are you ready to jump in with both feet here?

Gregory Klein-Hertzel
Let's do it.

Tim Fitzpatrick
Okay, man. So when you're not working, how do you like to spend your time?

Gregory Klein-Hertzel
Great question. So I'm going to Red Sox game this weekend, and that's great. I just got a puppy, and it's been my dream to get a Sheep-A-Doodle and name him Gus. So finally got to do that. So I got to go hiking with him, and he's my best coworker. Then things like play tennis and barbecuing and see family and friends and be with family. So some stuff like that. It makes me happy.

Tim Fitzpatrick
Okay, so Sheep-A-Doodle named Gus.

Gregory Klein-Hertzel
Once you see pictures, you're going to fall in love. I guarantee it, everybody.

Tim Fitzpatrick
Okay, so Sheep-A-Doodle, is it like sheep herding dog mixed with poodle?

Gregory Klein-Hertzel
It's a sheep dog with poodle in it.

Tim Fitzpatrick
What's your hidden talent?

Gregory Klein-Hertzel
Hidden talent. For years and years and years, I spent a long time singing in an acapella group, actually. I was the bass, not up front singing solos. I was singing the Duit duts and the bop bops in the background. But for years, I sang in an acapella group, and we still get together every once in a while and pretend we still have talents in singing a cappella still. But that's a hidden talent. I'd say it's in there somewhere.

Tim Fitzpatrick
Awesome. I love it. What's the best piece of advice you've ever been given?

Gregory Klein-Hertzel
One of the foundations... So once upon a time, I worked for a health care company. I was in health care administration and ended up leaving because I called my boss out and committing Medicaid fraud. And he said to me, Greg, Everybody's doing it this way. Nobody's ever going to check. We're not going to change. And I quit after 10 years there. And one of the biggest lessons someone told me is that you are defined by the people you're surrounded by. It doesn't matter. Employees, vendors, staff, friends, family. It really wasn't until I started having conversations like this with you, Tim, and more, that I started realizing this is a much better way to figure out who I'm surrounded me my business by, and my clients, then who got paid more and who dressed me, and said something funny, right? And so that is still one of our core foundations and one of the best pieces of advice I've ever gotten.

Tim Fitzpatrick
It is so, so true. Whether intended or not, the people that we surround ourselves with have a huge impact. Huge. And gosh, if you don't pay attention to it, all of a sudden you're like, Gosh, why am I doing this? Why am I acting this way? And it's like, Oh, my God. Some of the people I hang out with do the same thing.

Gregory Klein-Hertzel
Oh, yeah, absolutely. You nailed it.

Tim Fitzpatrick
Yeah. Okay, so other than singing acapella, anything else about you that might surprise people?

Gregory Klein-Hertzel
Well, back when I was younger, I was a big tennis player, so I played D1 tennis in college. And for a hot second, I went to an international tennis tournament in Scotland, got to the finals, did not win, but I still made it to the finals. And so I was internationally ranked for a minute and did not end up pursuing it because I'm not actually that good at tennis, but just enough to like, brag about it just a little bit.

Tim Fitzpatrick
Hey, you're good enough to play D1. Do you still play?

Gregory Klein-Hertzel
Yeah, I'm in these old man league now. It's I get injuries constantly. So it's one of those situations now. It's just for fun.

Tim Fitzpatrick
The pleasure's of aging.

Gregory Klein-Hertzel
I know.

Tim Fitzpatrick
What does success mean to you?

Gregory Klein-Hertzel
I would say success, it translates into one word, purpose. One of the major things in my life, to be able to provide to family, to be able to live the life I want, to be able to affect the people I'm surrounded by the way I can affect, gives me purpose. There's no, I have to go to work today mentality. I love what I do. That is what I encourage everyone to really think about. I mean, one of the major reasons people leave a job is because they don't really have purpose behind it. And it's what motivates you, what keeps you up. And so that's what success means to me. If I can wake up every day and feel good about what I'm doing and can show my face and affect the people around me positively, then that's success for me, I would say.

