Sportsbook management for profit; with these business tips, your book will be a success.
Sportsbooks had a bad rap. Shady characters in back rooms smoking cigars and taking bets over the phone became the go to image. Any time we heard the word “sportsbook” that’s what many of us thought. Per the United States’ moral compass, sports betting belonged in the degenerative dust bin along with stealing a baby’s candy.
But the U.S. Supreme Court changed that. By striking down an antiquated and unfair law that gave a business advantage to a single state, the Supreme Court cracked open the door and allowed a sliver of light to enter.
What the Supreme Court saw is what many people have begun to see. Sportsbooks are no different than other exchanges where financial instruments are bought and sold. Schwab, Merrill-Lynch, and TD Ameritrade provide trading platforms where we can trade stock.
Bookies offer platforms where we can buy points or lay points against the spread. It’s the same concept. In this blog, we dive deeper into that concept before turning our attention to sportsbook business finance, and how you can use PayPerHead tools to run an efficient, profit-making, sportsbook.
Comparing Stock Trading Platforms to Your Sportsbook.
It sounds crazy to compare something like the NASDAQ and New York Stock exchanges to your sportsbook. Trillions of dollars are exchanged every day on stock exchanges. One of the most heavily traded stocks on both exchanges is Apple.
Apple’s public float, shares allowed to trade, is 4.38 billion. That means a potential 4.38 billion shares of Apple could change hands every day. The average amount of shares traded every day for Apple is 26,337,770.
Shares are only traded if there is a buyer and seller. The buyer “bets” on Apple stock going up. The seller “bets” on Apple stock going down. Sound familiar?
It should. That’s what online sportsbook operators and bookie agents do. Here’s an example of a game that just happened in the NFL Playoffs. Notice the similarities between someone who buys and sells stock on Apple and a sports bettor who wagers on San Francisco versus Minnesota
The stock buyer purchases Apple stock at $310 a share.
The sports bettor purchases points, buys, Minnesota at +7.
The stock seller unloads Apple stock at $310.
The sports bettor lays, sells, San Francisco at -7.
The action on Apple stock is almost the same type of action on a sports betting platform. The difference? Most sports bettors play the day-trading game. Most investors purchase Apple stock and keep it for years.
That’s a small difference, though. Sports bettors can play the long game as well. It’s called future betting. There are other similarities.
Stocks exchanges care about fees. Trading platforms make money via fees or the right to use money housed by their clients on their platforms. Bookies care about the fees, or juice.
Hedge funds “hedge” against a stock position from losing money by purchasing put options. Bookmakers “hedge” against large wagers by using PPH tools like the layoff account. There are other similarities. We mustn’t go through every single one.
But it’s important to understand that what you do, offer sports betting services, is similar to what the largest banks in the world: JP Morgan, Bank of America, Goldman Sachs, etc.do. You’re on a much smaller scale, but the concept is the same.
Why is this important to understand? It’s important because before becoming a successful bookie you must break down barriers. It’s perception versus reality. The perception is that what you do is wrong.
The reality is different. You provide a service. So, the next time someone tries to break out their moral compass, you kindly remind them of the comparisons between sports betting and stock market investing.
Understand Sportsbook Business Finances
Now that we know that running a sportsbook is similar to running a trading platform, we can get down to business. We define a business as: a person, partnership, or corporation engaged in commerce, manufacturing, or a service; profit-seeking enterprise or concern.
Most corporations run their businesses with key executives. There’s the CEO, the Chief Executive Officer. The CFO is the Chief Financial Officer. The COO is the Chief Operating Officer.
Corporations can split c-level executive duties because they’re gigantic. You can’t because you run a sportsbook. You’re a private business owner. You are the CEO, CFO, and COO. All duties fall on you.
As the CEO you overlook the CFO. What are the CFO duties? It’s to understand the company’s financial structure. Let’s do that by looking at sportsbook revenue and sportsbook profit.
What is Sportsbook Revenue?
A bookie agent’s customers, your customers, make wagers on sporting events. Your customers might wager on the NBA, NFL, college basketball, MLB, etc. They might wager on all those sports. They might wager on a single sport. No matter. Your business won’t make money if your customers don’t provide betting action.
Action is revenue. Every time one of your customers makes a wager, they drive revenue to your business. Revenue is sales. Every time a client bets on an NFL game, you just made a sale. That doesn’t mean you made a profit. You made revenue.
Revenue are sales. That’s it. There’s also something called cost of goods sold. All companies in the long run must turn revenue, sales, into profit. Bookie agents must turn revenue into sales as soon as possible. Companies that sell growth, like Tesla and Netflix, mustn’t make profit. They sell a promise that in the future they will make profit.
Sportsbook operators don’t have that luxury. They must profit off every sale or every wager.
What is Sportsbook Profit?
How do bookie agents turn revenue into profit? They make money from betting fees. Every time a person wagers on a game, the bookie profits from fees. We call bookie fees “juice” or “vig”. It’s often 10% of the wagered amount.
If a player, your client, puts money on Baltimore at -10 to beat Tennessee, your profit comes from the 10%. If your customer wagered $200 on Baltimore, your profit is $20. If the customer bet $1,000, your profit is $100.
Does it matter if Baltimore covered the spread or not? It can. Say you accepted a $1,000 wager on Baltimore at -10. Also, you accepted a $600 wager on Tennessee at +10. Baltimore beats Tennessee 28-10.
You must pay out $1,900 to the client that bet on Baltimore. You take your $100 fee and pay out the initial wager as well as the winnings. You keep the entire $600 from the client that wagered on Tennessee.
So, you use the $600 to pay a part of the $900 profit. You have a shortfall of $300. Where does that $300 come from? It comes from your pocket, your sportsbook.
If you’re a bookie agent, though, you can use a specific per head tool to balance the money on Baltimore and Tennessee. The layoff account allows you to make lay off wagers. It ensures that you keep the juice on both sides of Baltimore-Tennessee as profit.
We go deeper into that later. For now, realize that PayPerHead offers tools like the layoff account that helps bookie agents ensure profit.
How To Use PayPerHead Reports
A function of both the CFO and COO is to use reports. All c-level executives use reports. But the CFO and COO use reports to give recommendations to the CEO. The CEO’s goal is to grow the business and make more money.
In your bookie capacity as CEO, CFO, and COO, you should use PayPerHead reports to grow your business and make more profit. You can check out 15+ reports on your dashboard. Experiment with reports and decide which ones you like the best.
A useful report to you might be the player activity report. You want to know which of your clients provide steady action to your sportsbook. Make sure to study player activity reports.
There are other reports you might find useful. Call a PayPerHead customer service rep at 800-605-4767 if you’ve got any questions about reports.
COO Functions: Using PayPerHead Tools to Keep Profit
The Chief Operating Officer runs the day-to-day. Bookie agents must run the day-to-day to ensure they increase revenue and turn that revenue into profit. How do sportsbook operators do this? They use pay per head software tools.
Let’s start with the most important. The PPH layoff account ensure profit by allowing bookie agents to keep every dollar generated in juice. The 10% adds up.
If you accepted $10,000 in action on the Super Bowl, that’s $1,000 in bookie fees. The way to ensure that you keep all $1,000, that the entire amount remains profit, is to use the layoff account. You must pay winning players without having to dig into what you’ve got in the bank.
Check out an example of how you do this with the layoff account. Here’s a real betting spread:
Seattle +4 ½
Green Bay -4 ½
Let’s say that you accepted a $1,000 wager on Green Bay at -4 ½. You accept a $500 bet on Seattle at +4 ½.
Your fee for the Green Bay wager is $100. Your fee for the Seattle wager is $50. You won’t have a potential loss on the Seattle wager. If Seattle covers the spread, your profit becomes $550. You pay the Seattle bettors $450 winnings from the Green Bay wager. That leaves you with $550 in profit.
But if Green Bay covers, you could have a shortfall of $450. After you take your cut, the vig, you must pay $900 to the winner who wagered on Green Bay. You can use the $450 after your cut from the Seattle wager to pay half of the Green Bay bet. But, you must come up with the other $450.
Where will that come from? The layoff account. All you had to do was lay your potential shortfall, your risk, on Green Bay. Your risk is $450. So, you bet $450 on Green Bay to cover the spread.
If Green Bay does cover, you use your layoff winnings to pay off the Green Bay bettor. If Seattle covers, you use your profit from the Green Bay bet to pay off the Seattle bettor. Either way, you’ve zeroed out your potential loss on Green Bay versus Seattle.
Why do this? You do this so that you can keep the bookie fees as profit. Sounds great, right? It is, but you mustn’t use the layoff account on every bet. Use common sense.
Also, if you can take a swing once in a while, you can make even more profit. Let’s say you handicapped the Green Bay versus Seattle game. You had a strong opinion that Seattle would cover the spread. If Seattle did the cover the spread and you didn’t lay off risk on Green Bay, you’d have made a $450 profit on top of the bookie fees.
Use your common sense before going into the layoff account blind. Shelve the layoff account once in a while for the chance at big profits.
Agent Payment System
The Agent Payment System, or APS, allows for quick deposits and payouts. There’s something that all successful businesses understand. That’s cash flow. The quicker cash can flow to your sportsbook, the quicker it can flow to the bottom line. Making it easy for your customers to deposit leads to more betting action.
More betting action leads to more bookie fees. Quicker payouts leads to quicker deposits, which leads to more bets, which leads to more bookie fees. Get to know the Agent Payment System. Make sure your clients know about it as well.
Standard Live & Premium Platform Live Wagering
PayPerHead offers a Standard Live Wagering platform. But the company also offers a Premium Platform for Live Wagering. We suggest that if you haven’t yet done so that you sign up for the Premium Live Wagering Platform.
Live wagering is a growth revenue stream for every online bookie agent. Premium Live Wagering gives bookies an option to offer more markets and live video coverage of most major events. There’s also a game tracker.
Read more about both live wagering platforms here. Whatever you decide to go with, remember that as a sportsbook owner, you must always look to increase revenue that you can turn into profit. Live wagering is one of those growth revenue streams. Make sure to offer and promote live wagering to your sports bettors.
BetAlert, Line Mover, & Override Limits
If possible, you want to use your layoff account in necessary situations. If money evens out on both sides of a spread in a natural way, that’s good for you. Here’s a simple process that can help with that.
- Set up a BetAlert on a high-profile game.
- Once you are alerted to a big wager, do one of the following:
- Change the line to encourage wagering on the other side of the game.
- Set an override on the game until any potential “steam” has subsided
Steam wagering can happen on any game. It can dominate your sportsbook, forcing you to overuse the layoff account. Stay ahead of steam by setting up BetAlerts. Then, manage wagering on the game through either the line mover or override limits.
Also, never forget that nothing says you must offer wagering on any game. You run your own sportsbook. It means you can take any game, even the Super Bowl, off the board. That’s your right.
You’re the CEO of Your Sportsbook
Sportsbooks are similar to stock market trading platforms. Buying and selling stock is comparable to laying or backing a team against the spread. Once bookie agents realize this, they must turn to sportsbook business management.
Bookies are their company’s Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer all-in-one. Agents manage their sportsbook businesses through reports and pay per head software tools like the Layoff Account, Line Mover, Agent Payment System, and BetAlerts. One thing bookie agents must never forget is that it’s their business. They can pull any game off the board, decide to change betting lines, or offer as many or as few live betting options as they wish.
PayPerHead strives to help every customer become the most successful sportsbook business owner possible. Call a PayPerHead representative at 800-605-4767 if you have any questions about our services.