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Cornerstone Aspects of How to Start Lottery Online Business

Author: Igor Balanchuk
11 December 2020, 16:23
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Votes: 9

The lottery business can be regarded as one of the most stable ones in the gambling industry. The increasing popularity of lotto games in all the regions and individuals' desire to try their luck make this type of business almost immortal. Following all the latest lottery news, Login Casino has determined the most reliable industry trends and is ready to share advice about how to start the business in this sector.

Cornerstone Aspects of How to Start Lottery Online Business

How to start a lottery business: introduction to the industry

Why do people like lotteries?

Even though ideas are the cornerstone elements of every business, the most prosperous ones rely on intrinsic human nature. People are ready to spend the last money on pharmacies, grocery stores, taxes on the army or police because the need to be healthy, sated, and protected are the primary human needs.

However, most of the Earth's population have already passed the first stages of the Maslow's hierarchy of needs, so entertaining businesses are on the rise. Interestingly, the lottery is a unique case if to look at it from Maslow's perspective. On the one hand, it's pure entertainment as making a small bet and hope for a huge win lead to an adrenaline increase.

However, the word 'hope' makes the difference and arranges lotto games just between the basic and upper stages of human existence. Individuals are not only receiving satisfaction while waiting for the result of the draw, but they also want to move forward in Maslow's hierarchy. Moreover, people are ready to spend much on hope, which correlates with the research in the field. In short, the scientists defined that richer people spend less money on lotteries than poorer ones as the latter want to join the upper class.

In other words, people are ready to spend cash on the game of chance just after they satisfied the basic needs. Such a conclusion correlates with the lottery sales rates during the pandemic, which hasn't dropped compared to the spendings on other entertainment, even in gambling. Understanding this feature is the key to being sure that opening lotto commerce is a safe investment. If organized cleverly, of course.

Lottery types

Humanity has developed multiple lottery types, which differ from a few insufficient items and up to radical changes between the games. The only common feature is the game of chance principle, which means that people have to rely on luck to receive a winning amount of money.

However, all the variety of lotteries can be categorized into just three groups:

  • Terminal-based
  • Scratch-cards
  • Sport-related

how to start a lottery online business

The first includes both predetermined combinations and personally-chosen ones, while the overall outcome still depends on the machine that chooses ball numbers or alike. Buying a paper ticket or choosing six numbers online is actually the same-principle lotto game.

Scratch-cards are another popular type of lottery as the punter receives the ticket or a scratch-card with an already predetermined outcome, so erasing the corresponding field (available in the digital form too) gives an immediate outcome. That is why many experts call this type of gambling instant lotteries.

The last huge group of games of chance is sport-related ones. Choosing the winner of the sports competition is still the game of chance as the punter cannot influence the outcome (excluding match-fixing cases, of course). That is why betting in many countries is going in parallel with lotteries and is often organized by the same operator. As a rule, there are diverse types of bets on the same event, while guessing 10 or 12 outcomes for separate matches is also awarded as a jackpot of a sport-related lottery.

Why is the lottery business attractive for investing in?

One of the most important aspects of every financial investment is understanding whether you will achieve success in this field. In the regarded case, the land-based or online lottery's potential owner can be sure that the industry will grow. Aside from the psychological preconditions that push people to spend money on a game of chance tickets, the financial analysis of several authoritative sources confirms the industry's stable growth.

Thus, the lottery industry's recent market value is estimated at $7.1B, while the stable 6.6% annual growth will bring the sphere to $11.1B capitalizations in 7 years. Interestingly, all the three major types of lotteries will be growing more than 5% per year, transforming this potential business into a reliable one. In other words, investments in the online lottery business can be rather precisely calculated due to the sector's detailed analysis.

The review of the lotteries' future financial situation (by lotto-type) is described in the table below:

Lottery Type

Specifics

Recent market value

Forecast for 2027

Forecasted CAGR for 2027

Terminal-based

Combination of player’s selection and predetermination

$4.55 (64.1%)

$7.1B

6.60%

Scratch-cards

Instant lotteries, including digital-based ones

$0.9B (12.7%)

$1.3B

5.30%

Sports-related

Depends on the real sport outcomes

$1.65B (23.2%)

$2.7B

7.40%

Overall

 

$7.1B

$11.1B

6.60%

Becoming a lottery retailer: open your own one or use a franchise?

