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How Much Should You Spend on Business Gifts?

how much should you spend on business

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:

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 [1] 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:

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.

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.

Gift Substitutes

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:

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) [2]?

Gift [3] Photo via Shutterstock