Gift Card Problems in SMBs

Great topic David Barnett. We aim to get in front of balance sheet items early with buyers, and also be clear with sellers during the valuation assessment how inventory, A/R, A/P, any debt, and gift cards will be treated. Similar to gift cards, I’ve got a business now that requires a 25% deposit at booking for a service. Numbers are large..nearly a million dollars in customer deposits. Have a successful Ecom / retail biz under contract now, our formula on gift cards: Issued with last 3 years = credited 100% to buyer at closing Issued between 3 - 5 years = credited 50% to buyer at closing No credit to buyer for gift cards aged over 5 years. On another business, my seller has documentation that ~30% of gift cards never get redeemed Takeaway: 1) discuss these early in a sale, especially if the numbers are large 2) promote gift card sales if you own a business ??

Always useful salient advice for the small business entrepreneur.