If You want to start own online casino, then first thing is to do is to intruduce Yourselft with whole process of owning online casino and managing online casino, make excellent business plan for online casino, and then finaly find investment for releasing that project. This post is related for that part of job: creating own online casino business plan. So, no matter are You taking some turnkey casino solution, or building Yourself online casino, business plan is something esential where You will know exactly what you need to invest and what you can expect.
I found and excellent sample of online casino business plan, and here I will present you, remember this is someone else business plan, and it is just sample of business plan for online casino what means that You need to create Your own.
Sample Business Plan For Own Online Casino
1. Executive Summary
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Business Opportunity
Product/Service Description
2. Company Background
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Business Description
Company History
Current Position and Business
3. Business Plan For An Online Casino Company
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4. Services
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5. The Industry, Competition, and Market
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Market Definition
Primary Competitors
Customer Profile
6. Marketing Plan
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7. Financial Plan
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Investment Plan
Break-even Analysis
Liquidity Plan
Earnings Plan
Risk Analysis
8. Conclusion
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1. Executive Summary
The core offering will feature more than 20 different games from roulette to slot machines.
The platform service provides the newest technology with the best infrastructure.
The online games and casino business is a growing segment. The expected growth rates show
a positive dynamic between 80% to 100% for the next few years depending on the demand of
new national and international customers. The competition in this sector is strong but new
services will support the success of the company.
company with specific knowledge and different customer groups has good chances to move
into a profitable market niche.
1.1 Business Opportunity
The internet provides online service businesses essentially unlimited opportunities
without significant capital investments, allowing them to quickly build large global
customer bases and to potentially achieve superior economic returns over the long-term.
The expected returns are between 5% to 7%. In addition, the internet has emerged as a
unique distribution medium that provides service companies with a cost-effective means
of targeting specific customer groups, interacting with and receiving feedback from
customers and measuring the effectiveness of specific distribution campaigns.
The company's objective is to be one of the leading global providers of online casinos.
The company plans to achieve this goal by pursuing a focused strategy. The company
intends to establish a significant market presence by continuing to provide
comprehensive services at competitive prices.
The company will enter into relationships with other internet companies which helps to
sell and distribute the service and promote the brand. These relationships include
agreements with leading companies. These relationships provide the company with
significant benefits including access to new customers and marketing activities such as
banner ads, buttons, logos and direct sales force activities.
The company develops innovative and proprietary technology to support the success of
the company. The company produces a system and a proprietary software which enables
the customer to play in real time on the web.
The required investment for the business is relatively high compared to other companies
in the industry. Interest payments to finance the technology are expected to be the main
cost driver. For the future there are further substantial investments in fixed assets
required. This will be financed through retained earnings. Depending upon the market
growth the minimum required investment amount ranges between $250,000 and
$300,000 in the start-up phase based on a 20% to 25% average revenue margin. This
amount is well within the financial requirements observed for other comparable
companies.
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1.2 Product/Service Description
The internet is becoming one of the most important mediums for global communication
and business. Industry analysts estimate that the number of internet users worldwide will
increase to 419.8 million in 2008 from 168.7 million in 2002. The dramatic increase in
internet use provides a tremendous opportunity for electronic commerce.
The company plans to develop a multi-player casino platform. The company acts as a
host or facilitator for customers who play games against one another. In return for
facilitating these games, the company charges its customers a type of commission.
Customers can either compete online against each other on individual tables where up to
five players play on each table, or participate in tournaments where individuals compete
against each other.
Figure 1.1 shows the distribution of revenues.
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2. Company Background
The online casino market has experienced strong growth since its establishment. It is
estimated that the gross win of the online casino market has grown from $751 million in
2001 to $2,157 million in 2006, representing approximately 26% of the online gaming
market in 2004 and a compound annual growth rate of approximately 42%. In common with
other online gaming markets, the United States represents the largest online casino market,
with an estimated share of approximately 59% of the global online casino market in 2004.
The company wants to become one of the world’s leading online casino companies. The
company owns and operates several web sites. The main entry and navigation point to the
various sites is a single platform.
2.1 Business Description
The company's performance is substantially dependent on the efforts and performance of
its senior management.
The company has a strong management team with significant experience in the online
industry, the leisure and entertainment sector, information technology, payment
processing, media, e-commerce and customer support.
