Deciding on how much to charge for a product or service is a common question among small business owners who consult with SCORE mentors. Developing a pricing strategy depends on several factors: the type of product or service, the costs to provide it, your anticipated profit, the average rate for your type of business and many other factors. Finding the answer to the question can be tricky.

L-A SCORE mentor Robert Kennelly cautions, “Identifying just the right balance among 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.”

As Kennelly points out, “A common misstep — especially in the early stages of a business — is pricing too low in order to attract customers. 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 when 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 can 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 want simply to test different pricing levels to see what works best for your business.

Research the norms for your industry, including price ranges across your selling area. You may want to charge more or less, depending on your brand positioning.

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. Also take into account seasonal fluctuations that might cause short-term increases.

To learn more about issues affecting your small business, contact SCORE, a nonprofit organization of more than 10,500 volunteer business mentors who provide confidential counseling and training workshops. In the Lewiston-Auburn area, call L-A SCORE at 782-3708 for information and an appointment; in Rumford-Mexico call 364-3123; in Oxford Hills call 743-0499. Or contact SCORE at www.SCOREMaine.org.