Overcoming a Competitor Who Underbids Projects

Contractor tallying numbers for projects

Are you  finding yourself in a situation where you’re consistently losing to a competitor who underbids projects? As frustrating and disheartening as this can be, take a moment to realize the repercussions for them, and the value you bring to the table. What sets you apart from the competition? Does your reputation precede you? Is your company known for outstanding customer relations, timely follow through, accurate bidding, or hopefully all of the above? Understand the bigger picture is integrity and quality, not  the cheap thrills of securing a job while you’re in a pinch.

Cheap Results

Customers who are simply searching for the cheapest option may not be the customer for you. That is ok! The winning bidder, if they are consistently underbidding, will likely not be able to deliver a product with the necessary quality. Corners will be cut, and trust will be lost as additional costs and change orders add up over time. Change orders will slow the progress on the project and could even result in legal action by the owner.

It’s possible they are bidding on jobs that are outside of their expertise, or not thoroughly reviewing the requirements. They could be using cheap materials that won’t hold up over time. Regardless of the reasons that a competitor underbids a project, the outcome tends to be the same. As with most things in life, saving money by going the cheapest route ends up costing you in the end. Quality work is worth its weight in gold.

No matter the competitor, rise to the challenge.

While underbidding can be extreme, if you’re running into a competitor that underbids projects by a small margin, it’s a good and necessary challenge to examine your processes, subcontractors, materials, and labor costs so that you can bring a competitive edge. If possible to decrease pricing while maintaining your profit and value, do it! Don’t let anything get “set in stone,” so to speak, as that hinders growth and flexibility. Keep things fresh, and keep the industry competitive.

Keep Your Value High

Let your reputation and your work speak for itself. This may come with temporary frustration if a competitor consistently underbids jobs. But the long-term effects will fall on their shoulders and not yours. Don’t undersell yourself. Know what your company brings to the table that no one else can. Master that, and then learn how to communicate that well in all of your bids. Don’t be deterred by focusing your energy on a competitor who is underbidding projects.

Respecting the Industry

The underbidding war delivers a fatal blow to the contracting industry as a whole. At first, it seems to keep the cash flowing and the employees working, but it actually starts a snowball effect of negative consequences. Contractors basically end up paying the owner to complete the project, subcontractors go unpaid because of a lack of cash reserves, and the contracting industry as a whole takes a hit by watching the market value plunge. This is not something to envy. Winning the job won’t mean they don’t actually lose in the end. Keep your standards high. Focus on overall value and not just a dollar sign. 

Let HFS Financial Help 

It’s possible that clients accept the lowest bid because they, too, are strapped for cash. What if offering a financing option for your clients could be the make-or-break of landing your next contract? We have great news! HFS Financial can connect your clients with home improvement loans to get those bids accepted and those projects rolling. Click here to get started. We can’t wait to watch your company succeed!

Overcoming a Competitor Who Underbids Projects

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