One of the first questions that arise when considering this topic is the possibility of using a franchise scheme. Alike in almost every business, such a way costs additional money but allows to apply the already tested approach. Opening a new business is also a lottery game to some extent, but one can minimize risks by attentive research of the market and all the related aspects. Even if an investor has decided to rely on the franchise model, he or she has to take the following steps:

  1. determine jurisdiction/location;
  2. conduct research of the industry;
  3. count your money;
  4. draft a business plan.

Making those steps will guarantee that the franchise owner's potential pitch won't have sandcastles of how everything will perfectly work. We'll explain all those four steps, in short, so one can understand the primary pitfalls of this stage.

Determine jurisdiction/location

how to start a lottery business

Being an independent part of the gambling industry, lotteries' licensing procedure varies from location to location. Different countries have diverse attitudes to this kind of gambling, beginning from full prohibition to absolute support. Some states review some sports betting types as lotto games and include them in lotteries. Others allow only a few kinds of lotteries, excluding some specific types as an instant game of chance or virtual draws.

It means that the future lottery business person has to define the legislative cornerstone. Though, one can focus on a particular region (his or her country or a neighboring one) and then adjust all the further steps concerning the location's situation. Another person may be sure of his or her lottery idea and can try to determine the countries that allow offshore lottery providers. None of the opposite approaches is wrong or right, but synchronizing the legislative aspect is the cornerstone step before making the next ones.

Conduct research of the industry

After the location is defined and the business person knows the market’s laws, it's time to conduct the existing industry's in-depth research. As the idea to start the lottery business is actual for open markets, the entrepreneur is sure that such a location is fulfilled with lotto operators.

This step should begin from visiting the lottery shop or website of the market leaders. The objects for paying attention to are everything, starting from the design and number of suggested lotteries and ending with the variety of payment systems or license origin. The special pedantry deserves the review of bonuses and other attractive propositions. Market leaders are usually eligible to define the best methods and approaches that work in particular locations, which are linked to culture and social psychology. Some nations prefer welcome bonuses, others like cashback, while the thirds actively participate during holidays.

Another important step is to research the marketing side of the existing projects. What kind of advertising is the most widespread and why: TV, radio, city-lights, or street banners? Every type has its price and effectiveness and can tell either about the location trends or the opponents' possibilities.

lottery retailer

Count your money

The previous passage is among the most vital before coming to the calculations stage. However, that is not the only aspect, which influences the approximate amount of the project. Not to turn to an endless sentence with numerous items, will present the list of the elements that influence the price of a lottery opening plan:

  • license cost;
  • covering parallel spendings (insurance, annual fee, taxes);
  • hardware and software cost (or annual rent amount);
  • advertising strategy;
  • office rent (including utility bills);
  • retail shops maintenance (if offline lottery-type is chosen);
  • salaries & bonuses for the workers;
  • suggested sales values and growing tendency pace;
  • additional and unexpected spendings;
  • inflation and forecasted lottery price changes;
  • credit percentage calculations (if needed).

Interestingly, every item of this list can be divided into another list with dozens of sub-points. We've just tried to show the primary directions that should be covered with a calculator in hand and understanding the economic basics.

Special attention should be given to the last point. Thus, if a businessman wants to rely on personal assets only, he or she has to be attentive with calculations and evaluate whether every item is worth the costs it will consume. For instance, the investor has to review different firms that use AI algorithms in gaming if the budget is limited, and probably save on the initial advertising campaign but purchase reliable programming support.

Draft a business plan

If the previous sub-topics are done in detail, the further steps will be much easier. The financial side is the key in every business plan as it creates a substantial basis for further work. The other previous items are also vital as they give a general understanding of the region's situation. So, the potential lottery business owner can draft a business plan, which can be regarded as the summary of the previous steps.

lotto retailer

Even though the business plan usually relies on the financial part, it has to be focused on the strategy of achieving success. This is especially essential for potential business owners who are going to attract investors. The latter usually like to receive the bright future picture in the nearest-possible time, while the amount of money is of secondary importance for them. Actually, this is the topic for the whole article that explains all the elements related to pitching.

If to return to the simple explanations, every business plan should have a clear structure. One of the most common ways of building suchlike documents is to rely on some planning technique, SWOT analysis, for instance. The detailed review of strengths, weaknesses, opportunities, and threats (SWOT) allows to structurize the whole business plan and understand the basic elements that can help or will put the whole business idea to the bottom.

