“How much should I charge?”

That’s one of the first questions most small-business owners ask. And it’s not an easy one to answer. Setting a pricing strategy depends on many factors: the type of product or service you are offering, your own costs to provide it, your expected profit, your customers’ location, the “going rate” for your industry and many others.

L-A SCORE chapter Chairman Jack Tetreault says, “Finding the right balance between all of the factors involved is more art than science. Pricing too low can cut into your profits, while overpricing also can hurt your business.”

Tetreault further points out that a common misstep is pricing too low in order to attract customers, especially in the early stages of a business. “While special deals can work in some cases to start the ball rolling, going low is not always the best path. Low prices can draw customers interested only in price. They are the ones most likely to abandon you the moment they find something even lower elsewhere.”

Selecting excessively low pricing levels to attract clients is even more dangerous for service businesses. You have only so many hours to sell. Your business can’t make it up in volume like a retailer who still profits from lower prices if volume is high enough.

Pricing is partly psychological. You will want to set your levels according to the perception of your product or service “brand.” If you want to be in the premium neighborhood, your pricing can be higher to match an upscale image. Pay attention to price points as they differ widely by product and industry.

Pricing is an ongoing process, so test your pricing periodically. You may need to adapt to changing conditions. Competitor prices, your own costs, customer perceptions and your profit expectations can all change. Or you may simply want to test different pricing levels to see what works best for your business.

Tetreault’s concluding advice is, “Make sure you use timely and accurate information to calculate your costs for labor, supplies and direct and indirect overhead for every product or service you offer. ‘Guesstimates’ are not good enough and may cost you far more than the hour or two of research. Also take into account seasonal fluctuations that might cause short-term increases.”

To learn more about building your small business, contact SCORE, a nonprofit association of more than 10,500 volunteer business counselors who provide confidential counseling and training workshops.

In the Lewiston-Auburn area, call L-A SCORE at 782-3708 for additional information and an appointment; in Rumford-Mexico call 364-3123; in Oxford Hills call 743-0499, or contact SCORE at www.SCOREMaine.org.


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