2.2 Company History
The company was incorporated in 2004 and through 2006, it was engaged principally in
research and development of online casino products. The company begins commercial
distribution of the services in the fourth quarter of 2006. The net revenue will increase
from $0.1 million in 2005 to $1.1 million in 2006.
The fiscal year of the company is the calendar year and the life expectancy of the
company is unlimited.
The company plans to have 20 employees in the first business year. Competition for
qualified sales,
marketing and technical personnel is intense as these employees are in limited supply,
and the company might not be able to hire and retain sufficient numbers of such
personnel to grow the business. The company plans to substantially expand the sales
operations and marketing efforts, both domestically and internationally, in order to
increase market awareness and sales of services and products. The company will also
need to increase technical staff.
Figure 2.1 shows the current distribution of labor costs for each segment.
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2.3 Current Position and Business
The growing adoption of the web represents an enormous opportunity for businesses to
conduct commerce over the internet. The ability to successfully offer products and
services and implement the business plan in a rapidly evolving market requires an
effective planning and management process. Future expansion efforts could be expensive
and require additional resources. The company plans to continue to increase, the scope of
the operations at a rapid rate.
The company plans to have a significant local presence in the United States and Asia. In
addition, the company will expand the sales reach by adding sales personnel and
third-party representatives in Europe. It intends to continue to expand the sales team to
broaden the customer reach on a global basis. Particularly, it intends to achieve
significant growth in key countries.
The strategy strongly focuses on new technologies. New distribution channels, such as
interactive television and wireless applications on 3G mobile telephones and other
handheld devices, represent potential growth opportunities for online casino operators.
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3. Business Plan For An Online Casino Company
Typical games offered by online casino operators include slots, roulette, blackjack, craps,
baccarat and video poker. Customers place bets against the house and the casino games are
games of chance with the outcomes randomly generated by computer. The casino software
generates a statistical gross margin for the operator.
A large number of players are required in order to provide customers with opposing players
for the game. The company will experience rapid growth of customers in the next years, but
the operating results will be affected by seasonality.
The company provides a wide range of methods to pay-in and withdraw funds. Such payment
processing must also be quick and efficient while maintaining low levels of fraud.
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4. Services
The service is one core element of the business strategy because the market for internet
products and services is highly competitive.
The company seeks to provide a safe, responsible and trusted online gaming environment
through compliance with industry best practice.
The additional services create an environment that attracts users and encourages both longer
and repeat visits as well as customer loyalty, resulting in a large base of registered members.
These services are focused on generating both core business and advertising revenues.
Of the total revenue, 10% is based on advertising services. Advertising revenue is linked to
the level of traffic on the web sites, so if traffic is less than the level expected by the
advertising customers, revenue from this source could be reduced. The company will have
some advertising contracts that include a guaranteed minimum number of impressions on the
web sites. Reduced traffic on the web sites would cause the company to fall short in meeting
these minimum requirements and, as a result, it may give credits to advertisers and reduce
advertising rates, which would lead to a reduction in the revenue from advertising.
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5. The Industry, Competition, and Market
A careful analysis of the market and competitive forces in this industry is a key element in
assessing the business potential of the project. This analysis will provide marketing and sales
data that are indispensable to optimally develop the business potential. Market is defined as
the market where the company plans to operate in the next four years.
5.1 Market Definition
According to several research institutes, in 2004, there were over 273 million online
households worldwide. The growth of the Internet has far exceeded the growth of any
other communication medium in the 20th century. In just under four years the Internet
has reached penetration rates that took the television 13 years to reach and the radio over
30 years.
The Internet gambling and online casino segment has grown from 30 sites and bets of
$17 million in 1996 to approximately $3 billion in wagers in the year 2000. Market
research estimates anticipate an estimated $6 billion in revenues by U.S. wagerers alone
by 2003. The global market is much brighter. Research firms forecast that revenues from
gambling will soar to $20.8 billion by 2005.
In 1997 there were 6.9 million potential internet gamblers and casino players and
revenues of $300 million. Within a year the potential pool of users had risen to 14.5
million users and revenue of $651 million. 4.5 million Americans have gambled online or
played in an online casino. While the U.S. has been the dominant market for the Internet
to date, statistics indicate that approximately 25% of Internet users are from Europe and
15% are from Asia.
It can also be predicted that the number of online gamblers in Europe and the US will
grow from the current 2.9 million in 2001 to 7.4 million.
