It’s great to give something back to those who helped make your business a success. Whether around the Holiday season or during any other time of the year, choosing gifts for employees, service providers, clients and customers can give you an awesome feeling.
But let’s not forget practicalities. The big question is: how much should you spend on business gifts?
That depends, first and foremost, on:
- how much is in your gift budget;
- how many recipients are on your gift list; and
- who is on your list and their relationship to you and your business.
There are also other considerations, such as religious beliefs around Christmas. For example, does the recipient even celebrate Christmas? Rather than being tone deaf and giving a Christmas gift, perhaps a New Year’s greeting card would be more sensitive. See the discussion about business gift giving etiquette for more about such issues.
Some corporations and organizations have policies stating the value of gifts their employees are permitted to receive. Any gift above that value may have to be refused or returned.
Let’s break down the “how much should you spend on business gifts” question into steps.
Step 1: Establish Your Overall Gift Budget
The first step is to set a budget. Approximately how much can you afford to spend on Holiday gifts?
You may be the most generous business owner in the world, but you run a business. Well-run businesses live within budgets.
A sample gift budget might look something like this:
- $750 for clients or customers;
- $300 for valued service providers; and
- $1,000 for employees.
The above are example numbers, only. In no way are we suggesting those are recommended numbers or small business averages.
Rather, they are there to get you started thinking of what you can afford.
Your budget becomes your framework for building your gift list. By setting a budget up front, you’re less likely to get carried away and overspend.
Decide right now how much you can spend for all business gifts. You can always tweak budget amounts later — just start somewhere.
Write down your budget amounts per category.
Step 2: List Your Gift Recipients
Next you have to consider how many clients, employees and service providers you actually have.
And that may depend on the type of business you have. In a retail business, for example, it may not be possible to give individual gifts to each customer. You may have hundreds or thousands of customers. In that case, see “Gift Substitutes” below for alternative ideas.
Start listing every person you plan to give a holiday gift to.
Write down each and every name. This is a crucial step.
Why? There are two reasons.
First, you’re less likely to forget someone. Human memory can be unreliable. Forgetting a single employee could create hard feelings. Or, suddenly remembering on December 22nd that you forgot your most important client could throw you into a stressful last-minute frenzy.
Second, you’ll be more accurate. For example, if the client is another business, you may deal with several people there. You may want to give a gift to each person, even though it’s technically only one client. Write down each person – not just the client name.
Once you create a list of each recipient by name, it becomes much easier to divide up your budget into “amount per recipient.”
Step 3: Choose Your Amount Per Recipient
Now it’s time to decide on gift amounts per recipient — and start fielding gift ideas.
Once again, write everything down. On your list of gift recipients, next to each name, write down how much you plan to spend. Also, start jotting down specific gift ideas.
Writing everything down makes it easier to review and make sure that you are being fair.
What is meant by “fair”? Well, at this point you have some important decisions. Are you going to spend the same amount on every person in the same category — or different amounts? Are you going to give a standard gift across the board, or give different gifts to each person?
There are no hard and fast rules. But here are some important things to think about.
- Clients — If you’ve earmarked $750 for client gifts, and you have 15 clients, you may decide to spend $50 on each. On the other hand, some business owners choose to spend more on their best clients. After all, if one client netted $120 in profit, is that client’s value the same to your business as the one that brought in $120,000 in profit? You have a lot more to thank that latter client for.
- Service providers — You’ll probably want to give more to those who deliver services more important to your business. Also, there are “customary” cash tip amounts for certain industries or by the provider’s role, and these can be your guide.
- Employees — If you give tangible gifts to employees, giving different gifts to each is tricky. Most employers that give gifts opt to give a standard gift across the board (often food gifts or gift cards). That’s because, if you’re giving most employees a $35 food basket, it’s tough to successfully pull off giving one of them a $100 electronic gadget. Employees compare notes. Some WILL feel hurt – no matter how you justify it. Cash bonuses for employees, on the other hand, are a different story. Employers often give different bonus amounts to different employees. That’s because bonuses are really compensation and usually kept confidential.
Typical Gift Dollar Ranges
Everyone wants to know: what is a typical dollar range for business gifts? No one wants to seem cheap.
It is hard to generalize. There’s not really a “typical” amount.
Many small businesses choose to start with a range of $20 to $50 per person. A gift of food (coffee sampler or box of chocolates) or a live plant (Poinsettia or orchid) often falls nicely in this range.
At the opposite end of the spectrum, it’s best to avoid gifts that are too expensive (worth hundreds of dollars), except in rare instances. They may embarrass the recipient.
Here’s another reason to avoid expensive gifts. Recipients may have limits on what they are allowed to receive. Policies in many large corporations, for instance, prohibit their employees from accepting business gifts valued in excess of $25. For this reason alone, some small business owners limit gifts to clients to $25 in value.
If you run a business that has a lot of customers or clients, giving individual gifts to each may be impractical. Or, economic necessity may drive you to something other than gifts.
Let’s say, for example, that you run a retail store. You sell to hundreds or thousands of customers throughout the year, and may not even know who they all are. Giving each customer an individual gift is not realistic.
A gift substitute may be just the ticket. Some gift substitutes are:
- Open house event — Instead of giving gifts to customers or clients, you might hold an “open house” event on your premises one afternoon or early evening. Bring in some munchies and beverages for all comers that day. If you run a retail business, you can also turn it into a marketing event. Simply put up a sign a few weeks ahead. Send email invitations to any customers on your email list. Or if you can afford it, take out an ad in a local community newspaper or send out mailers using any Any Door Direct from the U.S. Postal Service. Typical “open house” event budget: $250 and up.
- Special discount coupon — This is great for eCommerce businesses. Simply give your past customers a special discount coupon as a thank-you. Typical discount budget: $500 and up.
- Greeting card — In lieu of gifts, some businesses simply send greeting cards. Even here, you have a range of options. Before December 25th you can send a Season’s Greetings card or Christmas card. A growing trend is to send a Thank You card in late November, near Thanksgiving, to thank clients, customers and business partners. Another option popular with small businesses is to send a combined calendar/greeting card that can be useful throughout the year. Often cheaper than printing a full calendar, a calendar greeting card seems more “gifty” than a greeting card alone. Typical card budget: $100 and up.
- Homemade food — Another option is to give a homemade food item, such as small bags of hard candy or cookies that you made yourself. Add a handwritten note of thanks. Typical homemade food budget: $75 and up.
Gifts and Tips for Service Providers
Tips or gifts for service providers are also customary, but are a somewhat special case. The expected amount varies widely depending on your location, how long the service provider has been working with you and some other factors. And again, your budget must also be a factor. For an in-depth look at this topic, see our companion article: Who Do You Tip at the Holidays (and How Much)?
Gift Photo via Shutterstock
This is part of the Small Business Trends holiday article series featuring tips, advice and news about the latest holiday trends taking place in today's business world. Check out our Business Gift Giving Guide for more.
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