The practical part of lotto retailer incipience

Although the previous part can be done ideally, the next huge step is the practical realization of the business plan and overall idea. Experienced businessmen know that there can be a huge difference between the numbers in the business plan and in practice, which relates to all the aspects, including money, terms, and amount of obstacles. Here is the old rule to making things step-by-step receives the cornerstone importance. Though, one can follow the draft plan below when it turns to the practical realization of the lottery business plan:

  • Register the needed legal entity.
  • Get the required license.
  • Hire appropriate staff.
  • Choose the right software providers.
  • Prepare a unique marketing strategy.
  • Don't forget about maintenance and customer service.
  • Be ready to adjust and change.

Not to transform this article into an endless instruction, we'll describe in short every item to give an insight into what the entrepreneur will meet on this stage.

Register the needed legal entity

how much do lottery retailers make

All the European gamble-licensing operators usually require registration of the business entity (open office, buy hardware and servers, hire some staff) in the location where the permission is given. It gives them the possibility to check your business documentation or technical facilities if needed without additional relocations. This step also includes opening bank accounts in the country of license receiving though the regulator can review your money flows. Some European countries allow the business lottery newcomer to be registered in another EU country, while the European Economic Area agreement will help them in reviewing financial transactions.

Get the required license

When the initial steps are made, one should start an application process. As the licensing legislation varies from country to country, the business owner has to learn it in detail and prepare all the necessary documentation. It is impossible without the previous item's execution as operators traditionally require payment bills and rental agreements before even reviewing the application. One also has to know that the application procedure costs a lot of money, and any mistake can crash the procedure without any money back or re-application possibility. So, be incredibly attentive at this stage as it can be costly.

Hire appropriate staff

This item becomes way important if one starts the business abroad. None can resolve the dilemma between the experience and price proportion of the worker, so one can rely on soft skills. Among the other pieces of advice in this regard is to exclude savings on the multidirectional workers. In other words, it's better to hire three professionals - a content writer, SMM, and project manager - instead of one who can successfully fail the task of brand promotion. Local lawyers or HRs are also the preferable variants for employing as they just orient better in a particular country.

Choose the right software providers

how to make lottery tickets

There are plenty of software providers on the market, and almost all of them are ready to suggest products worldwide. Moreover, the number of firms that offer gambling soft rapidly increases, which leads to another price/experience dilemma. We've covered this topic in a separate article, which can help in choosing the best software for online casinos and lottery.

Prepare a unique marketing strategy

Being a part of the business plan, marketing strategy, however, deserves special attention. Here one will undoubtedly face real obstacles and should be ready to deal with them. The detailed market analysis can help in defining the unique strategy as using the new information channels can bring the businessperson to the new target audience. Experienced marketers usually prepare a few strategies and just check them on practice as it's almost impossible to guess which one will be the best fit.

Maintenance and customer service

Signing the contract with a software provider can be only half of the way. The recent gambling industry confirms that new game types are the inevitable part of success, and lotteries aren't the exclusion. From the flip side of the process is the need to help people with their problems, and suggesting the comprehensive list of customer service support is a must. It usually invisibly increases the trust in the firm, just like the number of payment methods realized on the platform. People like the huge variety of options to choose from, even if they use only the single option - this rule is applicable to almost all directions in business.

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Be ready to adjust and change

One of the synonyms of the businessman is the 'person that can risk.' The last word means that problems, especially unexpected ones, are the inevitable part of every business project, and the lottery isn't an exception. Broken car on the way to delivering the paper, illness of the Chief Financial Officer before the obligatory quarter report, a new rich competitor on the market that pushes prices down, changes of the licensing requirements - that is only a shortlist of the possible obstacles that cannot be predicted. That is why one has to be ready to adjust quickly and do not avoid changes, even if they are implicit. Even though such advice can be regarded as common to every business, who said that starting a lottery has many principal differences from traditional cases?

Opening a successful lottery business can be compared to winning in the game of chance, but here everything in your hands. Good luck!

Read moreIs the desire to buy lottery tickets makes you a gambling addict?

Read moreClaiming lottery anonymously: is it really needed?

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Frequently asked questions

How much do lottery retailers make?

Usually, the commission of the lottery retailer is about 5%, while another part of total revenues goes on taxes, good causes, and covering the prize pool, depending on the particular rules.

How much do casino owners make?

Casino owners earn from the commission of the particular venue, so the more clients came, the higher the revenues are. As the number of clients can vary significantly, casino owners' monthly earning may be between a few dozen and a few hundred thousand dollars.

How to make lottery tickets?

Usually, lottery tickets are produced via the specific technology that protects the operator from being cheated with winning combinations. However, most of the lottery tickets are registered before the draw to avoid further cheating scandals.

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