The Gift From Hell

How this one little piece of plastic could cost you thousands.

Picture this!

You’re About to Sell Your Business… But There’s a Problem You Never Saw Coming

Selling your business should be exciting. You’re about to cash out on years of hard work. The finish line is in sight. Then, just when you think everything is wrapped up, the buyer drops a bombshell:

“What about the outstanding gift cards?”

Wait… what?

You did the math. You calculated your revenue, expenses, and cash flow. But you forgot one thing—every single gift card you’ve ever sold is a ticking time bomb. And guess who the buyer wants to pay for it? You.

Gift Cards: The “Free Money” That Comes Back to Bite You

Gift cards seem like easy money. Customers pay upfront, and some never even redeem them. Sounds like a win, right?

Wrong.

Because when you sell your business, your buyer sees those outstanding gift cards as a liability.

And they’re not wrong. Every unredeemed gift card is money your business has already collected but still owes in services or products.

The problem? Most business owners never account for this in their sale price. And when the buyer demands that you subtract the total gift card liability from the purchase price, you’re suddenly taking a massive hit you never planned for.

Here’s How the Math Works Against You

Let’s say you own a Med Spa, and over the last few years, you’ve sold $50,000 worth of gift cards. Some have been redeemed, but $30,000 worth are still out there, unspent.

You list your business for $500,000. The buyer agrees to the price, but when due diligence starts, they say:

“Hey, we need to account for these gift cards. That’s a $30,000 liability. We’re reducing the purchase price.”

Just like that, you’ve lost $30,000 overnight.

And it gets worse…

• If you have no expiration policy on your gift cards, they could be redeemed years later, costing the buyer even more.

• If you didn’t track them well, you have no leverage to negotiate how much is actually outstanding.

• Some states require businesses to honor gift cards indefinitely, which means the liability never goes away.

This isn’t just a small adjustment—it can kill a deal or cost you a huge percentage of your sale price.

Why Smart Buyers Care... A Lot!

From the buyer’s perspective, they’re about to take over your business. That means they inherit all of its obligations, including outstanding gift cards.

If customers come in after the sale and redeem those cards, the new owner is on the hook to provide services… but they don’t get any new revenue from it. It’s a straight loss for them.

Would you buy a business knowing that tens of thousands of dollars would disappear as soon as you take over?

That’s why buyers demand sellers cover the cost before closing.

How to Avoid Getting Screwed Over

Now that you know the problem, how do you fix it before it costs you a fortune?

1. Audit Your Outstanding Gift Cards

• Pull a full report of all unredeemed gift cards in your system.

• Categorize them by date issued, amount, and expiration (if applicable).

2. Implement a Plan to Reduce Liability

• Encourage redemptions before selling – Run promotions or incentives to get people to use their cards before the sale.

• Set expiration dates (where legally allowed).

• Buy back old gift cards at a discount—some customers would rather have cash now than a facial later.

3. Negotiate Gift Card Liability in the Sale Agreement

• Instead of paying out of pocket, negotiate a partial split of liability with the buyer.

• Consider offering a small discount on the sale price in exchange for the buyer taking on the risk.

• If you’re running a membership-based business, propose keeping a portion of the business’s cash reserves to cover future redemptions.

4. Work With an Expert

This is one of those sneaky details that business brokers and M&A professionals catch, but most owners don’t. If you’re thinking about selling, make sure your advisor knows how to structure the deal to protect you from surprise liabilities like this.

Your Next Step: Don't Ignore It! - Fix it!

Most business owners don’t realize this is a problem until it’s too late—when they’re sitting across from a buyer who’s slashing their offer.

By taking action before you sell, you can keep tens of thousands of dollars in your pocket instead of giving it away.

So, if you’re even thinking about selling your business in the next 1-3 years, now is the time to handle your gift card liability.

Avoid costly mistakes like this and maximize your exit. If you want to make sure your sale goes smoothly, without unexpected hits to your price, let’s talk.

Click here to schedule a free strategy session.

Don’t let something as small as a gift card wipe out your hard-earned money. Fix it now, and sell your business on your terms.