How to Value a Sportsbook?
November 3, 2021
There are many ways to value a sportsbook, so it is important to take into consideration many factors when trying to do this. If you are a bookie that is taking action on sports from people that you know, the end value will be the net of what is lost over the lifetime of the account, and then compared to what is collected of those total losses.
However, you also have to factor in future earnings and the overall potential earnings of the book. There are many variables at play here, so it’s important to understand what affects overall earnings.
So for example some important factors to keep in mind when trying to value a sportsbook is how many total active players a bookie has. Generally the more active players, then the more overall earnings for the bookie each week, and over the long term. However, it’s not just about more players.
The other important thing to consider is how frequently each player bets or the overall volume risked each week per player. For example, a player that only bets 3 times a week and bets $25 a game is not going to add that much overall value to the sportsbook, compared to a player that bets 150 times a week and $25 a game. So players that bet more frequently definitely add more value to the sportsbook.
In addition, the amount that is risked per wager, is also important, because a player that bets $500 a game and bets 150 times a week, adds more value to the book than the player that bets $25 a game and the same 150 times a week. Over the long term that $500 bettor is going to lose a lot more money than the smaller bettor. However, if a player bets just 3 times a week at $500 a game, depending on what he actually bets, could be less valuable than the player that bets $25 a game and 150 times a week. More volume is generally more valuable than just overall risk level because each bet charges juice or vig, which will eat away at a player’s winning percentages.
The other very important thing to factor in is the quality of each player in terms of paying what they owe. Unfortunately, when bookmakers give players a credit account and then settle up after the player wins or losses, this can sometimes lead to players not paying what they owe. Sometimes players are betting with money they just don’t have, or get too deep in the hole on losses that they can’t afford to pay what they owe. So obviously a player that is a good player and always pays what they owe, is much more valuable than someone who loses a bunch of money but doesn’t pay or pay in full.
Since this can happen, it is important to deal with people that you know and trust, and also give smaller wager limits and credit limits, to avoid people getting in over their head and losing a lot more than they can pay.
With that being said, having 20 quality players that all always pay what they owe, is a lot more valuable than having 50 players that always give problems when it is time to pay.
So if you want to value your own sportsbook business or even want to buy a sportsbook from another bookie, it is important to take into consideration all these types of factors when valuing the sportsbook.