Tim Fitzpatrick
Where's your happy place?

Gregory Klein-Hertzel
You know what's interesting? Because back to the people mentality, there are people in my life that I call family, that no blood relation to me. It's funny because they're my happy place when we all get together. Their kids call me uncle, and we get together all over the place, Vermont or Washington, DC, because We're all spread out. But there's a core group of us that are probably 15, 20 strong, and it's growing with wives or significant others or kids and things like that. So these people are my happy place. So it's, again, the people I'm surrounded by that brings me the most joy, I'd say.

Tim Fitzpatrick
What qualities do you value in the people you spend time with?

Gregory Klein-Hertzel
I have a philosophy. Never lie, therefore, you don't have to remember what you say. And so to be able to call these people family and friends or just surround yourself with the right people, you look for good people, people who share some of your values. It's so funny. You can look at... I've done this exercise where I've looked at my employees or I've looked at my group of friends, and they are truly all combined together, all add up to who I am. Some people are, I don't know, better at sports or better at communication or better at being family people, right? And they all have the qualities that I strive for myself and some more other. And it gives me some purpose to reach for. And so those are some of the qualities that I look for, I'd say.

Tim Fitzpatrick
So tell us about Connective Tech. What are you doing? Who are you working with?

Gregory Klein-Hertzel
Really odd company. I'll be honest. There's not a lot out there like this. So we are a fractional CTO organization, but our specialty is a vendor selection and procurement. And what we're talking about here is service providers. So anytime a company needs to outsource something or is looking for a vendor, what we are is an outsource procurement Department for a business, right? And so what we had found in my dealings with companies and what I have done is that a lot of businesses are failing at selecting who they're going to pay and who they're going to trust. They're failing because they're relying on a lot of uncertain resources to pick these people, these companies. And so what we've done, actually, to get really good at this, to help companies select the right vendor, is that our vetting process is actually more proactive in nature. And so long story short, there's more bad than good out there. And so if we're going to be really good at selecting vendors for businesses and helping businesses identify what type of vendors are going to solve their problem. There's a huge vetting process we go through. In fact, there's a lengthy assessment process where we're actually walking through their services that they provide, the money that they cost. But we're actually looking at the employees at an organization consultation. Because it's one thing for the CEO or the salesperson to say, Here's what we do. It's another thing to talk to the employees that actually do it. But we're actually evaluating operations in a company because that usually translates into customer service. Looking at ethics into a company. Is this a company a business can trust? And so much more. Then we actually bring them through live environments to test them. And really, at the end of the day, if you had to pick one method to say, Hey, how do I select vendors? Well, after you sign the contract and see them in action, that's how you see if they're any good or not. But by that point, it's too late. So that's where really Connectiv Tech shines is that after being in business as long as we have, we've seen these vendors in action with clients, and we've seen who's going to be good, who's going to be bad, right? And then we go through a whole partnering process with them. So there's a lengthy process. Now we have a list of over 200 different vetted, approved, and tested potential vendors that we pick and choose from every time a client engages us. Now it's about specific criteria, price point, services, personality match, ethics, that we're going to match the company. This was actually modeled after really all the Fortune 500 to the Fortune 5, having dedicated in-house departments towards procurement. Our goal is to bring this enterprise solution to small, medium, large, and enterprise-level businesses. And so we're helping businesses find vendors for cybersecurity and software and app development projects, doing a ton of CRM and ERP implementations or even HR services. We even developed a whole division that is all about filtering money back into the company through vendors. So we're doing free audits of telephone and internet services, credit card processing, Microsoft licensing, or business printers. We're even helping companies now with loans and debt or even investors, and sometimes bringing in private equity venture capital firms as some examples of what we do. But really, just keep in mind, at the end of the day, really all we are is this vetting and matchmaking service with a technology consulting lens to it, if you will. The cool part about this is that I decided a long time ago to make sure we're incentivized to make meaningful and good matches. Actually, this is a complementary service for the client. We actually are getting paid from the vendor, our client's pick, and not our clients, which is the way our business is structured. Very similar to think about commercial insurance agents. They get paid by all the insurance carrier, they represent all the insurances, and they're advising the client what type of insurance and how much they should get. And so we're structured very similar. And that way, it's a success-based model. If we're not doing a good job making matches, then we don't get paid. And so we're putting our reputation on the line for that.

