In the game of life, it is always smart to reward people who work for you because it gives them incentives to do a better job, and when they do a better job, then more money can be made for everyone. The pay per head business works similarly.
The biggest bookies in the business grow their business by having subagents work for them.
Subagents are other people who know a bunch of other players and are willing to collect money from these players for you. The subagent becomes a middleman by bringing you more players and handling the payments when they are due.
The typical way this works in the pay per head business is by rewarding the subagent for the referrals and dealing with the payments by giving the subagent a percent of the losses. This percentage could be anywhere from 10% to 50%. When you, as the main agent, are the one that is responsible for all the losses, or as they say in the pay per head bookie business, you are the one bankrolling the whole package, then you often give a lower percentage to your subagent.
When you are the one bankrolling the subagent and are the one responsible for giving the subagent money to pay the players when the players win, then you would set your subagent onto a percent with a red figure. A red figure means that you only give your subagent his agreed-upon percentage when his group of players loses. If his group of players wins, then you are the one who is using your money to pay the players. This also means that you are not giving your subagent his percentage until his group of players loses back the money they won.
Suppose your subagent has 10 players who just started playing with you, and you agreed to give him 20% of their weekly losses with a red figure. So after the first week, this group of players won a combined $5,000, which would mean that you as the master agent would give your subagent $5,000 to pay the players, and your subagent would have a red figure of -$5,000 that his players would have to lose back for him to start making his 20%. Now let’s say the following week these players lost $7,000. Your subagent does not get 20% of $7,000, because you have to include the $5,000 that you had to pay the week before. As a result, the net overall loss of the players is $2,000, and that would be the amount that your subagent would get 20% off, which in this example would be $400.
Setting up red figures with your subagents is a great way to give your subagents an incentive to keep getting more players who lose. If they get players that win, then the subagents will constantly be in the red and will not get a percentage until their players lost back all their original winnings.
Furthermore, the concept of red figures is closely tied to the “hold,” which represents the percentage of total wagers the bookmaker expects to retain as profit. A bookmaker’s goal is to achieve a healthy hold, and managing red figures is crucial to achieving this. By balancing the betting action and minimizing potential losses (red figures), bookmakers can improve their hold percentage.
Consider the previous example. If Team B wins, the bookmaker profits $500 (the total bets on Team B). This profit contributes to the bookmaker’s hold. However, if Team A wins, the red figure represents a dent in the potential hold. Therefore, effectively managing red figures isn’t just about avoiding losses; it’s about maximizing the hold and ensuring long-term profitability.
Beyond adjusting odds and layoff bets, bookmakers also use sophisticated software to track and analyze betting patterns. This software helps identify potential imbalances and allows for proactive adjustments to minimize red figures. Understanding these patterns is essential for skilled bookmakers who aim to consistently generate profits. The ability to predict and react to betting trends is a hallmark of successful bookmaking operations.
Running a bookie operation, even a small one, involves more than just taking bets. It requires a blend of business acumen, sports knowledge, risk management, and customer service. Here’s a general overview:
1. Legal Considerations: Before anything else, research the legality of sports betting in your region. Regulations vary widely, and operating illegally can have severe consequences.
2. Setting Up Your Business:
3. Odds and Lines:
4. Player Management:
5. Risk Management:
6. Ongoing Operations:
7. Consider Working with a Pay-Per-Head Service: For many starting out, especially smaller operations, using a pay-per-head (PPH) service is a viable option. PPH services provide the software, infrastructure, and sometimes even the line management, allowing you to focus on acquiring players and managing your customer relationships.
Disclaimer: This overview provides general information and should not be considered legal or financial advice. Operating a bookmaking business involves significant legal and financial risks. It is essential to consult with legal and financial professionals to ensure you comply with all applicable laws and regulations and manage your business responsibly.
Particularly those starting out or running smaller operations, for several reasons: