How to make an online casino an investment source?
The turnover of an online casino mainly depends on the brand's popularity, percentage of wins, and losses. Of course, you can gather all the public financial statements for a quarter and calculate an average income. However, this data will be unreliable because, to a large extent, it will be determined by the laws of strict secrecy. Let's try to calculate future revenues, anticipate risks and develop an effective strategy together.
The total size of the online casino market will reach a record $92.9 billion by 2023. Behind this figure are large corporations and small businesses contributing to market development. However, entrepreneurs will have to invest no fewer resources, efforts, and patience in the industry to make real money. Careful planning of the platform promotion strategy, search for investors, risk analysis, budgeting, data security, legal support, and many more tasks related to management can sometimes seem like Sisyphus's work. Yes, it is usually tricky: once your brand becomes a reliable service provider, the number of players will grow exponentially, bringing you the desired income.
In general, we have to learn how to calculate the logarithms of profit, calculate the likely risks, determine preventive measures, and analyze the state of our business. Also, as a bonus, we'll give you one of the most important secrets of success.
Calculating profitability of an online casino
Several vital metrics determine how well your business is doing. So, let's talk about two important KPIs.
Gross Gaming Revenue (GGR)
GGR is a financial indicator determining the difference between net income and taxes. Many will find this KPI unethical because the entrepreneur is "profiting" from the loss of users. As Bertrand Russell said: “Everything is vague to a degree you do not realize till you have tried to make it precise.” Taxes can help build critical infrastructure and even reduce unemployment.
The formula for calculating gross gaming revenue is:
Gross Gaming Revenue = Amount Wagered (AW) - Winning Payouts (WP).
AW represents the total amount of all players’ bets. WP is the sum of all payments to users. Note that GGR is equivalent to “sales” or “revenue” – not “profit” or “earnings.”
Then you should divide the resulting GGR by AW to calculate the margin. The higher the value, the more money relative to the AW the company will retain. Therefore, it is essential to raise payout percentages in online gambling, encouraging players to bet.
A simple example
Having decided to launch your own digital business, you must analyze your competitors' platforms and identify several popular areas in gaming. Let’s take online poker and virtual slot machines.
So, you have gathered the necessary financial information about payouts and total wages. To determine which type of game might be the most profitable, we must use a formula to calculate the margin.
|Online poker||Virtual slot machines|
Online poker: $1.200.000 - $1.500.000 = $300.000
$300.000 * 100% / $1.200.000 = 25%
Do the same with the calculation of virtual slot machines. The result is 22%. It turns out that online poker has higher margins and, therefore, more income.
Net Gaming Revenue (NGR)
We have already learned how to calculate profitability. We need to determine net revenue or dividends minus all payments to players and tax deductions. The thing is that there is no traditional approach to measure this indicator because it is not connected with the mandatory fees. It depends on the luck of the players in the game. Look at a simple example of an acceptable NGR calculation.
A simple example
Let's say you registered a company in France, where the tax on online poker is 36.7% per GGR. Users made bets for $10.000.000 and won half during the year while receiving about $1.000.000 in various benefits. To understand how well you and your service quality are doing, you should determine the GGR. It would be $5.000.000. Let's calculate the amount of all taxes: multiply the resulting value by the tax rate. It turns out to be $1.835.000.
NGR = (($10.000.000 - $5.000.000) - $1.000.000) - $1.835.000 = $2.165.000.
This KPI excludes royalties to providers, payments to affiliates, commissions of payment systems, staff salaries, etc.
Make your business work with a minimum of your time
Before launching an online gambling platform , you should research the industry:
1. to get acquainted with competitors;
2. identify popular directions;
3. learn all the legal pitfalls;
4. calculate the ROI and profitability of gambling activities, etc.
In general, you should use all your skills as a project manager to see the multiple opportunities and benefits of the gambling business.
