How much should you spend on Christmas gifts for your clients?

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Here at SME we don’t buy client gifts. Instead, we make a donation to a local charity. This year it’s Eat My Lunch, which feeds Kiwi kids in need. We let our clients know that we’ve donated rather than sending them a hamper or a bottle of wine – so far, no complaints. However, individual gifts are important for lots of industries and they can foster good relations for the year ahead and remind your clients how much you value them.

So how do you know how much to spend on each client? Ask yourself:

  • How much profit are you making off this client each year? Valuable clients get gifts, one-off or low-value clients haven’t earned one.

  • How easy is the client to deal with? Spend more on the easy ones, because they’re worth more to you.

  • How long have you had the client? So few businesses reward loyalty, but you should. Loyal customers have massive value to your business.

  • What are you giving your clients? Food and drink are 50% tax deductible while other items are 100% deductible (ask us if you’re not sure). That means you can spend more on non-food-and-drink items. Also think about whether your client would appreciate something tangible or if they’d prefer a donation to a charity or similar – don’t be scared to ask them, lots of people really appreciate being given the opportunity to choose a gift.

To work out what to spend on each client, first calculate a total gift-giving budget. The maximum should be something like 1.5% of your profit. Say your profit is $100,000 a year, you might spend $1,500 on gifts.

Obviously, though, you don’t want to divide it equally among your clients. Your best client might get a $250 gift, while your smaller clients might get a $25 bottle of wine. And don’t forget to write a nice note on the gift so your client knows you’ve been thinking about them. With any luck your gesture will be appreciated and help to support a strong relationship with your valuable customers.