How to create a financial forecast for a betting company?
Creating a financial forecast for your betting company, and ensuring it stays up to date, is the only way to maintain visibility on future cash flows.
This might sound complex, but with the right guidance and tools, creating an accurate financial forecast for your betting company is not that hard.
In this guide, we'll cover everything from the main goal of a financial projection, the data you need as input, to the tables that compose it, and the tools that can help you build a forecast efficiently.
Without further ado, let us begin!
Why create and maintain a financial forecast for a betting company?
The financial projections for your betting company act as a financial blueprint to guide its growth with confidence and ensure its long-term financial viability.
To create them, you will need to look at your business in detail - from sales to operating costs and investments - to assess how much profit it can generate in the years to come and what will be the associated cash flows.
During challenging market conditions, maintaining an up-to-date financial forecast enables early detection of potential financial shortfalls, allowing for timely adjustments or securing financing before facing a cash crisis.
Your betting company's financial forecast will also prove invaluable when seeking financing. Banks and investors will undoubtedly request a thorough examination of your financial figures, making precision and presentation essential.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
What information is needed to build a betting company financial forecast?
The quality of your inputs is key when it comes to financial modelling: no matter how good the model is, if your inputs are off, so will the forecast.
If you are building a financial plan to start a betting company, you will need to have done your market research and have a clear picture of your sales and marketing strategies so that you can project revenues with confidence.
You will also need to have a clear idea of what resources will be required to operate the betting company on a daily basis, and to have done your research with regard to the equipment needed to launch your venture (see further down this guide).
If you are creating a financial forecast of an existing betting company, things are usually simpler as you will be able to use your historical accounting data as a budgeting base, and complement that with your team’s view on what lies ahead for the years to come.
Let's now zoom in on what will go in your betting company's financial forecast.
The sales forecast for a betting company
The sales forecast, also called topline projection, is normally where you will start when building your betting company financial forecast.
Creating a coherent sales projection boils down to estimating two key drivers:
- The average price
- The number of monthly transactions
To do this, you will need to rely on historical data (for an existing business), market research data (for both new and existing betting companies), and consider the elements below:
- Increased competition from other betting companies can drive down the average price of bets, as customers have more options to choose from and may be inclined to shop around for the best deals.
- Changes in regulations or laws surrounding betting can also affect the number of monthly transactions, as new restrictions or requirements may discourage customers from placing bets or make it more difficult for them to do so.
- The outcome of major sporting events, such as the Olympics or World Cup, can have a significant impact on both the average price and number of monthly transactions. For example, if a popular team or athlete performs poorly, it may decrease interest and therefore decrease the number of bets placed.
- The availability of new and popular betting platforms, such as mobile apps or online platforms, can greatly influence the number of monthly transactions. If your company does not offer these options, customers may choose to use a competitor's platform instead.
- Economic factors, such as changes in consumer spending habits or overall market conditions, can also affect the average price and number of monthly transactions. For instance, during times of economic downturn, customers may be less likely to place bets or may choose to place smaller bets, resulting in a decrease in both the average price and number of transactions.
After the sales forecast comes the operating expenses budget, which we will now look into in more detail.
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The operating expenses for a betting company
The next step is to estimate the expenses needed to run your betting company on a day-to-day basis.
These will vary based on the level of sales expected, and the location and size of your business.
But your betting company's operating expenses should include the following items at a minimum:
- Staff Costs: This includes salaries, benefits, and other expenses related to your employees. As a betting company, you will have staff in various roles such as customer service, marketing, and operations.
- Accountancy Fees: You will need to hire an accountant or a team of accountants to manage your financial records, prepare tax returns, and provide financial advice.
- Insurance Costs: As with any business, insurance is essential to protect your assets and mitigate risks. This may include general liability insurance, property insurance, and cyber insurance.
- Software Licences: Your betting company will rely on software for various functions such as odds calculation, payment processing, and customer management. These software licences come at a cost and need to be factored into your expenses.
- Banking Fees: Your company will have regular banking transactions, including deposits, withdrawals, and international transfers. These transactions may incur fees, which can add up over time.
- Marketing and Advertising: To attract customers and promote your services, you will need to invest in marketing and advertising efforts. This may include traditional methods such as print ads, as well as digital marketing strategies.
- Rent and Utilities: You will need a physical location to operate your betting company, which means paying rent and utilities such as electricity and water.
- Licensing and Regulatory Fees: As a betting company, you will need to obtain and maintain licenses from relevant regulatory bodies. These licenses often come with fees that need to be included in your operating expenses.
- Data and Information Services: To stay competitive, you will need access to real-time data and information related to sports and events. This may include subscribing to data services and purchasing live streaming rights.
- Customer Acquisition Costs: Acquiring new customers is essential for the growth of your betting company. This may involve offering promotions, bonuses, and other incentives, which will incur costs.
- Professional Services: You may need to hire external professionals such as lawyers, consultants, and IT experts to provide specialized services for your business.
- Equipment and Supplies: Your betting company will need equipment and supplies such as computers, printers, and stationery. These may need to be replaced or upgraded over time.