Figure 5.1 shows average growth figures in revenues of all available companies in the
specified market during the past five years. Despite slowing global economic growth in
general a lot of companies with an international focus and new services have experienced
constant growth rates of more than 35%. For 2005 a growth rate of 40% is expected with
a strong development in the third and fourth quarter.
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5.2 Primary Competitors
The company currently faces measurable competition from other internet and gambling
companies. The local internet industry is comprised of a few large, well-known
companies, several mid-sized companies like this company, and a large number of
relatively small independent companies. Several new companies have emerged producing
similar services. Competition might come from the use of existing internet platforms and
technologies but also from the development of new services. To further examine the
competitive environment it is necessary to define the players in that environment. Figure
5.4 shows the size of businesses in this market segment. The numbers are based on
average revenues of companies that run their business more than five years.
The company believes that the products and services are not easily substitutable with the
products of the competitors due to the level of technology, but nonetheless the company
must constantly maintain the technology developments.
5.3 Customer Profile
The company markets and sells the products worldwide through a combination of its own
Internet platform and third-party internet providers to all kinds of customers. Figure 5.2
shows the demand for the described services. Numbers are based on average revenues per
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customer of a particular group multiplied by the number of customers in the respective
group. This gives total demand share per group. The primary target market for the online
gambling and casino segment in the Internet industry, and particularly online poker and
sports betting, are males aged 18 to 35 years old. Online casino, bingo and skill games
skew more toward women. The majority of marketing efforts of the company will target
a single male with an average income of more than $90,000. Figure 5.3 shows revenues
by yearly income of private persons. The figure shows revenues generated per income
group. Numbers are based on the average income per customer and the number of
customers per income group.
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Effective marketing together with consistent promotion are the keys to success online. The
company focuses on a comprehensive web marketing and classical marketing strategy
designed to attract new customers, convert leads into sales, and maximize the revenue. In the
start-up phase it is a central task of the marketing concept to establish name recognition and
its own trade mark. Several marketing and sales promotion strategies are available in the
online industry. Figure 6.1 shows different marketing elements and their use in marketing
strategies as well as their estimated potential success factor. Later on the strategy will
primarily be targeted to gain new customers and create customer loyalty of repeat customers.
The figure can serve as a direction for the planning of a marketing and sales promotion
strategy. The numbers are based on comparable businesses.
Online marketing There is a broad range of online marketing opportunities. Successful online
marketing depends largely on the ability to identify marketing services that provide the best
opportunity to reach customers in a cost effective manner. Search engine marketing and
banner marketing are the most widely used method of attracting visitors to a website.
Print advertising Newspapers, magazines and published information targets a large potential
customer group but at a relatively high cost. The first step of this marketing strategy is to
identify newspapers and magazines that target the right customer group. The campaign itself
will continue for about six to eight months.
Marketing cooperation Marketing and distribution alliances with other electronic businesses
to generate cost savings and increase efficiency will also be used. The company expects to
find about five strategic partners.
Sales promotion Sales promotion strategies have temporary effects only. Sales promotion
will be used for a limited time to increase the number of customers. The strategy will include
special offers with opening discounts for new customers. The initial prices will be reduced
by 50% for the first three month. This strategy is expected to continue for one to two years.
Direct marketing The company uses direct marketing campaigns with e-mail and mailing
lists as well as newsletters. This strategy will be used to increase the revenue per customer.
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7. Financial Plan
The financial plan is the key factor for the success of a business start-up. Investors and banks
will base their funding decision on the information given in this plan. Besides a plan of the
financial needs, this plan must ensure that the business is always liquid and ultimately
profitable. Since the sales and earnings projections in the business plan are based on
expectations, the financial plan has to be revised and refined on a constant basis so that
discrepancies can be uncovered and solved instantly. The inputs for this financial plan are
based on other companies, which serve as a group of comparable firms as well as the
company's own estimates based on the planned business environment. Revenue estimates are
conservative and expense projections include a cushion for unforeseen contingencies. All
figures are refined by statistical simulations.
The most important features of the financial plan and the financial strategy can be
summarized by the following points.
The initial capital requirement is estimated to be $300,000 to $350,000. This is comparable
to other businesses in the segment. Cash used in investing activities for the next year will be
constant. Capital expenditures for the following years will include higher spending on
technology and licenses as the company continues to develop new functionalities for the
online systems that are in place when the company begins operations.