Why Businesses Fail at Vendor Selection

Tim Fitzpatrick
Thank you for sharing that. You shared a lot of good stuff in there. I want to dig a little bit deeper. You touched on it. Why are businesses failing at vendor selection? And you touched on it a little bit. I have a feeling we're going down this vetting path. They're just doing a really bad job vetting. But am I on the right path there? Let's dig in.

Gregory Klein-Hertzel
Yeah, you said it. I'm glad you asked this, it's so crucial. If anyone's ever... Let's say if you own a home, maybe you're looking for someone to mow your lawn or do your garden or paint your house. So what are you relying on to do this? Maybe ask a neighbor, who do you know, or look on Google reviews. Maybe there are even some websites that put together, you click one button, it throws it out to 20 different possible one. But how do you really know based on what you're doing, if they're any good? You're still looking at a quote and using your emotions to say, was this a good experience? Just getting a quote, did they call me back? And those are your really two methods. So think about a business. Let's take a pharmaceutical company. What they're really good at is pharmaceutical things. But in order to actually run a business, now you need your Microsoft licenses, now you need cybersecurity. I'm sure you can attest to this, Tim. Now they need your marketing services, right? And so how do they figure out who to trust with that? So they're going to go to their competitors. They'll look at Google reviews, maybe even look at do an RFP process. And still, at the end of the day, they're really relying on a quote and their experience and their emotions to pick this. So they don't have the expertise in all these areas to figure out who's bad and who's good, right? And think about human nature in general. There's going to be more bad than there is good out there. It's just human nature. Forget about the services people offer. Anywhere you go in any industry, there's just more bad than good. So how do companies do this? Well, the fact is there's no real methods unless they've used the vendor before. I mentioned the real way to select them is, Hey, I've used them, and I can see if they're bad or good. And so I would say two out of three clients come to us and be like, We've tried this vendor. We failed, and they didn't do a good job for us. And now we've wasted a lot of money and a lot of time. And so that's tough to do. So a lot of these business are really just talking about, Hey, give me a reference check, or Here's what I need. What do you recommend? And there's a lot of trust issues there because everyone's selling what they're selling. The biggest red flag for me is that when these service providers, these vendors, don't know their own limitation, they'll yes you to death. That's usually a good sign that says this is going to fail because they don't know their loan limitations or when to bring in a partner or when to collaborate or how to advise you. They just want to make a sale. And so this is why connective tech was born. There has to be a better method to pick your service provider, to pick your vendors of a business than just a quote, basically, and emotions. And so this model was put in place to really test these vendors. It's almost like an unofficial accreditation for these service providers or vendors, right? If you can make our list, then chances are you got something going for you, right? And so sometimes it could take months or years to vet a company the right way, right? They could be great, but not ethical, right? And you don't know that until after you start interacting with them. And so a lot of misconceptions are around this or be like, Oh, the competitor down the street is using this company. I'm sure it should work for me. Take Salesforce. There's a lot of conversations around Salesforce, and a lot of companies say, my competitor is using this, so it should work for me, which is a complete misconception. You can put 20 similar companies, let's say, manufacturing firms that do something similar right next to each other. The fact is all these manufacturing firms are going to have different operational procedures, different people overseeing it, different steps in their processes, or they're going to require something unique. So even if it was a Salesforce for all 20, which is unlikely, that's going to be a good solution. Each Salesforce should look very different for all these manufacturing firms. It should complement what's in their business already. And so it's very hard for a company to understand this and how to select software, the right service provider, because they're experts on what they know. That's why they have to lean on a company like Connectiv Tech to walk them through the recommendations. What's good? What's bad? What should they stay away from? To make sure they're not being overquoted or underquoted for that matter. To make sure it's a long, long term fit, and they're not wasting money or wasting time redoing it, because some of these solutions are very expensive, right? So that's a lot of what we see, and that's really the birth of connective tech is that realization a lot of businesses were failing at this. And so to tackle the oversaturation in service providers, Connective Tech was born to handle that.

