new business idea - feedback/advice

[lord keef]

Hi everyone, my first post so please be gentle

i have for the last few months been researching an idea of mine which i think is a simple, innovative twist of on line sports betting. i have made some reasonable assumptions, and if launched would target 300k turnover in year 2 and hope to grow further thereafter. the initial gross profit projection is 34%. if 50% of that could be achieved in year 1 then i would be reasonably satisfied, and this would enable the business to go into year 2 without significant further capital investment. i've analysed some key areas / costs and would be delighted to receive any constructive feedback (positive or negative) from other users, these are as follows:-

- regulation, around £14,000 for initial gambling commission fees in year 1, £13,500 per annum thereafter. based on remote live event licence of less than £5.5m pa turnover. i have also received an indication that around £850 would be needed in legal advice to enable smooth gambling commission registration, and this party has indicated they provide services on specific site terms & conditions, and contracts with potential website designers.

- the website itself. i have targetted around 1,500 new registrations a year. the site would need to efficient, attractive, robust and secure enough to have hopefully hundreds of users using it on a regular basis. the side would need the software to be able to enable deposits and withdrawals, and provide me with all the info i need for decision making purposes. it has been difficult so far to ascertain an accurate, competitive cost for planning purposes. the site is very simple compared to whats out there in the betting market. as an innovation it comprises to no more than 5 pages (along with tab info such as 'about us / responsible gambling' etc). the user accounts would effectively be used within these 5 pages.

- gambling tax, 15% of gross profits, input vat is recoverable where taxable supplies are carried out.

- marketing, i have little relevant knowledge of apart from ideas. a free bet offer along with a £5,000 per year marketing budget would i hope encourage enough site hits to ensure new user registrations at least. SEO, viral and social media marketing. i imagine if i'm going to take a slating from users it may be in this area

- banking, indication that free banking is available upto £500k turnover.

- intellectual property, etc. copyrighting i understand can be achieved through posting designs, initial work, etc, back to oneself by registered post. i have also read about trade marking but cant see for now how this would benefit my idea.

- royalty payments to sporting bodies, eg, dataco for football bets.

- customer service. being a full time workerm initially thought encourage email contact, but also provide 4 hours evening telephone contact on a 0844 number. this would then be reevaluated if demand indicated more resources was required in that area.

i have also considered such things as po address for written communication, accounting fees. i have set up a 2% of turnover misc cost provision for po box, accounting / limited company admin type costs, telephone as above, and intellectual property type costs. so far, these four areas fit quote comfortably cost wise within that 2% provision.

i think that about covers it for now! thanks for bearing with me. please feel free to make any comments, etc, that come to mind.

look forward to hearing from you all, thanks

 

[darren atkinson]

...i have targetted around 1,500 new registrations a year...

- marketing, i have little relevant knowledge of apart from ideas. a free bet offer along with a £5,000 per year marketing budget would i hope encourage enough site hits to ensure new user registrations at least. SEO, viral and social media marketing. i imagine if i'm going to take a slating from users it may be in this area

Hi,

You are right, your marketing costs are way out.

Obviously 1,500 new registrations a year equates to 125 per month which is a lot for a new business, especially in a sector such as online betting.

How are you going to attract these users?

On your budget you can forget about SEO it would be completely pointless and as a very wild ballpark figure I think you'd be looking at a spend of £15K - £20k per month over 12 months to even try and compete. I'd still say that was a long shot at that.

For AdWords, you could be looking at anything from £5.00 - £20.00 per click, so even at the lower costs you'd be lucky to drive 1,000 visitors a year. I'm not sure what conversion rates are like in the betting industry but even if it where around 20% (which is a high estimate in my opinion) you'd end up with just 200 registrations per year, not the 1,500 you're looking for.

TV advertising is also out the window on your budget, and I don't think you'd get very far with magazine ad's either.

Sorry to be negative and blunt but you have to be realistic. The rest of your plan might be excellent, I'm not qualified enough in that field to give an opinion, but your marketing budget is a tiny fraction of what it needs to be.

I used to do a lot of SEO and Internet Marketing consulting, I still do it but only for a handful of clients now, but if you approached me with a budget of £20k a month I'd still turn it down. Sometimes a market is just too competitive and you have picked one of the worst possible to enter.

Also, try and take this as a warning, if you approach a company, or they approach you and offer to do it for even 3 times your current budget be very careful about handing over money or signing any contracts...

 

[mobyme]

, but if you approached me with a budget of £20k a month I'd still turn it down. Sometimes a market is just too competitive and you have picked one of the worst possible to enter.

Also, try and take this as a warning, if you approach a company, or they approach you and offer to do it for even 3 times your current budget be very careful about handing over money or signing any contracts...

