Pros & cons of selling gift certificates in your small business

As we dive into the holiday season, I know many small business owners and massage therapists are considering whether to offer gift certificates.

While it's not exactly a life-altering decision, it's a good idea to understand the pros and cons to help you figure out what’s best for your business.

If you're more interested in listening as you putter about, here's [podcast episode 21] - The Pros and Cons of Gift Certificates: What you Need to Know!

Pros of Selling Gift Certificates

🎁 Boost Your Cash Flow:
First off, gift certificates can give your cash flow a nice little boost. When people buy them, you get that immediate influx of cash, which can be super helpful during those slower months.

🎁 Attract New Clients:
Think about it—when someone gives a gift certificate, it’s like they’re introducing a friend to your services. This could bring in new clients who might not have discovered your business otherwise!

🎁 Increase Brand Awareness:
Every time someone hands over one of your gift certificates, they’re essentially recommending your business. It’s a great way to spread the word without spending a dime on advertising.

🎁 Flexibility for Recipients:
Gift certificates let recipients choose what they really want. No more guessing what size or style someone likes—this way, they get exactly what they need!

Caveat-ideally, the recipient does love massage. Best case scenario, they've been to you and love your skills.

🎁 Compete with Larger Businesses:
Offering gift certificates can help you compete with those big national stores, especially when last-minute shoppers are scrambling for gifts.

Cons of Selling Gift Certificates

🙄 Specialization Challenges:
On the flip side, if you specialize in something niche—I offer ONLY barefoot massage—gift certificates might not be the best fit for everyone.

If recipients have contraindications for barefoot massage or even just find it weird, they're out of luck. I don't offer other modalities.

🙄 Logistical Difficulties:

If you’re running the show solo or don’t have a receptionist, managing physical gift certificate sales can get tricky. It can be tough to juggle selling them between clients.

You can sell online 24/7 with a service like Square or Spaboom, though.

🙄 Financial Complexities:
Here’s a biggie: when you sell gift certificates, you have to report that money as income that year—even if the service isn’t used until later. This can complicate your bookkeeping and cash flow management.

🙄 Potential for Unused Certificates:
You might find yourself with unredeemed gift certificates hanging around for ages. It can feel like you’re giving away services for free when they finally get used!

Looks like I earned an additional $928 in unredeemed and expired gift certificates (minus fees).

🙄 Processing Fees:
Don’t forget about those pesky fees! If you go with an online platform to sell gift certificates, they often charge significant fees that can eat into your profits.

🙄 Fraud Risk:
Lastly, there’s always a risk of fraud with gift cards. Scammers love targeting these programs, which could lead to chargebacks and hurt your reputation.

Take into consideration...

If you decide to go ahead and offer gift certificates, here are some tips:

1. Choose a User-Friendly System:
   Find a platform that integrates well with what you already have going on. You want it to be easy for both you and your clients.

   
   

   I use Spaboom. Back in the stone ages, my start up fee was $19. It's now $99. Plus a 5% fee of what they're buying. Now, add in 2.9% plus 10 cents per transaction. That adds up. But it IS convenient.

   
   

2. Be Clear About Terms:
   Make sure to outline expiration dates and any other terms clearly so there are no surprises later on.

   
   

   In Ohio (where I am), GC are good for 2 years. Other states have other laws. Federal law mandates they not expire for 5 years.

   
   

   

   If there's a possibility you're going to close your business, you need to be able to refund the client's money if you cannot perform the massage sold via gift certificate.

   
   

3. Consider Digital Options:
   Offering digital gift certificates can save you from handling physical cards and streamline the whole process.

   
   

   This is the ideal option if you're a solo therapist or don't have front desk staff.

   
   

   Over the 13 years or so that I have used Spaboom, I have sold (without marketing), over $15K in Spaboom GC sales. (For a time, I used Square, and I sold paper GC for a while, too.)

   
   

   

   
   

4. Set Aside Money from Sales:
   Remember to set aside the money from gift certificate sales until the services are rendered. In other words, don't spend the money until you earn it.

   
   

   You don't want to feel like you're working for free a year down the road because you spent the money already.

   
   

   As you can see below, I currently have $5615 outstanding in unredeemed, unexpired gift certificates.

   
   

   

   
   

5. Do you want to promote them?
   I personally don't. They're there if people need them. ↯

   
   

   

   
   

   But if you want that influx of cash, don’t forget to shout about your gift certificates during seasons when demand is at its peak! We're talking Christmas, Hannukah, Mothers' Day, Valentine's Day, Sweetest Day, etc.

   
   

   So, while gift certificates can definitely be a great tool for growing your business, they’re not necessarily right for everyone.

   
   

   Should you sell GC? Just weigh the pros and cons. Determine what's best for you and your unique setup.