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The RFP Process

Tim Fitzpatrick
Greg, one of the things you mentioned was the RFP process. And for those that are not familiar with the RFP Request For Proposal, I've never liked the RFP process. I think as a supplier or a vendor, it's broken. But I also think that the RFP process also assumes that the business knows exactly what they need and want. And most of the time, I don't think they do. And it's just like, this is what we need. Give us a quote. It eliminates the whole conversation process around discovery to make sure that what the client is asking for is what they actually need and is going to get them where they want to go. What are your thoughts on the RFP process?

Gregory Klein-Hertzel
I'm meant to that. Oh, my gosh. I'm so glad you asked this. So as a business, if you're large enough to go through the RFP process, it makes a lot of sense. So it eliminates a lot of time. You're putting together all these requirements, and then you're throwing out to the getting quotes. It's, for time's sake, fairly efficient. But people really don't think about the effectiveness from a service provider standpoint. All of these, because we talked about every business really needs a unique solution. To your point, you said it eliminates the conversation. That's a crucial part of what you could be in the vendor selection part. You need a conversation. You need a customizable quote. And the RFP process assumes a lot of things. And so many times there's not enough information in it. And it's always about who can give the lowest bid, right? And that's usually the winner, right? And then everyone maybe will have a chance to present, but they're really going to make a decision off of a financial aspect, which is a horrible way to pick a provider, right? And from the service provider's point of view, there's not enough information ever, right? And I would say 50 % of our conversations when we talk about vendor selection, it usually starts one place. And they're right to think they have a need and the problem where it is, and they're looking for a specific vendor, but they're wrong to think that a specific vendor is going to fix that. Really, let's take, for example, website development. Very simple concept, right? Some people come to us and be like, We need a new website, right? And so we go through the conversation and we say, All right, maybe it's not a website, maybe, but it's a branding conversation. Maybe we need to look at what is your go-to-market strategy before we do a website development. It's just because that's what they know. That's what's out there. That's what Google's saying in order to achieve what I'm going to achieve. That's what these service providers want to come in and vet. They want to vet these businesses just as much as these businesses want to vet these service providers. They want to make sure they're a good fit. Sometimes these vendors, in order to win this business, have to come in as cheap as they possibly can to win it. You know what? They end up losing money because the scope changes, because they couldn't have that conversation, or it ends up being something different, and now they're scrambling to find the resources because they want it, right? And then these vendors sometimes have to be in network with a certain online SaaS business in order to even bid at this, which means you're missing a a whole another 75 % of the vendors that may be a better fit than the people just registered to respond to RFPs, right?

Tim Fitzpatrick
Thank you for bringing that up.

Gregory Klein-Hertzel
Huge, right?

Tim Fitzpatrick
Because that, to me, I think is a huge downside to the RFP process is there are a lot of great providers out there that refuse to go through the RFP process.

Gregory Klein-Hertzel
Yes.

Tim Fitzpatrick
So you're It's automatically just closing off whatever the percentage is. It's a lot. And some of those people are, if not extremely good, they are at the top of their game. Because maybe this may not be true across the board, but in a lot of cases, the best providers will not participate in the RFP.

