7 Key Elements To Ensure You Get The Lowest and Most Complete Price

As a small business owner, you will always be sourcing some sort of product or service – a manufacturer to build a product for your business, a company that could do your web development, SEO, small business insurance or any other product or service.

It has happen to me time and time again.  You explained your project to a supplier and asked for a quotation. Then you asked another supplier to give you a quotation on the same project so you can compare.  When the bids came in they looked like two different projects and you were totally frustrated.  Now you have to interrupt the bids or try to explain them to the suppliers. This is not only frustrating for the small business owner but it is time consuming and time is one commodity that all small business owners do not have enough of.

Many mid-size and larger companies will send out an RFQ (Request for Quotation) which, accordingly to Wikipedia, is a standard business process whose purpose is to invite suppliers into a bidding process to bid on specific products or services.

An RFQ typically involves more than the price per item. Information like payment terms, quality level per item or contract length are possible to be requested during the bidding process.

A RFQ not only gives the suppliers a multitude of information so they can give you the best possible complete quotation, but it also will make a level playing field for all people quoting the project.

We have outlined 7 key elements to developing a professional RFQ:

  1. Purpose:  Give as much specific detail of the products and services you are looking for. The more they know about the overall project, the better it will be for you.

  2. Tell them about your company:  Give them an overview of your organization and its operations, organizational chart and customer demographics. What are your strengths and weaknesses as a company and in the marketplace? They need to know who to communicate with and who is in charge of the project. Let them know who is part of the decision making process along with their title, responsibilities and contact information.

  3. Scope of Work:  Give specific details on what is to be performed by the provider and the expected outcomes.  It is a good idea to include a detailed listing of responsibilities.

  4. Performance Standards:  Specify the MAP (minimal acceptable performance) standards expected from the supplier and benchmarks for monitoring performance.

  5. Deliverables: This is a two-way street, the supplier has deliverables and so do you. Provide a list of all products, reports, and plans that will be delivered to your organization and propose a delivery schedule. You will provide, clearly and concisely, the timeline for the steps leading to the final decision, such as the dates for sending questions, submitting the proposal, and or samples. Also the date you will be making a final decision.  This is one of the most critical elements and everyone needs to fully agree on the timeline.

  6. Life span of the product or service: What is the length of time this product or service will be needed for?  Is it a year or more or just one order?

  7. Terms and Conditions:  What are the terms and conditions of this RFQ as to freight, payment terms, and defectives solutions? Lead time for deliveries from time you place the order.  There is nothing too small to put into this section.

Yes this seems like a lot of work.  However, if you lay out a template with these 7 elements, it may take you some time to develop the packet of information; but the amount of time and frustration that you will save yourself as a small business owner will far exceed the initial time spent in developing this template.

You will be able to reuse it time and time again just by changing a couple of the elements. This process will provide complete, competitive quotations with everything you need to monitor and control the product or services you need.