@Dan1586 I'm a bit late to this discussion so you may have all the answers now but I thought I'd contribute as I build raffle competition sites so have some experience.
When these guys start out they usually run at a loss, so they fund the prizes for the first few draws until they acquire enough users buying enough tickets to become profitable.
Contrary to what others have suggested, you don't need a license as long as you follow basic rules, the two main ones being:
- You must offer a free postal entry option, and it must be clearly visible on the page (not hidden away somewhere);
- You should require that participants answer a question to be able to enter; this makes it skills-based.
Many don't seem to bother with the second point but it's advisable to - it can be an easy question, with only one obviously correct answer out of, say, three options.
As others have said, you cannot cancel the draw if you don't sell enough tickets - that's your problem, not the contestants', who have entered in good faith.
Most do not sell all of the tickets, so they generally make more tickets available than they need to sell. Obviously the longer you've been running and the more members you have the more you will sell each time.
When you first start out it's hard, as you have no following, but you can run a hype campaign for 3-6 months ahead of launching your site, with just a simple holding page and lots of social media activity, to get people signed up and ready to enter.
As a newbie you'll need to gain trust, so start small and build steadily. Always do what you say you will do, never give your members any reason not to trust you.
You will need a website as this builds trust and shows stability, preferably a limited company also foir the same reason. Terms, privacy policy, etc are all important, and contact details too. Running competitions on Facebook without a website is not advisable, and Facebook are pretty hot on policing these types of pages.
There have been cases of shady operators, but they tend to lose their customers' trust or get shut down pretty quickly.
The majority of these sites make little or no profit, but that's more due to lack of planning and persistance than lack of demand, as with any other type of business. There are people who are lured by the prospect of easy money, but the reality is (like anything worthwhile) it's hard work.
When you do the draws, presenting personally on camera is the best way to build trust and gain followers. You need to be committed to providing a service and building a community, this will come across and will make all the difference between success and failure. Look at the others and see how they're doing it.
So, to get started you will need a prize fund (you cannot expect this to come from entry fees when you have no customers yet) and, optionally, an ad budget (I recommend Facebook ads) to boost that inital momentum.
Best of luck with it, if you're still considering it - happy to answer any questions if you comment here or DM me.
