Undercutting to get a foot in the door....EVERYBODY does it!

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Papa Deuce

DJ Extraordinaire
Aug 8, 2006
19,843
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Valley Forge Area
Foget DJ's for a minute.... this is an example I just had at my house.

Last season we installed a big above ground pool. To run the filter we ran a cord from our shed.... Not legal, and not smart, I know. So why did I do it? Because I couldn't find a single established electrician who would take the job. I had 2 guys give me quotes for a cheesy way to do the job, and I was willing to accept that because it was at least better than what I was doing.... But neitehr of them ever showed up to do the job.

So, two weeks ago, a flier appeared in my mailbox for an electrician. I called. He called back within 2 hours. He said he would come right over and give a quote. And he did. Then he said he would be back in 3 days to do the job, and he in fact did just that.

The quote was $1560. All told, 20 - 25 man hours to do the job. He had 2 guys at my home all day, and he was there off and on.

Anyway, at one point during the day, he checked all of my outdoor GFIs. I knew most of them had issues. He went out and bought 6 new ones @ $18 each. He charged me $155 dollars to purchase and install them.

Finally, as I was paying him, he said to me: "I hope you will refer me. I have been an electrician for 11 years at the same company, but just started my own business 9 weeks ago. This job SHOULD have cost you $3600, but I need to get my name out, so I only charged you $40 an hour for labor. My previous boss was charging $135 an hour. So, if you liked my work, I would really appreciate you telling people about me. And, if I start seeing referrals from you, when you need work done, I'll remember what you did for me".

Can you imagine an electrician only charging $40 an hour for labor? :sqerr:

He was licensed and insured.
 
You should see some doctors :D:D:D:D
 
When it comes to electricians and plumbers I'm more than happy to cough up the dough for an older more experienced person to take care of things. Rather then some jack of all trades/master of none type guy.

I don't know that I'd pay $135 an hour though..My eyes would probably start popping out of my head at $80.
 
All I can say is he is a smart business man. That's the way to start. You've got to give a little to get a little. I did that for many years. Not to get my name out for more business but to just get my rep going. Guess what, it worked.

I'm glad you got it done right and getting it done cheap was a bonus. Now pass his damn name around.
 
While I can certainly understand the logic behind the stratagy, what this guy will soon figure out that he really wont be making any money with charging $40 an hour. After he pays the workers, then pays his payroll tax, there won't be a lot left over to purchase needed things, let alone make a profit.
Then when a project has problems, he won't have any room to be able to make it right.
He'll realize that he'll either need to raise his rates or go back to work for someone else.

But yes, you see it in all businesses. Someone making $18 an hour full time thinks if I go out and get jobs on my own and charge $40 an hour, I'll be ridin' in high cotton. They soon find that to not be the case.
 
The main difference between undercutting DJ's and this electrician is EXPERIENCE. Most undercutting DJ's do not have the years invested and the experience the posters here have had.

The electrician had prior experience and skills. New DJ's do not.

But I have seen a few long term DJ's cutting their prices dramatically just to get work - so sad.
 
Hank Davidson said:
I would have done it for $30. :sqlaugh:

Also, I don't where he's buying GFIs, but they are not $18 (not for him).
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Well, the invoice said $18 each.... Looking at them, it seems like a fair price. But I don't know much about outdoor GFI's.
 
Hank Davidson said:
I would have done it for $30. :sqlaugh:

Also, I don't where he's buying GFIs, but they are not $18 (not for him).
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True, but I'm sure his markup to the consumer is $18. They're about $14 at Lowes. It's just like buying a battery from your mechanic or driving to Walmart. Same battery at a much cheaper cost.
 
Scott Hanna said:
While I can certainly understand the logic behind the stratagy, what this guy will soon figure out that he really wont be making any money with charging $40 an hour. After he pays the workers, then pays his payroll tax, there won't be a lot left over to purchase needed things, let alone make a profit.
Then when a project has problems, he won't have any room to be able to make it right.
He'll realize that he'll either need to raise his rates or go back to work for someone else.

But yes, you see it in all businesses. Someone making $18 an hour full time thinks if I go out and get jobs on my own and charge $40 an hour, I'll be ridin' in high cotton. They soon find that to not be the case.
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Ron Auger said:
True, but I'm sure his markup to the consumer is $18. They're about $14 at Lowes. It's just like buying a battery from your mechanic or driving to Walmart. Same battery at a much cheaper cost.
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I quoted yous together because Ron made my counter argument for me. If he's charging $40, let's say he's paying his back breakers $10/hr each, which is a little on the high side (around here your lucky to get $8) he's still making $20/hr just to supervise and make the final connections. If he's got 3 or 4 jobs going at once that's possibly $80/hr. That's not pure profit sure he has to pay taxes and insurance so maybe he's walking away with $12-$13/hr per job.

If you add in the upcharges to the consumer, I'm sure they use a base percentage rate he could be looking at closer to $20/hr. He's not going to get rich off that but I'd sure be happy to be making that consistently right now. Consistently is the operative word here if he's only doing 4 or 5 jobs per week he's very likely loosing his shirt.

Don't forget those electricians are more of a solid value meaning people can see the value in an electrician. DJs are more of a perceived value.
 
Where I see this the most is with plastic surgeons, the well established and experienced ones never budge on the pricing, and there's a reason for it. They they're good and the guys undercutting them usually don't have the experience and they tend to botch up things that the established doctors need to fix.

The horror stories are not figments of anybody's imagination they're true. You initially saved $3000.00 but :D:D:D, to fix the stuff that was messed up you're going to have to pay a lot more money and sometimes you'll have visible scars that you won't be able to cover.

I find it funny how many Americans, Europeans, Asians, etc. come to Latin America to get cheap plastic surgery done, that's a decision that will come back and bite them in the ass. Yes there are great surgeons down here, but to get there services you will have to refer to my first sentence ;). Same applies to "legal" drugs, people run SOuth of the border to buy their medication, big mistake. Generic and cheap drugs down here are worth chit and people are putting themselves in harm's way to save a few cents.
 
Ron Auger said:
True, but I'm sure his markup to the consumer is $18. They're about $14 at Lowes. It's just like buying a battery from your mechanic or driving to Walmart. Same battery at a much cheaper cost.
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...and this is why I'm a DIY'er. Shut the main off and get out your screwdriver.

Cost of labor for changing six GFIs = One cold six'er poolside. :sqwink:
 
Hank Davidson said:
...and this is why I'm a DIY'er. Shut the main off and get out your screwdriver.

Cost of labor for changing six GFIs = One cold six'er poolside. :sqwink:
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I re-wired my entire house all by myself. One room at a time. :sqwink: I'm talking stripping out old aluminum wire and running new copper lines. I learned a lot about wiring.
 
Too bad some surgeries can't be done DIY :D:D:D:D:D
 
Total cost to you: $1805.00

What it would have cost: $3600.00

Savings to you: $1795.00.

The $1795 is a marketing expense for him. In the long run, he'll recoup this expense as his rates increase.
Right now, he's taking a loss to get his name out there. It's only temporary.
From the way it sounds, if he gets work through you he'll always give you a good deal in the future.
 
Papa:

Not to cut your post into the ground...but is this a undercutting??


Again undercutting is beating someone elses prices to get the business.

If his rates were cheaper...then they are. That is not undercutting.
 
DJMN said:
Papa:

Not to cut your post into the ground...but is this a undercutting??


Again undercutting is beating someone elses prices to get the business.

If his rates were cheaper...then they are. That is not undercutting.
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Papa, don't listen to him. I can make the same point using half the words he did.

:sqlaugh:
 
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