Now, there speaks a man who knows what he is talking about. Solid gold advice.

 

[oliver123]

I am replying not from a business perspective but from a customer perspective. Up until this year I used the Betfair website for betting, mostly on horses, but I did venture into football betting as well. To be honest, I read your post and I scratched my head because I could not figure what service you were offering. For instance, are your setting yourself up in direct competition with Betfair, Betdaq, William Hill, Coral's? Or have I missed something? And if you are, I wonder what you could offer the punter that these mega betting companies haven't already.

 

[lord keef]

Hi both, thanks for this.

Hi Darren, obviously not what i was wanting to hear but probably what i was expecting. what i would say is, as a simple innovation i'm not looking to compete with the main industry players, obviously that would be very foolish. this is looking for a small niche type market, i was hoping that some way of making the site visible along with a 'hardly any strings attached' free bet offer may have encouraged at least the interest in the site, but obviously that needs far more thought.

oliver, the idea comes from my 20/25 years experience as a sports fanatic and a gambler (a bit like yourself maybe). obviously at the moment with it being an innovation i need to be careful how much i communicate about the idea, even if it is pants :-( , my target is to generate enough interest to obtain the registrations as per the above paragraph, then the next target would be to keep the users interested, in reality i'm not in competition with the big boys (apart from trying to gain a very small share of the market) and there are ways i plan to differentiate the concept.

 

[fisicx]

Maybe your idea will work but as suggested you have woefully underestimated the marketing costs.

Assume a conversion of 1%. That means to get 1500 new members you need 150,000 visitors year. At even £1 per click that's still £150k per year. At a more reasonable £5 per click that half a million pounds every year just on marketing.

Plus you will need dedicated servers, full time staff to run the site and manage marketing and process the members and to the finances. So add another 100k per year running costs.

 

[NJW39]

hi IMHO having read the posts i agree that we cant really evaluate the idea until we know what the prosposition is. You have gone into detail on the marketing and financials but not on the proposition ie "why would someone want to buy from you rather than the established big boys in the online gamblign space. and to answer this in my view you would need to pitch the idea in detail, to a group of mates who are into online gambling, and ask them for honest feedback. If you pitch the idea in detail to strangers you would need to get a non disclosure agreement signed and these are hard to enforce.

So- my advice is find some mates/trusted contacts and pitch the whole proposition, not just your sales and marketing strategy

 

[lord keef]

thanks fisicx and njw39.

if i am doomed from the outset then at least lady keef will be happy, although i am pleased to have had additional feedback other than her "what if everyone wins their bet" argument! :-D

there are 2 of us currently in discussion over this. our short term strategy is that over the next few months my friend (who has IT / website design experience, but not at this required level of robustness / functionality) will design a visually attractive website which will effectively be the core and contain all relevant information, etc. once this is done i will then look to copyright, which will give me something tangible for relatively low cost, so i can then decide in the future if i want to approach external parties with it. the core website would then need to taken on by a suitable website design company in order to incorporate the custom software to facilitate deposits and withdrawals, make it secure, etc, etc.

the idea itself? well i'm not blind or deluded to how potentially good it is. i am a naturally cautious person. as with many (i suppose) people / business ideas i fluctuate from feeling extremely positive about the idea itself, and then being very negative about its chances. it has strategies to generate interest, and it also has strategies to maintain interest, which are not designed to compete with the big boys.

 

[johncraig]

Money Market provides online business opportunities which in general terms of the budding entrepreneurs. The game is a niche business, business development and profitability in line faster.

New business ideas are like a games coming every day, but most are still in the rule. However, companies sometimes come with some very strange and, daring rules.

 

[Chris Ashdown]

You fail to mention Merchant accounts and Payment service provider, both of which would i imagine be both hard to get and very costly in cashflow especially with no history.

If you fail they would be responsible which is one thing they both try to avoid

 

[lord keef]

Thanks Chris, this is what i've done recently regards banking. initially i assumed a normal business account service would apply (deposits in, withdrawals out, working capital balance in place to cover losses, etc). again i may have been a little naive. on the advice of a website designer i have sent a letter to my bank which i am waiting a reply on.

basically, as an innovation it has a sensible maximum bet / payout limit. the past trend indicates the maximum payout is achieved on average for every 13 bets placed. my working capital in terms of payout liabilities is more than 15 times the maximum payout level. I have put this (plus other information) in the letter to the bank which i have requested their view to whether they would provide normal business account services.

it looks to achieve £2k+ per week turnover in year 1, then hopefully increasing to £5-£6k per week in year 2. the site would have to generate considerable interest (especially considering the negative feedback i've had on the marketing side of things) and make a considerable trading loss, in order for any significant pressure to be put on the cashflow / liquidity side of things, assuming that is i can obtain normal business account services.