Holiday Gifts for Customers Can Say Thank-You

With the holiday season here, small-business owners should start thinking about gifts for their customers and employees. Not only is this a time to show your appreciation for their loyalty or efforts, it’s an opportunity to build better relationships for the future.

For your customers, you could go with the obvious: calendars, clocks, letter openers and other utilitarian objects--with your name imprinted on them, of course. There’s always food--fruit baskets, and chocolates are the most popular. Or you could make an investment in your company’s growth.

One way is to give your customers a discount on your products or services. They’ll appreciate the price break, and you’ll have strengthened your business relationship.

But let’s say you really want to give a gift that doesn’t have such a clear business purpose, or that’s more personal. You can create a lot of goodwill with customers by customizing gifts to the extent that your time and budget allow.

These days, sending gift certificates can mean never having to set foot inside a store. Many big retailers let you order them over the phone or online, which can be a big time saver (you’ll also save on postage). And chances are good that a smaller, more local retailer or even a restaurant will be very happy to mail gift certificates for you and include a personalized message.

With some creativity, you can find other gifts that will strengthen your company’s relationship with customers.

In the book “222 Ways to Promote Your Business on a Budget,” author Ron Gielgun notes that “more often than not, you will find that many of your customers share the same interests or have the same needs.” If, let’s say, they belong to the same gym, Gielgun suggests negotiating a group discount for them. Again, we’re talking about making a gift more personal.

You might want to take the same route when it comes to gifts for employees. There’s always cash bonuses or gift certificates, but what about a gift of time? Many workers are likely to be happy to get letters telling them Santa Claus has given them additional days off.

The best thing to do is probably to ask employees what they’d like, and then see whether you can accommodate their wishes.

When putting your gift list together, you need to keep some tax considerations in mind. Under the Internal Revenue Code, a business can deduct up to $25 of the amount spent on gifts per person per year. In other words, if you gave a customer or employee two separate gifts during the year, one costing $20 and the other costing $15, you can deduct only $25.

If your gift is in the entertainment category, you might be able to take a bigger deduction. In J.K. Lasser’s “Tax Deductions for your Small Business,” author Barbara Weltman notes that up to 50% of entertainment expenses can be deducted.

Is it a gift or entertainment? “The choice is yours,” Weltman says. However, she notes, if you go with the employee or customer to the event, it must be treated as entertainment and not a gift.