The company expects to invest in new technology in a variety of ways, including: software
technology upgrades in the form of product updates and replacements and the installation of
new servers. The company will make disciplined capital expenditure decisions, prioritized on
the basis of cost structure improvement, potential for profit generation and maintenance of
high quality service.
The company has a diverse customer base that produces a recurrent revenue stream and
predictable cash flows. Despite fluctuating economic conditions, the company expects to be
able to generate stable revenues. The company intends to maintain the financial performance
through continued productivity initiatives designed to sustain the margins, reduce costs and
improve operating efficiency throughout the businesses. The growth rates of the whole
company are expected to be better than the rest of the market due to a strong cost control.
Based on the business plan, the company currently projects that cash provided by operations
will be adequate to meet foreseeable operational liquidity needs for the next 24 months.
However, the actual cash needs and the availability of required funding may differ from the
expectations and estimates, and those differences could be material. The future capital
requirements will depend on many factors, including, among others, the demand for our
services in the existing markets and regulatory, technological and competitive developments.
Depending on the initial investment sum cost and revenue estimates vary. Figure 7.1 shows
the expected relationship of cost and revenues. As can be seen, the relationship is not linear
everywhere but costs decrease relative to sales. This effect is due to the better utilization of
capacities in personnel at rising revenues at constant cost.
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The details of the financial plan are laid out in more detail as follows:
Section 7.1 gives an investments schedule. This includes all investments necessary during the
start-up phase.
Section 7.2 gives a break-even analysis that shows revenues at the break-even point. Every
additional sales dollar adds to profit and vice versa.
Section 7.3 gives a liquidity plan. This plan is based on current cost and revenue estimates
from Section 7.2. Liquidity must always be positive.
Section 7.4 contains a long-term profit projection for the first four years of business. The
projection shows that the critical amount of revenues at which the business is profitable and
how profit develops over time.
Section 7.5 provides a risk analysis. The risk analysis contains critical factors that may
impact the financial numbers presented in this plan.
7.1 Investment Plan
The investment plan comprises primary capital needs for the foundation and operation of
the business. The plan also includes initial marketing and sales promotion expenses. The
figures are based on comparable businesses.
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7.2 Break-even Analysis
The break-even analysis shows how earnings rise as a function of sales. The break-even
point is the point at which revenues from sales cover total costs (fixed costs and variable
costs rising with sales). This analysis is important for the development of the liquidity
plan and the pricing policy. If the break-even point is not achieved in the long run, the
business loses liquidity and may become insolvent. This requires that a critical amount of
revenues must be generated.
At a sales revenue of $1,200,000 and given total costs the business will begin to generate
a profit. Fixed costs of this business are estimated at $700,000 to $800,000 and variable
costs are estimated at $500,000. In this case, fixed costs are expenses that do not vary
with sales volume. These costs have to be paid regardless of sales. Variable costs vary
directly with the sales volume.
At an estimated revenue of about $1,700,000 after two to three years profits are expected
to rise to $400,000. This represents a revenue margin of about 25%. These estimates are
realistic in this market segment and comparable to similar businesses.
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Increasing sales volume will increase pre-tax earnings margins but this development
reverses when administrative costs begin to rise sharply. Up to a sales volume of
$3,000,000 earnings margins rise to 27.5% after which the margin decreases to constant
26.5%.
Figure 7.2 shows at which critical sales volume the business generates a profit. This
serves as a base for a business and pricing strategy. Additionally the graph shows the
amount of sales at which a marketing campaign can be run profitably.
7.3 Liquidity Plan
The liquidity plan shows the amount of finances necessary to assure permanent liquidity
of the complete business. The liquidity plan is based on four representative months of a
typical business. Revenue estimates and costs are simulated from a standard normal
distribution. Cash is constant at $1,000 for every month.
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7.4 Earnings Plan
The earnings plan shows the results from ordinary operations. The plan is based on the
first four years of business. Revenue estimates are drawn from a normal distribution with
a strong estimated growth rate. Figure 7.3 shows net income.
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7.5 Risk Analysis
The risk analysis considers critical factors that may lead to a failure of the business
concept. Such factors can involve failures during the implementation phase as well as
during operations. Such potential factors are ordered according to the probability at
which they can arise. Shown are the key factors that led to the failure only. Data are
drawn from surveys from five businesses with different services as well as revenue and
cost structures.