- Maintenance and Repairs: Regular maintenance and repairs are necessary to keep your equipment and facilities in good working condition. These costs should be included in your operating expenses.
- Travel and Entertainment: As a betting company, you may need to attend events and conferences, entertain clients, and conduct business meetings. These activities will incur travel and entertainment expenses.
- Credit and Debit Card Fees: With the majority of transactions being done electronically, your betting company will incur fees for processing credit and debit card payments.
This list is, of course, not exhaustive, and you'll have to adapt it according to your precise business model and size. A small betting company might not have the same level of expenditure as a larger one, for example.
What investments are needed to start or grow a betting company?
Creating and expanding a betting company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for a betting company could include elements such as:
- Betting software and technology: This includes the cost of purchasing or developing software for your betting platform, as well as any necessary hardware such as computers, servers, and other equipment. These investments are crucial for the smooth operation of your betting company.
- Facilities and infrastructure: This includes the cost of renting or purchasing a physical location for your betting company, as well as any renovations or improvements needed to make the space suitable for your business. This could also include the cost of setting up security systems and other necessary infrastructure.
- Gaming equipment and supplies: As a betting company, you will need to invest in gaming equipment such as slot machines, card tables, and other supplies such as chips and cards. These are essential for your customers to be able to participate in your betting activities.
- Licensing and regulatory fees: In order to legally operate a betting company, you will need to obtain a license and pay any associated fees. These costs can vary depending on your location and the specific regulations in place.
- Payment processing systems: As a betting company, you will need a reliable and secure payment processing system to handle transactions from your customers. This could include the cost of setting up a merchant account, as well as any fees associated with each transaction.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your betting company.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The financing plan of your betting company
The next step in the creation of your financial forecast for your betting company is to think about how you might finance your business.
You will have to assess how much capital will come from shareholders (equity) and how much can be secured through banks.
Bank loans will have to be modelled so that you can separate the interest expenses from the repayments of principal, and include all this data in your forecast.
Issuing share capital and obtaining a bank loan are two of the most common ways that entrepreneurs finance their businesses.
What tables compose the financial plan for a betting company?
Now let's have a look at the main output tables of your betting company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your betting company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a betting company should normally show:
- Sales growing above inflation
- Stable or expanding (ideally) profit margins
- A net profit
This will of course depend on the stage of your business: a new venture might be loss-making until it reaches its breakeven point in year 2 or 3, for example.
The projected balance sheet
Your betting company's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits and losses generated by the business to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.
The cash flow projection
The cash flow forecast of your betting company will show how much cash the business is expected to generate or consume over the next three to five years.
There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:
- Operating cash flow: how much cash is generated by the betting company's operations
- Investing cash flow: what is the business investing to expand or maintain its equipment
- Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)
Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your betting company is adequately funded.
Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your betting company's financial plan.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Which tool should you use to create your betting company's financial forecast?
Using the right tool or solution will make the creation of your betting company's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial projection software to build your betting company's forecast
The modern and easiest way to build a forecast is to use professional financial projection software such as the one we offer at The Business Plan Shop.
There are several advantages to using specialised software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast, and recalibrate your forecast as the year goes by
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
- It’s cost-efficient and much cheaper than using an accountant or consultant (see below)
If you are interested in this type of solution, you can try our forecasting software for free by signing up here.
Calling in a financial consultant or chartered accountant
Outsourcing the creation of your betting company financial forecast is another possible solution.
This will cost more than using software as you can expect as your price will have to cover the accountant’s time, software cost, and profit margin.
Price can vary greatly based on the complexity of your business. For a small business, from experience, a simple three-year financial forecast (including a balance sheet, income statement, and cash flow statement) will start at around £700 or $1,000.
Bear in mind that this is for forecasts produced at a single point in time, updating or tracking your forecast against actuals will cost extra.
If you decide to outsource your forecasting:
- Make sure the professional has direct experience in your industry and is able to challenge your assumptions constructively.
- Steer away from consultants using sectorial ratios to build their client’s financial forecasts (these projections are worthless for a small business).
Why not use a spreadsheet such as Excel or Google Sheets to build your betting company's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free betting company financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your betting company's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially for this.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Use our financial projection templates for inspiration
The Business Plan Shop has dozens of financial forecast templates available.
Our examples contain a complete business plan with a financial forecast and a written presentation of the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own betting company, looking at our financial forecast template is a good way to:
- Understand what a complete business plan should look like
- Understand how you should model financial items for your betting company
Takeaways
- A financial projection shows expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial forecast up-to-date is the only way to maintain visibility on future cash flows.
- Using financial forecasting software makes it easy to create and maintain up-to-date projections for your betting company.
You have reached the end of our guide. We hope you now have a better understanding of how to create a financial forecast for a betting company. Don't hesitate to contact our team if you have any questions or want to share your experience building forecasts!
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Also on The Business Plan Shop
- Example of financial projections
- Financial forecast template for a business idea
- How to project sales for a business?
Know someone who runs or wants to start a betting company? Share our financial projection guide with them!
Founder & CEO at The Business Plan Shop Ltd
