Written anonymously by a guest contributor to inform consumers and encourage them to make smart investments and protect themselves and their loved ones from unethical business practices
Unethical Business Practices
I have been in the remodeling industry for four years now, primarily working on the sales side of the business. There are many businesses in the Tidewater area, and countless more throughout the state of Virginia that have criminally unethical business models, and I work for one of them. These companies have no regard for the wellbeing of our fellow Virginians. Through my firsthand experience, I will explain how these businesses operate. I will tell you why they are detrimental to Tidewater, and explain what exactly makes them unethical. Hopefully, sharing will help us fix the exploitation of our citizens, while protecting legitimate businesses.
The business models of these unethical companies are all the same, to turn business over at the highest profit margins possible. The goal is to do this as fast as possible. A sale needs to be made on the initial appointment. If the homeowners are given time to research, they will discover how high the prices are. In order to pressure someone into signing, what you first do is tell them that the condition of their existing product is in terrible shape.
How We Trick Consumers
If I were selling a roof, I may say “I see several signs of high stress on your decking and rafters, and to be honest this roof could collapse any day now.” Then I would price condition, which is the practice of getting someone to expect your product to be unbelievably expensive. When it comes time to give a price, I would give them a price of over double what the company wants me to sell it.
It does not matter if they accept the price or not. I will tell them that the price is good for a year and offer 20% off because of a promotion we are having. The caveat is that the contract needs to be signed at that moment. We put immense pressure on the homeowner to decide. The reality is that there is no promotion going on and these are all lies.
Not only are the discounts not true, but if you say no to me, then someone from our company will call you the next day. They will then offer you a lower price than I was authorized to give. There is no justification for the rate at which we overcharge. As a sales rep, my job is to differentiate the company and our product. The problem is that these representatives are all selling the same products as a competitor who would be at least half of our price.
Detrimental to All
This impacts a large portion of Tidewater in many different ways. From my experience, the most vulnerable to being pressured into a sale is the elderly population and first time homeowners. Imagine someone pressuring your elderly parents to purchase a roof that they cannot afford. Imagine someone lying to them. The company may tell them the roof will collapse in on them if they do not fix it. The reality is that they still have three more years of life left on their roof. How would that make you feel?
These practices ruin the reputation and trust with other local businesses in the area. If someone is fortunate enough to say no to us, and do more research, the next company may have a hard time getting the job. This is detrimental to small, veteran and family owned businesses. The homeowner is now very confused about the price differences.
Inflated Cost & Profits
I run a roofing business on the side for friends and family. With that, I need to know how much to charge, what my costs will be, and what my total profit is. I created a calculator that will help me price my jobs. My current home has a roof that is 1,926 square feet. Putting that into my calculator, I would price my roof at $6,753, with a profit of $2,312. The particular company that I work for would charge $18,100 my roof, using the same exact materials. That leaves them a net profit of $13,660, a profit of over 307%.
These companies also pay their sales reps an added commission of 50% of every dollar sold over the preferred price. This encourages sales to be even more inflated. As a sales rep, if I sell a job $3,000 over what the company wanted, that would be an additional $1,500 in my pocket.
People often take money from their retirement plans to pay for these projects that they have been pressured into. Or, they put themselves on aggressive financing plans. These plans can range from 3% interest to 15% interest. Your credit score has no say in what rate you will receive. The sales reps will apply you for higher interest rates. These are cheaper for them to get, putting an unnecessary burden onto customers.
Protect Yourself from Unethical Business Practices
There is no problem with a business making money and making a profit. However, when that profit is so egregious, and is gained by means of manipulation and lies, it becomes unethical. Since remodeling has to do with the public, and the average citizen, it has a social responsibility. This is defined as “there must be a balance between economic growth and the welfare of society and the environment” (Social Responsibility and Ethics). Every business needs to make a profit to stay in business. In the cases of these businesses I am referring to, there is no concern to the welfare of society. It does not matter if someone is spending the last bit of their retirement income on buying their product. It does not matter that they will have to refinance their home. The companies don’t care if you can’t afford the monthly bills that come along.
Avoid Bait & Switch
Ethical businesses also do not participate in bait and switch tactics. According to CFI a bait and switch is “…a fraudulent activity whereby a company advertises goods at an incredibly low price with the aim of substituting for them with inferior or pricier alternatives at the time of purchase” (Bait and Switch – Overview, How It Works and Warning Signs). The salesmen set the price. If we know that you heard about a “deal” through an advertisement, we are trained to explain that we do not have anymore of that product, or to just convince them that they are getting a discount when they really are not.
In my years of selling home remodels, I have never seen a price drop for what the companies expected us to sell at. But, we have always run some sort of discount program. We just needed to find out before we gave our prices if the homeowner knew about any promotions.
They Simply Don’t Care
There needs to be work done that will prevent companies from lying in order to secure an overpriced sale. There is no reason that someone should be expected to make a decision that will cost them a year’s salary over the course of two hours. An ethical business will have no issue giving a price and waiting for an answer.
These companies do not care what your financial situation is. They don’t care what your mental capacity is to make such decisions, or if you have a legitimate need for the product. They only care about getting in front of you, by any means necessary, in order to get your signature for a contract. Unethical business practices should be stopped. Be cautious! Always do your research and seek out help from a trusted family member or friend when making a major decision.
“Bait and Switch – Overview, How It Works and Warning Signs.” Corporate Finance Institute, 2 July 2020, corporatefinanceinstitute.com/resources/knowledge/strategy/bait-and-switch/.
“Social Responsibility and Ethics.” Who Is Responsible And Why? | Pachamama Alliance, www.pachamama.org/social-justice/social-responsibility-and-ethics.