How to Spot a Bad Small Business

Question

I was approached by a small coffee distribution company about potentially doing business with them (I own a small gourmet cafe). What kind documentation should I be looking for? Any red flags? Do they need any kind of food license?

Answer 1

Ask them who their existing customers are and call those customers yourself.

Are they claiming their product is fair-trade? Ask for documentation. Organic? You want to see the certification. How do they store the product? Ground or unground, frozen or thawed, is it delivered in refrigerated trucks, and on and on and on. Basically, if YOU were the distributor, how would you run it? What you're trying to find out is whether they run it as you would in their position.

Coffee distribution isn't a hotbed of criminal activity, but if you're still unsure of them then make them work for your trust. Get them to sweeten the pot, give you some free product, test their turnaround, absorb shipping and freight costs, etc. for a limited time.  

Answer 2

Check them out with the Better Business Bureau for starters.  Find out everything you can about them, from your state department of justice to the BBB to the Department of Corporations for your state or the state where they're based.  Find out if they have an actual physical address, not a PO Box or a private mail box (think "pmb" or "#" after the street address).  If you can, visit their office and roasting plant.  

Ask for a list of other, satisfied, customers.  

Answer 3

Verify contacts and references., Check for Lic. Ask for Business material i.e. Brochures etc.