Gregory Klein-Hertzel
I've seen the same thing. I've seen the same. It's not universal. There are some good ones out there, and they have a lot of money dedicated to just responding towards RFP. So sometimes it does work out. I will say that it's not all the time, but what we're saying, yes, is it is a, unfortunately, most of the time scenario, like over 60 % of the time that we're seeing that.

Tim Fitzpatrick
Yeah. And to go back to your initial point, the RFP process is not doing a good job of vetting. It's a very hands-off approach.

Gregory Klein-Hertzel
Very. Yeah. And sometimes they even make these vendors pay to be a part of that, right? And so now these vendors are losing more money, right? It's not a great system. And more and more these days, you're seeing service providers or vendors leaning away from this, right? Much better to be able to have these type of conversations. So I will say this, while our primary purpose services to advise clients, we're here to also advocate for these service providers to make sure that this is going to be successful for them, and to give them a fair shot, which is why we've developed our process to be different from the RFP process, to make better connections. It's people. They're selling intangible objects. They don't have a sweater or a tennis racket to sell. They're selling a service, right? You need a connection. I'll be honest, you need trust. You need a relationship for a lot of this. Cybersecurity is a major one. You got to meet these people, right? And you can't just do that over a SaaS product or RFP process. You need a conversation.

Why The Vendor Selection and Procurement Process is Important

Tim Fitzpatrick
So why, you've touched on it. I mean, vetting is the biggest reason why they're failing. But why is this selection and procurement process so important?

Gregory Klein-Hertzel
Yeah. So let's break this up a little bit. So for small small to medium-sized businesses, this could be a make or break situation, right? When you try to get to next phases of your business, you talk about a business that saw the hockey stick. Now, what's next? I'm having trouble. They're at 5 to 10 million in revenue, and they're trying to get up to beyond that, which is a very critical point that most business are like, How do I get above this point? I've been stagnant here for three, four years, seven years, whatever it is. It's a lot of times it's surrounding yourself by the right people. This could mean employees. It could mean service providers of doing that for you. These service providers are going to be good for a certain level of business, meaning I may start with a client and they're at one to $5 million. Once they get to that $5 to $10 million, they're going to need the same service, but now a different provider that is used to those that size business and scaling up and up and up and up. And so the money wasted around getting to that next level could really damage a business. A business that has very thin margins needs to spend their money very wisely and sometimes has closed businesses down. Maybe they trusted the wrong cybersecurity provider. And the cybersecurity provider, Yeah, we're going to provide you antivirus, and we're going to do all tech support. And really, it sounds great. They have a great price, but you know what? They have a great price for a reason, right? And they didn't provide great security. They didn't provide malware protection, ransomware, right? They couldn't actually secure your business. And so those cyberattacks, which is roughly $162 per document that is on ransom, anywhere from hundreds of thousands of dollars to millions of dollars, could shut a business down if you're trusting the wrong people, there is a time to go with the cheapest option, and there is a time to go with the right option, which doesn't necessarily mean you have to go with the expensive ones, but you do have to invest in it, which you can utilize technology to grow your business. And then with the larger companies, especially for the public ones, there's a lot of people to report to. And so implementing some large ERP system to the business, which is a huge switch, could take a year, maybe longer, how big the company is. That's a big investment, and there's a lot of deadlines to meet. And so there is a domino effect of bad things. If you choose the wrong service provider, it means your internal staff can't get their job done, you don't meet your goals, things like that. It's going to affect businesses differently in different ways. It could have low impact, too. We're talking about extreme cases. We've seen websites go for six figures all the way down to five figures. It just depends. And so sometimes you trust the wrong people. It's no big deal. You only spend four or five grand. Sometimes you trust the wrong people, you spend 100 grand, and now you need to redo that and spend more money, right? And the second provider is paying for it because now there's trust issues in the industry, right? And the bad people make the give the good people a bad name. And so there's different effects for different stages of business. But regardless of what stage, it's going to affect the business positively or negatively, depending upon who you trust with that, if that makes sense.

