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View Full Version : Rewards for Referrals...Opinion


JayD
01-12-2010, 09:42 AM
What is your opinion on Rewards for Referrals for customers?

Some say give them a gift card.........Some say take it off there bill.........Some may say other things......

What and why do you do.....

I was thinking and tell me if you think I'm wrong but would'nt you be better off giving them a gift card instead of taking it off their bill because you could write it off on taxes with the purchase, and by just taking it off their bill you cant.....

Whats your take on this.....

Stevegotcrabgrass
01-12-2010, 09:52 AM
Well, you are a tad incorrect. Either way it is a wash...Tax wise. If you take it off their bill, your revenue is decreased. If you give them a gift card, your expenses increase. The net effect will be the same, as long as the service and gift card are of the same monetary value. Here is a short extremely simplified example.

GIFT CARD SCENARIO
Revenue 100
expenses (25) (all other, i.e. fuel, insurance etc)
expenses (25) (gift Card)

Taxable income $50

TAKING THE PRICE OF THE MOW OFF THE BILL SCENARIO

Revenue 75 (only 75 since the 25 cut was taken off the bill)
expenses (25) (all other , i.e. fuel, insurance etc)

Taxable income $50

obviously these numbers are made up but it illustrates my point...
Not to mention I am a CPA and feel comfortable giving this advice :)

sehitchman
01-12-2010, 10:07 AM
When you are sitting on the bar stool, bragging about your business to the hot chic. Which would you rather say. "I grossed six figures last year" or " I almost grossed six figures last year"? Your banker looks at revenue coming into your account also. Higher gross will look better if you decided to sell out sometime also. To the tax man it is a wash.

JayD
01-12-2010, 10:10 AM
Well, you are a tad incorrect. Either way it is a wash...Tax wise. If you take it off their bill, your revenue is decreased. If you give them a gift card, your expenses increase. The net effect will be the same, as long as the service and gift card are of the same monetary value. Here is a short extremely simplified example.

GIFT CARD SCENARIO
Revenue 100
expenses (25) (all other, i.e. fuel, insurance etc)
expenses (25) (gift Card)

Taxable income $50

TAKING THE PRICE OF THE MOW OFF THE BILL SCENARIO

Revenue 75 (only 75 since the 25 cut was taken off the bill)
expenses (25) (all other , i.e. fuel, insurance etc)

Taxable income $50

obviously these numbers are made up but it illustrates my point...
Not to mention I am a CPA and feel comfortable giving this advice :)

Oh man, that's even better that you replied. Thanks, that does make sense to me...

Stevegotcrabgrass
01-12-2010, 10:11 AM
It's a good thing I don't do taxes.....
Actually your banker looks at your debt to equity ratio, this is especially usefull in determining credit. Remember when you applied for a mortgage, they want to know your annual salary, then they want to see all of your expenses....I can gross $100,000 a year but if you net $15K who cares........

On a side note if you need to talk about your Gross to get women, you need to go to a different bar.

Stevegotcrabgrass
01-12-2010, 10:16 AM
Also wanted to add, Higher gross will normally not help sell in the future if you are selling to a buyer who knows anything about business valuation. They will want to perform (or higher someone to perform) an audit and do Financial statement anaylsis. If financials are not available, the next best thing they will (should) do is request prior years tax returns. And guess what number is key on a tax return, taxable income. Now I know taxable income can differ from financial statement income and that is why the IRS makes a schedule M-1 but I am sure you knew the difference between temporary and permanent difference's as they apply to tax law.

MarcSmith
01-12-2010, 10:19 AM
I always did the outback giftcard. That way when the husband and wife go out on my dime they remember it. and bills thats been reduced isn't as memorable, IMO.

and I want to be remembered so they continue to do it.

Simple thinks like sending them a birthday card and such all the special little things one can do. yes its business, but when push comes to shove you want your client to know you. Other wise its much easier for them to cut the cord so to speak.

Stevegotcrabgrass
01-12-2010, 10:21 AM
I always did the outback giftcard. That way when the husband and wife go out on my dime they remember it. and bills thats been reduced isn't as memorable, IMO.

and I want to be remembered so they continue to do it.

Simple thinks like sending them a birthday card and such all the special little things one can do. yes its business, but when push comes to shove you want your client to know you. Other wise its much easier for them to cut the cord so to speak.

I never argued which one is better, just the impact. I agree with you. Christmas cards, bringing up the newspaper, small tokens of appreciation (never free services unless as a referal incentive) work wonders.

JayD
01-12-2010, 11:37 AM
I always did the outback giftcard. That way when the husband and wife go out on my dime they remember it. and bills thats been reduced isn't as memorable, IMO.

and I want to be remembered so they continue to do it.

Simple thinks like sending them a birthday card and such all the special little things one can do. yes its business, but when push comes to shove you want your client to know you. Other wise its much easier for them to cut the cord so to speak.

How do you go about getting all that personal info from them like birthdays and such... I have been trying to work on a letter to send all of them asking to update their info, I have been wanting to get their email address to be able to send things too..

DLAWNS
01-12-2010, 11:39 AM
At the moment I give the customer a percentage off their next invoice, but I've been thinking of changing it up a bit just to keep it fresh so people will continue to remember to refer us.

MarcSmith
01-12-2010, 12:00 PM
Jay I imagine that in that age of the internet it would be real easy to get all the info...

But Like you mentioned an info sheet asking for updated info is one way, another way is to talk with your clients or even ask yoru client neighbors. You don't even need to get the exact day even juts getting the birth month. and sending a card then.

Strike up a conversation..."hey it look like you had a party this weekend"
"Yeah it was bill's birth day..." 10-15 years ago people were not as paranoid at giving out information... people are a bit gun shy now...