Making Money as a Bookmaker
Basic Bookmaking Principles
Sports betting attracts bookmakers because it is a great way to make money on a consistent basis. Bookmakers manage to lure in a big number of punters to spend money on sports betting because it brings them excitement and excellent opportunities to make some money.
Nevertheless, even though there many instances of bettors winning large amounts of money, bookmakers still make more. Using the right techniques enables bookmakers to make sure they are always at an advantage.
We will examine here several methods used by bookmakers to have an advantage over bettors. The main reason keeps bookmakers in business is bettors’ losses and bad debts.
Employing the bookmaking principle
The basic principle of bookmaking is quite simple. A bookmaking operation is based on taking money in from wagering punters and paying money out to winning punters. The main goal of a bookmaker here is to have cash proceeds from punters exceed cash payouts to them.
Although bookmakers cannot rule over the sports events outcomes, they are quite capable of regulating how much they can afford to lose on any particular outcome. Thus, the odds presented by bookmakers are always calculated in a way that will enable them to profit.
In order to have the odds work in their favour, bookmakers charge bettors so-called vigorish, or vig, also referred to as juice or the overground. It is a commission applied to the bookmakers’ odds, which makes it easier for bookmakers to make a profit. We will use the same coin flip example in order to demonstrate the concept of a vig.
As we already know, flipping gives us two possible results with the same degree of probability of 50% for heads and 50% for tails. If a bookmaker were to offer true odds on the coin flip, – namely, 1/1 in fractional odds, +100 in money line odds, and 2.00 in decimal odds, – they would yield even money on both results. This means that a successful $10 bet would return $20, which includes $10 profit plus a payout of the initial stake.
For the sake of the example, let us assume that this bookmaker has 100 punters all wagering $10 on the coin flip, whereas half of the wagers on heads, and the other half on tails. In this case, having to make 50 payouts of $20 each, the bookmaker would make no profit.
In this instance, the bookmakers would take in a total of $1,000 from bets, but they would also have to pay out a total of $1,000 in winnings whatever the outcome is. Consequently, offering the odds designated above, the bookmaker would simply break even and not earn any profit.
This explains to us why bookmakers adjust the vig into the odds. Adjusting the vig into the odds provides some reassurance for bookmakers that they will make some money no matter what the outcome will be.
If two outcomes have equal chances for occurring, it is quite typical for bookmakers to set the odds at 1.9091, which is 10/11 in fractional and -110 in moneyline formats.
Applying these odds to the example with the coin flip, the real odds on heads and tails would remain the same; however, the bookmaker’s odds would be lower and set at 1.9091. In this case, a successful $10 bet would payout a punter a total of $19.09 ($9.09 profit and $10 wager amount).
At these odds, the bookmaker would make a steady profit on each $10 bet. Given the same number of 100 punters placing $10 bets, the total amount taken in by the bookmaker will still be $1000. The total amount paid out to 50 punters will change and equal to $19.09 x 50 = $954.50. The difference between the cash amounts taken in and paid out is $45.50, which denotes the bookmaker’s built-in profit margin, i.e. the vigorish, or overground. Normally, the vigorish is designated as a percentage of the total bets received. In our example above, the vig equals to 4.5%.
This simple example above explains how the bookmakers can make the odds work to their advantage. However, when it comes to betting on real sports betting events, figuring out the profitable vigorish to charge bettors becomes a more complicated task. In reality, two possible outcomes may not have equal chances, and quite often, many sports betting events may have more than two possible outcomes. On top of that, the amounts taken in by bookmakers on all possible outcomes may not be the same, and can easily vary from a small to a great extent.
In view of all these reasons, having a profitable bookmaking business does not only involve figuring out how to charge a lucrative vig. Applying other techniques, such as assigning the right odds compilers, are also required to maintain consistent and sustainable profits.