Some entrepreneurs shy away from selling gift certificates because of potential fraud. However, if you take some precautions, you can start selling gift certificates without assuming too much risk.
Don't buy generic gift certificates at a stationery store. What's to stop someone from buying a pad of the same certificates and redeeming them at your store? Instead, invest in custom-designed certificates that bear your logo.
Avoid cash refunds. Include a line stating that any unused portion over $5 will be issued as a new certificate.
Make the certificates difficult to duplicate. Use security features such as an embossed logo or artificial watermark to prevent photocopying.
Keep a log and review it daily. Record the certificate number, date of sale and dollar amount of certificate at the time of sale.
Gift certificates are particularly helpful for small-business owners for two key reasons, says marketing consultant Wendy Tanenbaum of Creative Edge in Los Angeles: They're a cost-effective form of advertising, and they also help cash flow. "Small businesses I've worked with that have offered gift certificates actually prefer that people buy certificates [over merchandise]," says Tanenbaum. Why? In addition to the fact they bring new customers into the store, not all gift certificates are redeemed. And even for the ones that are, between the time of purchase and use, they're like an interest-free loan to your business.