Lost a potential client in Shreveport to another auditor who offered 15% contingency. My quote was 35%. The client showed me the competing proposal. 15% seems absurdly low — how can anyone make money at that rate? Is this a real auditor or some kind of bait-and-switch?
Competitor undercut my bid at 15% contingency — is that sustainable?
I've seen that in Louisiana. Usually it's one of two things: either they're a large firm that does volume and makes it up on quantity, or they plan to upsell the client on supply-side brokerage where the real money is. Some energy brokers offer near-free audits as a door opener to get access to the supply contract. The audit isn't their profit center — switching the client to their preferred supplier is. Ask the client what else the competing firm is offering. If there's a supply contract component, that's where their margin is.
I lost a prospect in Providence the same way. The 15% firm did the audit, found minimal savings, and then pushed hard to move the client to a new electricity supplier. The supply switch had a 5-year commitment with an early termination fee. The client later realized the supply contract wasn't favorable and called me to review it. The 'cheap audit' ended up costing them more than it saved. Not saying every low-bid firm operates this way, but it's worth asking what the business model is.
Marie and Tony both identify the most common explanation for below-market audit pricing. A 15% contingency on delivery-side auditing alone is not sustainable as a business model. There's almost always a secondary revenue stream — supply brokerage, demand response enrollment, or equipment sales. None of those are inherently bad but the client should understand what they're agreeing to. Your competitive advantage isn't price — it's independence. You don't have a supply contract to sell, which means your recommendations are unbiased. Lead with that.
Followed up with the client 6 months later. Exactly what Marie predicted — the auditor found small delivery savings and immediately pushed a 4-year supply contract. Client signed it without getting competitive bids. They're now locked into a rate that's above market. The 'cheap audit' was the entry point. I'm positioning myself as the independent alternative for their next review.