I’m basically working off the packages I sold before I closed my business, a friend and small business owner commented as we were discussing business during NOW.
Gift cards are a conundrum for the service and retail industry. We want to sell them as a service to our customers; I mean it is glorious as a business owner getting all of that cash in to your business.
Cash is king or queen for sure. But selling gift cards takes a hardcore discipline too.
When the money comes in from a gift card purchase, it may seem obvious to a non- business owner that the money gets put into a separate account marked GIFT CARDS- LATER.
But for new business owners or business owners who aren’t as disciplined, gift card money can be tempting to use for other purchases. In more desperate times such as a GLOBAL pandemic, owners may find themselves using the cash for payroll or even just survival mode.
Many people who receive gift cards wait to use them for that special day. As a spa business owner, I have often said, Everyday is special, use your gift card. As we quickly discovered the reality of an economic shutdown, those special days we waited for came and went.
Covid has created an additional layer of challenges with gift cards. People who had them sitting around quickly panicked.
Thoughts like, What if the business closes? What if I can never use them? This coupled with the inordinate amount of time many people who were in a shut down had, cleaning their cabinets and drawers produced dusty gift cards they forgot they had.
If a business is shut down for one month, this is one thing, but so many businesses were shut down for well over three months. The government intervention of economic assistance was a life line for many, but that money had to be used for specific purposes.
Gift card money for some businesses may have been their life line to stay afloat. What I saw happen immediately in the small business world were clients trying to help in whatever way they could. This help came in the form of purchasing gift cards when the businesses were closed and the small businesses that decided this would be a good way to stay afloat took this gesture to heart.
For me, especially being in the spa business which is a gift card heavy business, I knew that was not a good idea for my company. My business does a lot of gift card business and when the shut down happened, we were just coming off of the first quarter of the year when redemptions are the highest. December is the mecca month for gift card sales.
I chose not to sell gift cards during the shut down because at that time I wasn’t sure that my business would ever be reopening. Sounds funny now that I have the wisdom of retrospect, but we were all in chaos back in March and the future looked bleak.
In my early years of young business owning, I was not the most disciplined with putting gift card sales cash aside. I learned the hard way.
These mistakes over the years though were potent lessons and one that I never wanted to repeat.
Most small businesses can’t prepare for a four or five month shut down though. No matter how disciplined, because the notion that future business is questionable makes for savings discipline like speed dating.
So what is the gift card dilemma? Everyone who has one wants to use them up as quickly as possible. From the first moment we opened, the calls started pouring in. The challenge is not in the redemption of the gift cards sold in December of 2019 or even the ones sold in December 2018, the challenge is the ones pulled from the bowels of the closet, from the back of the drawers. More people than don’t hang on to their gift cards for the perfect day to use them. Then all of a sudden, a global pandemic strikes and that perfect day seems like right now.
Many states do not allow expirations on gift cards and the problem that many clients don’t really understand is that at some point the IRS wants businesses to declare unused gift cards as income if they are over a certain time frame. For my company, it is usually two to three years prior. This means that any gift card sold prior to 2017 would have been written off as income that I as small business had to pay taxes on for services that I never performed because people hung on to them for that special day.
This is a big responsibility that rests on small businesses.
You might be saying, Well this is the price you pay when you decide to open your own business.
But here is a good analogy. If you are a parent or thinking about becoming one, you can read book after book about parenting, listen to all of the advice about parenting, look at every online forum and go to parenting classes, but until you are actually a parent, you have no idea how hard that job is.
Small business owning is like parenting in a way. There is a lot coming at you and while you are trying to perfect your skill that made you want to open in the first place, the skill set of actually running your business is entirely new and takes lots of time to perfect. At the early stage of the game, most of us are winging it.
What I have seen in my last couple months of opening is those dusty gift cards from well over three years ago coming out of the woodwork. I had someone the other day call with a gift card from over ten years ago.
Gift card redemptions are the business owner’s responsibility but at some point, it should be the recipient’s responsibility to use them in a timely way.
How you can help: If you have a gift card, either hang on to it until the business gets back up on their feet, and for many businesses this can be at least a year. Or use the gift card towards product as my business is suggesting, or if you want to do something really kind, donate the card back to the business.
My partner and I did this with several businesses. The theatre, restaurants, gyms, I can’t tell you how helpful this is to small businesses.
Remember that your single one hundred dollar gift card is one of thousands and if everyone feels the sense of urgency to check using their dusty gift cards off their lists, it runs the risks of your small business you love not staying in small business for long.
With the future seeming uncertain, this small act towards your favorite small business is a generous and kind act.