To Gift or Not? Should you Give your Clients Holiday Gifts?

Whether it’s carols blasting in the malls, or menorahs in the window, the holiday season is upon us. For small businesses, it can be a great time to say “thank you” to the clients who’ve helped you have a successful year. Some companies choose to send holiday cards, which only cost pennies, but others want to go above and beyond. Sending a gift can make a deeper impression.

When planning your holiday shopping, should you add your clients to your list?

Reasons to Give Clients Gifts

Your clients support your business and keep your business afloat. It’s only natural to want to show them appreciation. Giving them tokens of your gratitude for their business can build goodwill and develop a closer relationship. Strong business relationships are so important that a Harvard Business School study found that 85% of professional success comes from people skills.

Giving gifts ensures that you remain in the person’s mind, as it’s hard to forget someone who gave you something nice. While it may not bring it business immediately, if a future business need arises that you can fill, they’re more likely to reach out. If it’s been a while since they brought your company business, it’s a subtle reminder of the work you’ve done for them in the past.

Consider a gift as a long-term investment in the client relationship. It may not pay immediate dividends, and the return on the investment may not directly tie to the present, but it contributes to the overall goodwill between you and a client.

Check the Company’s Gifting Policies

Many organizations have gift-giving policies. These policies have been instituted to keep bidding on contracts and hiring new companies fair and balanced. Larger organizations want to avoid the reputation risk  should they appear to take bribes. Some industries, such as banking, are subject to laws and regulations related to bribery, and must comply. If you offer a gift that isn’t allowed by a client’s corporate policy, you could place them in an awkward situation.

Policies commonly place a limit on the dollar amount. Gifts over a certain threshold must be reported to Human Resources. Or, they could prohibit gift-giving to individuals. In those cases, you are allowed to send a box of chocolates, but it must be addressed and intended for the entire team. Before pulling out your credit card to order a client gift, pick up the phone and call your client.

You can ask your client directly, or reach out to Human Resources, to find out their policy. Use discretion when deciding who to approach. Abide by the policy, and get creative, if needed.

Things to Consider when Selecting Client Gifts

Make it personal and thoughtful. Has the client mentioned that they love fly fishing? Send them customized fishing lures. Does the team solve complex problems?  Maybe they would enjoy a puzzle to set up in the break room. When deciding on a gift, ask yourself if you would like to receive it.

Be careful with branding and logos. A gift is meant to show appreciation for the client’s business; it’s not a marketing tool. Adding large branding turns it into a sales item, particularly if it renders the item virtually unusable. Again, ask yourself if you would want to use a wine cozy with a logo on it before you order 100.

If you’re going to send a food item, consider possible food allergies and try to pick something inclusive. Sending smaller gifts throughout the year, with a variety of food items such as cheese, meats, or candy, can also help build goodwill while avoiding the trap of excluding a key team member.

When selecting gifts, choose quality over price point. A cheap gift reflects poorly on your business. Sending a smaller, but higher-quality present is a better reflection. If their office is nearby and you know it would be acceptable, you can drop the present off in-person. If this would not go over well, or isn’t possible, have the gift professionally packaged and shipped.

Tax Implications of Gift-Giving

When it comes to gift-giving, tax laws can be a bit odd. A gift of a turkey isn’t taxable, but a gift certificate redeemable for a turkey would be if the value was more than $25. In addition to respecting the client’s gift policy, you also don’t want to create a tax headache for them. Employers who give their employees gift cards must include them in wages.

What if you want to use your gifts as a tax deduction? The IRS has placed stringent rules around the deductibility of gifts. You can only deduct $25 per person, per year. Some companies try to get around this by taking clients to a show, as entertainment is 50% deductible, but the client must attend with you. Bottom line? Gift-giving shouldn’t be a major part of your tax planning strategy. Always talk to your accountant before making financial business decisions that have a tax impact.

Above all else, give cheerfully and gratefully. Your attitude towards the gift can communicate itself to your client, and it should never come from a place of obligation or resentment. A joyful attitude is always in season.