Why low-cost suppliers damage entrepreneurship: An incendiary letter

6 € for one hour of work? That only exists in the Far East? Far from it! Even in western countries, far too many self-employed people and entrepreneurs sell themselves far below their price. As a rule, you will fail with this strategy sooner or later, as the little money you have is not enough to live and work. And to be honest: That’s just as good.

It is a thorn in my side personally that these “would-be entrepreneurs” destroy the market and prices in the short time they operate in the market. To do so, they suggest that everything is available for little money. The situation is further exacerbated by the fact that many of them are even well qualified and provide good services – for which they could actually charge far more

As a result, reputable companies with already good profits go to such service providers to save a few bucks and optimise their profits. Various online platforms make this an easy game: projects can be advertised here where low-cost providers can subsequently undercut each other.  The masterpiece of this type of service are portals where self-employed people compete against each other in competitions and have to do work without being paid for it. Only those who win the competition get a few bucks. All others go away empty-handed – entrepreneurial exploitation in its purest form.

The result is ultimately a muddled market situation in which an ever greater part of the qualitative work is done by constantly changing cheap self-employed people. Continuity is no longer important for many companies anyway, as we live in a time of change. The result is a mentality within the company where one assumes that every conceivable service is available for a few cents.

In the long term, this development is extremely problematic. On the one hand it harms entrepreneurs who have been offering good services at fair prices for many years.On the other hand, the failed ” wannabe entrepreneurs ” lead to burdens on our social security systems which we all have to bear.

But whining alone has not helped anyone. So what can we do to get out of this spiral?

First and foremost, every company that makes use of market services must accept a certain social responsibility and not always put the maximum profit motive first.

Companies should also actively question costs when assessing offers and evaluate whether the price is not too low. With a basic knowledge of business administration and a little common sense, this should not be a challenge.

In the next step, companies (and also public organisations) must move away from always taking only the cheapest provider. Instead, quality and healthy long-term business relationships should again play a much more important role. A selection procedure in which an internal minimum price is defined and all offers that fall below it are sorted out would be one possibility.

So much for the entrepreneurs who use services. What can the self-employed and companies themselves do when they offer services on the market?

First of all, there must be a change in mentality here too. Providers must summon up the self-confidence to refrain from undercutting each other at all costs. In particular, this means new business models where it is clear from the outset that it is only a matter of exploitation to refuse.

Should the customer nevertheless try to lower your prices, it is important to explain the value of your work to him. You can certainly give him a rough estimate of how you will get the hourly rate. More transparency in offers (e.g. through detailed breakdown) can also help.

And last but not least, you also need to have the courage to say “no” if a price is desired that you cannot offer under any circumstances. If the aim is to reduce costs, it should be made clear to the customer that reduced costs also mean reduced service. You get what you pay for.

As in every discussion where a controversial topic is raised, there will now be some who contradict me. But my personal experience shows that you can also be successful if you swim against the current of exploitation. You only need to have the courage to rebel against these unfair practices and be prepared to step out of the comfort zone, which is no longer a comfort zone anyway.

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Christian Wagner
Christian Wagner
Founder RiskPlayWin | Owner & Founder of the digital marketing agencies morethandigital.com & PEAKFOCUS.agency