1. Growth is the core strategy of the company. Development activities require a high level
of funding over a long period of time and, over the course of its existence, the company
intends to develop or acquire other online companies. There is no assurance that
additional funding will be available to the company in the future or be secured on
acceptable terms. If adequate additional funds are not available, the growth of the
company might be significantly lower.
2. The company’s success will depend in part on the continued services of its key
employees. The loss of services of one or more of the company’s key employees could
have a material adverse effect on the company’s business, the development of the
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platform, operating results and financial condition. The company’s future success will
also depend on its ability to hire and train qualified staff. Competition for such personnel
is intense and there can be no assurance that the company will be successful in attracting
and retaining such personnel.
3. The ability to make payments on, or to refinance or repay, the debt, to fund planned
capital expenditures, and to expand the business will depend largely upon future
operating performance. The future operating performance is subject to general economic,
financial, competitive, legislative and regulatory factors, as well as other factors that are
beyond control. The business may not generate enough cash flow, or future borrowings
may not be available to the company under the new credit facilities or otherwise, in an
amount sufficient to enable the company to pay debt or fund other liquidity needs. If the
company is unable to generate sufficient cash to service the debt requirements, the
company will be required to refinance new credit facilities.
4. Securing rights to technology and patents is an integral part of securing potential value.
Competition in retaining and sustaining protection of technology and the complex nature
of technologies can lead to patent disputes.
5. The company is expected to experience a period of rapid growth and an increase in the
number of its employees and offices and the scope of its supporting infrastructure. This
growth will result in new and increased responsibilities for management personnel.
6. The company will be required to continue to implement and improve its systems on a
timely basis in order to accommodate the increased number of transactions and clients
and the increased size of its operation.
7. Insufficient demand and wrong capacity frequently leads to business failure. This
includes permanently low demand as well as a temporary collapse in demand. Often
demand estimates were too optimistic at the outset. Such failures might also come from
external shocks instead of operating deficiencies. Approximately 15% of businesses with
insufficient demand go bankrupt. Since the expected frequency of business demand
during the start-up phase are still low, a critical success factor is to focus promotional
effort so as to generate customer loyalty early on, which will help minimize the effects of
demand fluctuations. This is also important for the future development of the business.
8. Poker and gambling is an enormous market and it is not surprising that a large number of
companies are developing alternative services. Not only is the market comprised of a
large number of participants, it is also subject to rapid change and intense competition.
The company faces competition from other organizations, many of which may have
significantly greater financial, technical and marketing resources. The company has
faced, and is expected to continue to face, additional competition from new entrants into
its markets. Due to low entry barriers additional businesses can enter the market at low
cost. Approximately 16% of insolvent businesses were driven out of the market by that
competition. A better service concept, innovative ideas and concentration on core
businesses are an easy means for an entrant to gain a competitive edge.
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8. Conclusion
The business of an online casino portal requires a comprehensive technology. Because the
competition is high it is necessary to develop new solutions, contents and to find profitable
market niches. In 2004, only five platforms were available, having about 250,000 customers.
Today, the number of web sites is between 40 to 60 with about 830,000 customers.
New companies in this business can be sure to have a high demand with a high sales margin.
The expected margins are between 15% to 20%. The main cost drivers are distribution costs
to find new customers.
The core offering will feature more than 10 different games, and the ability to play several
games simultaneously.
A company with specific knowledge and innovative ideas has a good chance to move into
profitable market niches and run a successful business. Market conditions in this segment
change constantly as do customer demands. This is the chance for new businesses with
innovative ideas and new offerings to secure a large customer basis. Service and technology
are factors that can earn a competitive edge. This is also true for new trends in the industry to
better control costs and increase efficiency.
For a successful operation of an online casino portal company 4 factors are critical and
central to the business strategy:
The customer basis is a core factor for a successful business. The initial number of customers
should be between 20,000 and 25,000 with a growth rate of about 50% per year. This will
provide constant revenues.
The platform service provides the newest technology. Online transaction platforms need to
use various technologies and approaches to know each customer, and respond effectively to
customers’ needs and demands.
Service is very important. This will secure customer loyalty and optimize profitability in a
market that is very competitive. The expected costs for additional service activities are
between 5% to 10%. On the other hand the expected additional growth rates due to new
service activities are between 8% and 12%.
The privacy of the customers is very important. The company will never share information
with other organizations or individuals.
