This story appears in the
April 2005 issue of
Entrepreneur.
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At Inspa
Corp., a fast-growing Seattle day-spa chain, CEO Colleen Stone
smooths out the wrinkles in her cash flow by borrowing from her
customers. When retail gift cards first hit the scene a few years
ago, Stone, 49, realized their appeal for her spa clients.
Previously, paper gift certificates made up approximately 25
percent of sales and were awkward to issue and track. Now, prepaid
gift cards account for more than 25 percent of InSpa's incoming
cash flow.
And since gift cards often go unredeemed for up to 12 months,
InSpa can use that cash in the interim--like an interest-free loan
from next year's customers.
One warning: Gift cards create a short-term liability on your
balance sheet, which may make bankers nervous about extending
additional credit. But the overall effect has been positive for
InSpa--the 2004 holiday season set new records for gift card sales.
Says Stone, "We plow all that cash flow right back into
opening new stores."
