Finding Your Niche in the Sportsbook Business

Sportsbook Business Plan
Finding Your Niche in the Sportsbook Business

Gambling is one of the oldest forms of entertainment in the history of the world. There was gambling going on during the Paleolithic period, as archaeologists date the earliest use of six-sided dice to around 3000 BC. Gambling houses were popular in China starting around 1000 BC, and one of the popular betting attractions was fighting animals. As long as there has been betting, there have been bookmakers – people who make money off the betting process.

When we fast forward to the twenty-first century, we see an industry that has moved far beyond dice, cockfighting, and even playing cards (which date back to ninth-century China). Now, there are wagering props available on different sportsbook business sites ranging from badminton to professional soccer to futures on professional and college football to eSports matchups. If you want to get your own book up and running, take a look at our primer on the best way to start.

Make Sure your Funding is Robust

Sports gambling in the United States alone is a twelve-figure business. Most of this still comes from offshore companies, but as the legalization of sports gambling spreads to more states, this number is likely to grow as the pastime becomes even more popular. You might think that all you need is a big stack of $100 bills and a second cell phone to handle the calls and texts, but if you think that, you are already behind the curve.

It helps to think about your sportsbook business as a bank. Yes, you can go to your bank and take out money through the ATM, but your bank does not have all of the cash on hand that its customers have deposited. In the United States, a bank with between $15.2 million and $110.2 million in transaction accounts has to keep 3% in reserve. So a bank with $100 million in account balances must have $3 million on hand. That sounds like a lot of money, but it would not take much for the bank to run out of cash if a financial panic hits.

Your sportsbook should operate the same way. You should keep a solid percentage of the bets that you have out there in reserve. You also need to keep an eye on the bets as they come in and adjust your lines as necessary to hedge your exposure.

The amount of cash you need on hand depends on the size of your operation. If you take in no more than $10,000 a week in bets, then you should start with $10,000 on hand. That’s about what you would expect if you were opening a local bookie operation. If you are starting a sportsbook business in a major city and plan to launch a major operation, you might need up to $500,000. On a daily basis, you need at least 20 percent of the handle you expect for a particular day.

Expect to Win Half the time – But not Much More

Sportsbook business profits come from the vig – not from the wins. One of the most important numbers you will track is the percentage of wins. If you’re not close to 50 percent, then your lines are costing you money. You will want to consider the maximum size bet you will accept. The larger your maximum is, the easier it is to get unbalanced – to have too much money on one side of the action. A good place to start is setting a range between $20 and $200 for bets. As your business expands, you can push that maximum higher. Think about it this way, though. If your daily handle is about $15,000, it just takes one $4,000 bet to push you dangerously out of balance. Keeping an eye on those maximums is a must.

So, How should you Set your Lines?

The best tactic you can use, especially if you are new to the sportsbook business, is to get the lines from the top books. It just takes a minute or so to find out what the largest sportsbooks in the world are offering on just about any prop. If you take the numbers from the midpoint of the books that you see, you are a lot more likely to maintain balance than you are if you start guessing your own lines. It is doubtful that you, as a local bookie, have insight onto tonight’s CavaliersPacers game that the experts at places like Caesar’s Palace somehow lack.

Just like any other business, your sportsbook also needs sound administration skills. Time management is an important skill that you will need if your book is going to make money. Once you sign on with the right pay per head service, you will not need to spend as much time on basic administration, but you will still need to keep a close eye on the movement in the action on games and props, adjusting lines as needed to maintain the appropriate level of balance. You also need to spend some time marketing your brand. Yes, the Internet makes it easier to run a book, but it also makes it easier for a lot of other people to start and run sportsbook sites, so the challenge becomes maintaining and expanding your visibility in a growing sea of competitive choices.

Once you have your feet under you and you feel comfortable running your business, consider adding some options that some of your competition may not. Casino games, live betting, access to horse racing, and other options will take you beyond the sports matchups that your competitors are offering and will keep your cash flow more level than it would be if you only operate according to the rhythms of the sports season.

Finally, it will be important to figure out what types of clients you want – and what types you don’t. There are some who win time after time, which means that you may want to lay off their action with another book – or you may want to adjust your lines to suit their wagers if you find that they are consistent. There are other players who will make you a bunch of money because they bet with their emotions instead of doing research. Finding the right blend will help you move toward profitability; will provide that and more.