Think about finding reliable software vendors. After all, getting a finished product does not mean its viability - it may take a long time to test it, especially if you trust beginners. Conversely, if your suppliers are professionals and know the market, the cost of a mistake will be lesser.
Take care of the license - it is necessary to avoid becoming a one-day casino with a reputation for fraud. So, explore the list of countries with the lowest taxes on profits.
Here are a few more aspects that you can't ignore:
- Choosing a reliable payment system.
- Buying a memorable domain name.
- Hiring a team of designers, artists, and developers.
Of course, you can't do it all by yourself. You have to look for a team of top specialists. Read more about how to do it and why 90% of your success depends on the team.
Team is everything
So, we're getting closer and closer to the main secret of online business - a dedicated team. Such people are difficult to find; moreover, many professionals may refuse the job offer because of the company's specifics. So when communicating with potential candidates, you should be frank and sensitive.
To make your brainchild work, take care to find the following staff:
- Customer assistants;
- Player support & compliance;
- Sales & business developers;
- Information Security Specialists;
- Technical team;
- Account managers, etc.
These people will directly depend on your online casino profitability. None of them will want to get in trouble with the law if you offer a gray deal. So, start by finding lawyers to help you legalize your business.
White label solution providers will help make the project launch easier. For example, casino-nonstop.com offers several unique services related to delivering viable software. The company has 14 years of experience in game development. Its principal privilege is creating a fantastic experience, 24/7 customer support, the shortest possible product development time, and regular updates.
Keep analyzing and growing
You can't build a business without a good pool of resources. But you can attract online casino business investments. To do this, you need to do the following steps:
1. Offer objective evidence of your business potential.
2. Present a strong sales pipeline.
3. Participate in a startup accelerator to expand your mentor network and get support.
4. Promote brand uniqueness through a strong team.
5. Polish your online reputation.
6. Perform legal, due diligence.
7. Explore crowdfunding options.
Connections are everything. So be prepared to present a strong proposal through the lens of clear and accurate information. Venture capital firms are also worth contacting - an entrepreneur’s idea could be their next project .
If investing enables your business to grow and develop, you shouldn't overlook the state of the industry. After all, it will affect cash flow and help prevent possible risks. Take stats for 2021 . The pandemic spurred growth in the sector and predicted a 33% increase in the digital business share by 2025. But over the years, user preferences practically have not changed: analytical studies show the growing popularity of sports betting and casinos and a slight increase in the area of casinos. So perhaps you should always consider market trends to get users' attention. But to protect them and yourself, you have to rely on project management.
Risks diversification in managing an online business
Flamma fumo est proxima (in Latin) or flame follows smoke (Plautus.) So all the unpleasant situations that happen to investors and entrepreneurs can often be prevented. With a well-developed business plan, you can identify future errors that have arisen so far on sheets of paper, not in reality. Your goal is to find ways around possible difficulties.
To persuade venture capitalists, a business plan alone is not enough. These people are eager to quench their speculative itch without sacrificing financial security. You can hardly beat this highly competitive market, but it is possible to become a rising star and a trend. You should diversify your business, regularly release new products, explore opportunities in other markets, and take risks associated with launching new products.
Readiness for risky investments in gambling depends mainly on the technology of your product. For example, in 2010, a popular area was integration into social networks . A clever and prudent bet was made on social gaming, which allowed the expansion of the online gambling market. Today this bet is developing mobile gambling, augmented or virtual reality casinos, and creating streaming software for gaming titles. The prospects of these areas are unconditional, and all that investors will do is buy shares, wait a little bit until they rise in price, and successfully earn on their sales. Well, why not?
Launching an online business is quite risky, like walking on a thin rope over an abyss. But to back yourself up with a bridge, you should take care of a reliable team of employees, investors, and accelerators. About how to do this and attract the right people read this guide.
The poker-developers.com team also wishes you the strength and patience to achieve your business goals. Love what you do with all your heart, and you are sure to succeed! See you in a new article!