Tim Fitzpatrick
It makes perfect sense. If you make the wrong choice, it really comes down to you waste time and you waste money.

Gregory Klein-Hertzel
Oh. Bottom line, that's it. Exactly.

Tim Fitzpatrick
I mean, that's really the bottom line. If you work with the right person, cool. Well, then it allows you to get accomplish what you needed to do so that you can focus on something else in your business that needs attention.

Gregory Klein-Hertzel
Not only that, but think about the time that you have to dedicate to go finding these companies, and then the time you have to dedicate to vet them and do your checks on them. Internal employees I don't care what level you're at. You don't have time to dedicate the proper time to actually dedicate to vet these companies. And so you get a quote and hope to God you make the right decision on who you to trust, right? So it's a time sucker for these internal employees. Even procurement departments have a list of favorite providers, right? Sometimes they even need help for a new type of service that they haven't used before. Who do I trust, right? So it's an interesting time suck exercise, regardless of the good or bad that comes out of it.

Conclusion

Tim Fitzpatrick
Yeah. God. This has been a fantastic conversation. Any last minute thoughts, tips you want to leave us with on this topic?

Gregory Klein-Hertzel
That's a good question. I would say that the reference checks has been a big topic of conversation as just a general tip. Here's my point of view on this. Reference checks are a big old waste of time. I don't care if it's an employee or employee you're hiring or a service provider, of course, they're going to give you a positive reference check. And these days, sometimes people decline giving reference checks because it's a liability depending upon the industry. So it's a waste of time. Don't waste your time doing reference checks. Hopp on LinkedIn. See if you can find somebody that's used them before, reach out to them. Do reference checks in a different way if you want to do them. Find a connection, right? Or find a company like Connectiv Tech that has verified that these companies are good, and this is a more successful route to go with, right? I'm not unique. The way we do it is unique to be more effective, right? So I would say just a tip, if you're doing that internally as a business, reference checks are just a big old waste of time.

Tim Fitzpatrick
You know what? From the provider side of it, whenever I have had somebody ask for references, I've given them, and they've never checked them. And so it's on the provider side, I've talked to people who are like, I don't do it anymore. It's like, go look at our testimonials, go look at our case studies, go look at reviews, but I'm not going to just give you clients to talk to.

Gregory Klein-Hertzel
Yeah, but what else are they going to rely on? Everything you just said, reference checks, Google reviews, all these uncertain ways to pick who they're going to pay and trust, right? Because how else are they going to do it? Standing alone, right?

Tim Fitzpatrick
Yeah, exactly.

Gregory Klein-Hertzel
You said it.

Tim Fitzpatrick
That's so interesting. Greg, this has been a fantastic conversation. Where can people learn more about you?

Gregory Klein-Hertzel
Hey, thank you for asking, and thank you for having me. I would go to our website, connectivtech.com or LinkedIn. That's just my name. I'm the only client Hertzel in existence, so it's easy to find me. So just come check it out. Remember, it's Connectiv Tech without an E after the V.

Tim Fitzpatrick
Cool. So we'll make sure that that is in the show notes as well. Like I said, I've never had anybody on the show that does what you do. So people that are watching, listening, if you need help with this stuff, please reach out to Greg. I've connected with him multiple times. Super nice guy, and I know that you will be in very good hands. So reach out, have that initial conversation, see if it's a good fit. But I know Greg can help you. So, Greg, thank you for being here.

Gregory Klein-Hertzel
Thanks for having me.

Tim Fitzpatrick
Appreciate it. Those of you watching, listening, I appreciate you as well. You can always connect with us over at rialtomarketing.com. That's RIALTOMarketing.Com. The other free resource we've got for you is over at revenueroadblockscorecard.com. So if you want to know which of the nine revenue roadblocks are slowing down your growth, you can do that there. Takes less than five minutes and a ton of value from that report. So take advantage of it. So thank you again. Until next time. Take care.


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