Six Reasons Why Gift Cards Make Sense for Small Businesses

If you run a small business, there are a lot of ways to drive revenue. But one of the most effective ways to boost your bottom line is with a gift card program. If you’re currently utilizing a point of sale (POS) system to manage your transactions, a gift card component is often built into your POS software, or can be installed alongside of it.

For small businesses, there are many ways a gift card program can be beneficial, including:

1. Increasing Brand Awareness – Gift cards are typically purchased for individuals that match your demographic — people who the gift-giver believes will benefit from  your products or services. This spreads brand awareness.
2. Generating Revenue – Gift cards represent revenue, which increases profit and cash flow. This adds stability to your small business
3. Generating Interest Income – Gift card sales provide cash in hand, and although the cash does not convert to revenue from an accounting perspective until the gift card is redeemed, it can still be invested in interest-bearing accounts.
4. Offsetting Expenses – The term “slippage” is used in the gift card industry to represent the average gift card balance that is never redeemed. Typically, this amount is 10-15 percent of the gift card’s value. Slippage can help offset labor and inventory costs typically associated with revenue generation.
5. Reducing Charge Backs – By eliminating credit cards from transactions, purchases made on gift cards prevent charge backs, which can be costly to a small business.
6. Making it Possible to Offer Services as Gifts – While you can’t gift wrap a manicure or a facial, you can offer them as a gift card. Gift cards make services both tangible and “giftable.”