The name of this column is Growing Pains. This, to me, describes what our small manufacturing company is going through. We've started up and now the challenge is to remain viable and grow.

Occasionally I get feedback from readers and their friendly words of encouragement make my day. Larry Ferguson of Cadillac, MI, called and asked if I could say a few words about product costing. He has a product and is unsure of where to price it.

Obviously the first thing you need to know is what does your product cost you to put it in the hands of your customer. You need an analysis of material costs, labor, packaging and distribution. As a first cut at pricing take all of the above and double it. If your product costs you $10.00 to build and ship, then assume you will sell it for $20.00 and see if it makes sense. This will give you a 50% gross margin on your sales.

To see if this price is right, you need to ask yourself some questions and find the correct answers. Will anyone buy your product at this price? Some basic market research (ask potential customers) and price checking of similar products will let you know if you are way off base.

If you are wholesaling your product, will the consumer buy the product at the ultimate price? In the gift business the old rule of thumb was gift shops would simply double the wholesale price to come up with the retail price. Now the rule is closer to a 2.25 multiplier. If your $20.00 product is sold through gift shops, expect to see it retail at $45.00.

How many will you have to sell to break even? If you pay $400.00 a month rent on your manufacturing space, you need to sell 40 units just to pay the rent. Now add on all the other expenses (utilities, taxes, sales commissions, advertising, non-productive labor, etc.) to see how many you really have to sell before you begin to see some net profit.

These are pretty basic questions, but if the honest answers to them reveal a problem, then you need to rethink the situation. Don't assume you will "make it up in volume".

If you have a unique product that people want, then you can charge more for it. Expect to be ripped-off at some point and to have to defend your patent if you have one.

You could license your product or contract for its manufacture. Experienced manufacturers know how to build things the lowest-cost way. You may even go offshore to get a super low cost. All of these are options to get your product to market at a price that makes sense.

This doesn't help if you have your heart set on being a manufacturer. If you are bound and determined to build it yourself, then you need to be diligent in your efforts to find the lowest-cost suppliers and methods. One way that entrepreneurs keep their costs low is by using "sweat equity" -- another way of saying putting long, uncompensated hours into the business and product.