The Real Cost of Undercutting Competitors
In the tough world of construction, tradies like builders, plumbers, and electricians are often stuck in a battle to win jobs.
The easiest weapon? Lowering your prices to undercut the competition.
It feels like a quick win, right?
But here’s the truth most won’t tell you: undercutting your competitors might help you win the job today, but it could cost you big-time in the long run.
Let’s be real…
We’ve all been tempted to lower our prices to secure a job and keep the work coming in.
But the fact is, if you keep slashing prices, you’re not just losing money – you’re risking your whole business.
If you’re not making a solid profit, what’s the point? It’s time to stop undercutting and start pricing for profit.
Our Profitable Pricing Masterclass will show you how.
Undercutting: The Trap That’s Hurting Your Business
There’s this idea in the construction world that to win jobs, you’ve got to be the cheapest.
But that mindset is a trap.
When you keep dropping your prices just to beat your competitors, you’re setting yourself up for a financial disaster.
Sure, you might win more jobs, but the real question is, are those jobs even worth doing if you’re not making any decent profit?
Undercutting might seem like a smart move when you’re desperate for work, but it’s a dangerous game that’s costing you more than you think. The worst part?
It’s a game you can’t win.
Why Undercutting Will Kill Your Profitability
Slashing prices isn’t just about winning a single job – it has a domino effect on your entire construction business.
Whether you’re a bricklayer, tiler, or electrician, you’re putting your financial future on the line every time you drop your prices below what a job’s really worth.
Here’s how undercutting hurts your business:
1. Crushed Profit Margins
The first and most obvious problem?
You’re killing your profit margins.
Every time you drop your price to beat the competition, you’re shaving away the money you should be keeping in your pocket.
Sure, you might be busy, but if you’re working for peanuts, what’s the point?
Those small profit margins leave you no room for error.
If something goes wrong – and we all know things can go wrong on a job site – you could actually lose money.
As a tradie, you need to ask yourself: How many jobs can I afford to lose money on before my business is in real trouble?
2. Poor Quality Results
Undercutting doesn’t just hit your wallet – it hits the quality of your work too.
When you take on jobs for less money, you’re often forced to cut corners.
Whether that’s using cheaper materials, rushing the job, or not having enough hands on deck, the result is often the same – the quality drops.
Imagine you’re a plumber working on a tight budget.
You’ve undercut your competitors, so you’re stuck with low-grade materials that might get the job done, but won’t last.
You finish the job, but guess what? A year down the line, the client has problems again, and your name’s attached to it.
Your reputation as a tradie is built on doing epic work, and when you’re forced to rush or use subpar materials, you risk damaging that reputation.
Clients remember who gave them a half-baked job. In the long run, you’ll lose out on repeat business and referrals.
3. Burning Out Your Team
When you price too low, you end up needing to take on more jobs just to make up the difference.
This means you and your team are working flat out to keep up – often for less money. Your crew starts feeling the pressure, and that’s when mistakes happen.
Burnout is real, and when your team is pushed to the limit, you can expect lower morale, more sick days, and even good workers leaving for better opportunities.
Trades like plasterers and painters know that when the jobs pile up and the profits don’t match, it’s tough to keep going with the same level of energy and focus.
A tired team equals poor results, and in the end, you might spend more time fixing mistakes than making money.
4. Attracting the Wrong Clients
When you’re the cheapest option, you’ll likely attract clients who are only focused on one thing: saving money.
These clients don’t care about your skills, your quality of work, or your time – they just want the job done for the least amount possible.
The worst part? They’re never satisfied. They’ll push for more, haggle over every detail, and won’t think twice about jumping to the next tradie who offers a lower quote.
If you want to work with legendary clients who respect what you do and understand the value of quality work, then you need to stop pricing yourself like you’re just there to make up the numbers.
It’s time to target clients who see the bigger picture – clients who value your trade, respect your skills, and are happy to pay for quality.
Why Undercutting is a False Economy
There’s this belief in the construction industry that any work is better than no work.
But here’s the thing – if you’re taking on jobs that don’t make a profit, you’re actually doing more harm than good.
Think about it: if you keep working for low margins or no margins at all, eventually you’re going to run out of cash.
You might stay busy, but you’ll be spinning your wheels and getting nowhere.
Many tradespeople, from builders to roofers, think they can make up the difference by taking on more jobs.
But working more hours for less money is a quick way to burn out and lose your passion for the trade.
You’re not just risking your business – you’re risking your well-being too.
The Way Forward: Price for Profit
It’s time to get serious about your pricing and stop playing the undercutting game.
The most successful tradies aren’t the ones who do the job for the lowest price – they’re the ones who price for profit, deliver awesome quality, and build solid relationships with clients who respect what they do.
Here’s how you can start turning things around:
1. Show Your Value
If you’re a builder working on a home extension, it’s not just about throwing up walls – it’s about the experience, the craftsmanship, and the peace of mind you offer.
The same goes for a plumber handling a complex fit-out or an electrician installing a state-of-the-art system.
Clients will pay more when they understand the value you bring.
Don’t sell yourself short – highlight what makes your work better and why it’s worth the price.
2. Build a Tribe of Loyal Clients
Clients who hire you because you’re the cheapest are never going to stick around.
Instead, focus on building long-term relationships with epic clients who see the value in what you do and want to work with a tradie they trust.
These clients will not only come back for future work, but they’ll also recommend you to others.
That’s how you build a legendary reputation.
3. Stick to Your Guns
Knowing when to walk away from a job that doesn’t pay well is hard, but it’s one of the best business decisions you can make.
Don’t be afraid to say no to jobs that won’t make you a profit.
There will always be another job around the corner, and it’s better to wait for one that respects your worth.
Join Our Profitable Pricing Masterclass
Undercutting competitors might feel like the only way to win jobs in the short term, but it’s a losing strategy in the long run.
If you want to build a successful and sustainable construction business, you need to start pricing for profit.
Join our Profitable Pricing Masterclass and learn how to charge what your work is worth, without losing clients.
We’ll teach you how to create a pricing strategy that’s fair, sustainable, and sets your business up for long-term success.