We undercut the market to win, and five years later we're still paying for it
Cutting price was the fastest way to get customers and the most expensive decision I've made.
When we started, we had one advantage and we used it badly.
The advantage was that I knew our costs. Not roughly — actually. I’d come out of a product role where I lived in spreadsheets, and I could see exactly what a job cost us in equipment, labor, and drive time. Most small shops are guessing at that number. We weren’t.
So when we looked at what the local companies were charging, the gap was obvious, and we did the thing that felt like the smart play: we came in under them. Deliberately, and by a lot.
It worked. That’s the part I need you to hear before the rest of this. Undercutting the market absolutely works. We got customers, we got busy, we got a foothold in a territory where nobody had heard of us. If you’d asked me at eighteen months whether it was the right call, I’d have said obviously.
What it actually bought
Here’s what I didn’t understand at the time. Price isn’t just a number attached to a job. It’s a filter. It decides who calls you.
When you’re the cheapest, the people who call you are the people for whom cheapest is the deciding factor. Not all of them — you get good customers by accident too — but the mix shifts, and it shifts permanently. You start building a book of business composed of people who chose you for the one attribute you can’t defend, because somebody can always go lower.
And then those customers are yours. Forever, in our case, because a lot of them are on recurring monitoring. They’re not one-time transactions I can quietly reprice next quarter. They’re accounts, with rates set by a version of me who was scared of losing the bid.
The trap closes quietly
Five years on, here’s the actual situation. A meaningful share of our recurring revenue is priced at a level I would never quote today. Not slightly low. Low enough that the account is barely worth the truck roll when something goes wrong.
And I haven’t raised it. That’s the part that’s hard to admit, because it’s not a strategy, it’s a flinch. Every time I look at that list I think about the churn — how many of them leave, how many leave loudly, how many tell a neighbor. When you win a customer on price, you have no other reason for them to stay, so any increase is a real risk. You built the relationship on the one thing that can’t hold weight.
That’s the whole trap. The discount that won the customer is the same thing that stops you from ever fixing it.
What I’d tell someone starting now
Not “charge more,” which is useless advice. Three specific things.
Know your costs before you set your price, but don’t let that be the reason you go low. Knowing your numbers should give you the confidence to charge correctly, not the room to discount. I had the information and drew exactly the wrong conclusion from it.
Understand that recurring revenue is a decision you only get to make once. A one-time job priced badly costs you once. A monitoring account priced badly costs you every month for as long as you have it — and it drags down what the whole book is worth if you ever sell. Alarm accounts trade on a multiple of net recurring revenue. Every dollar you shaved off the monthly gets multiplied when somebody values you.
If you’re going to compete on something, pick something you can raise the price of. Response time, actually answering the phone, doing the job in a way that doesn’t need a callback. Those give you a reason to cost more later. “Cheapest” never does.
The uncomfortable part
I want to be careful not to tell this like I’ve solved it. I haven’t. The low-priced accounts are still on the books. I still haven’t sent the letter. I’ve done the math on what a modest increase across the base would mean, and it’s not a small number, and I still haven’t done it.
Which is probably the most honest thing in this post. It’s not that I don’t know what the mistake was. It’s that the mistake keeps costing money after you’ve identified it, and knowing better doesn’t refund anything.
If you’re at the start and you’re looking at the local competition thinking the way in is to be a little cheaper — you’re right, it is the way in. Just know what door you’re walking through.