Cash is King

Generate Cash Flow With Gift Cards

Do you generate enough cash to keep your business strong? How about using gift cards to help boost your cash position?

You hear the talk these days about the slow down in the economy and how many businesses are suffering. With sales down in some categories and some customers slow to pay, small businesses can find it tough to keep cash flow positive.

Here is a little trick I have used at times to generate cash in slower season. I run a promotion where we pre-sell gift cards for the upcoming summer season, and in turn, give a discount off today’s purchases.

Here’s how it works.

A customer buys a gift card of any value then 20% of that value will be discounted off today’s purchases. Buy a $100 gift card get $20 taken off today’s purchases. (If margins are tight in your business, adjust the percentage to one you feel comfortable with).

Here’s how we sell it.

The cashiers in my store tell the customer “We have a promotion going on where I can actually give you your purchase for free today” after they ring in their purchase.

They then take the subtotal of the purchase, say it’s $50, and multiply it by five.

They go on to say; “If you wanted to purchase a $250 gift card to use towards your spring and summer purchases, then I can give you this $50 purchase at no cost.”

You’ll be amazed at how many people take advantage of a deal such as this. It’s a win/win for those who shop with you regularly. Customers get their purchase at no cost, and your business can bring in five times the cash proceeds today. When they turn around and use that gift card for future purchases and we often find that they will spend even more than they normally would, as a result of having already prepaid $250 worth!

When we run this program, we have days when gift card sales generate between two and three times as much cash and our regular daily sales would bring in.

Check out Moneris for more information about options for a gift card program. Moneris makes gift cards easy and very affordable. Despite what many think, any size retailer can start a gift card program. And, for any business, they increase the brand and perception of the business to the customer. Personally, my favourite part is knowing that a reminder of my store is sitting inside the customers wallet each time they pull it out.

Andy

P.S. Here is a great article on gift cards from the CBC.