Let’s start by calculating the costs of running an Internet casino each month. The biggest expense most online casinos have is software related. Almost all gambling sites lease their softwarefrom one of the big 3 casino software providers:
- Playtech
- Microgaming
- Net Entertainment
I’ve seen estimates that claim these 3 companies power 60% of all online casinos.
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All of them have one thing in common:
They’re expensive.
All of these providers charge $11,000 or $12,000 a month to lease their software. They also get a 15% cut of the casinos’ winnings. That’s a pretty big expense right out of the gate.
But that’s not the only expense. Almost all online casinos run an affiliate program in order to drive business to their site.
Here’s how that works:
A webmaster runs a gambling information portal or site. He signs up for a casino affiliate program. He advertises the casino in exchange for a commission on each player.
This commission usually takes 1 of 2 forms:
- A CPA (cost per acquisition)
- Revshare (revenue sharing)
A CPA is a flat amount that the casino pays the affiliate for each player who signs up and makes a deposit at the casino. This amount can range from $25 to $500, depending on how much volume asite is able to send a casino.
With a CPA arrangement, the casino risks paying more for the player than the player loses to the casino. But it’s okay, because over a large number of players, a casino has an idea of what theaverage player is going to lose. That amount is always more than the CPA.
I’ve heard from reliable sources that the average online casino gambler is worth at least $1000. That takes into account the low rollers who only deposit and lose $25, but it also takes intoaccount the high rollers who deposit and lose $10,000 a month for months at a time.
The other arrangement is called revshare, or revenue sharing. In this arrangement, the casino pays the affiliate a percentage of the players’ losses for the lifetime of the player. This amountvaries, but it hovers around 25%. Big affiliates can demand higher revshare percentages.
So if an affiliate refers a player who deposits and loses $10,000 a month, he gets $2500 in commission each month.
But affiliates on revshare also have to take into account the amount of money their referred players win. If that $10,000 a month high roller gets on a hot streak, he can wipe out the earningsfrom the other dozen or 100 players the affiliate has referred.
So far we have a flat fee of $12,000 a month going out the door. We’re also seeing 25% of the casino’s wins being paid out in commissions, and we have 15% royalties going to the softwareprovider.
Casinos also have to pay for customer service and hosting. Let’s assume you can operate a world class customer service department using offshore labor and spending only $5000 a month.
Let’s also assume that a casino is using its own secure server. I don’t have a lot of experience with Web hosting for sites with this kind of traffic or that sites that use so much bandwidth byhosting games, but I’m going to assume it’s expensive, but not too expensive. I’m going to call it $2500 a month. And if I’m way off on that estimate, let me know in the comments section.
So now we have almost $20,000 a month in fixed expenses, and we have 40% of player revenue accounted for on top of that. So just to break even, an online casino needs to earn enough money so that60% of its earnings equate to $20,000 a month.
So we’re looking at a minimum casino win of at least $33,000 a month just to break even.
Generic disclaimer: This article is written for entertainment purposes only. There are many risks involved with starting an underground casino. Not only do you become a target for armed robbery, but you may very well be breaking the law in your location. Do not ever start your own casino until you have thoroughly researched the gaming laws in your jurisdiction. If anything goes wrong because I forgot to mention something important, that’s on you. If you want to start a real money casino, it’s up to you to do all the proper research.
Now that we have that out of the way, let’s get to the fun stuff…
How to Start an Underground Casino
So you’ve always heard that the casino always wins over the long run and that the only way to guarantee a profit at a casino is to be the casino. Well, if you’ve taken that advice literally and decided to start your own underground casino, here’s a little information that you need to get started.
Research and Planning
The most important step in starting a home casino is to do the proper research and planning. For any home casino to be a success, it has to be a smoothly run operation. If you run out of money, have a hard time paying your winners or run out of casino chips, you’re going to have a hard time earning the trust of your patrons.
This article will get you off to a good start, but you still need to do your own research. If it’s possible, talk to people who have operated their own casinos in the past. You can either talk to friends or look for people online. Try visiting popular gambling or poker forums to see what other people have to say. Just note that most people will tell you that it’s a bad idea to start an underground casino.
Some of the things you’ll need to plan include the following:
- What games you will offer
- Who will deal the games
- How much start-up capital you need
- How much risk you are willing to take on
- What size of betting limits you will allow
- What type of casino chips you will use
- Record keeping
- How you will handle security
- How you will find people to play
- Side entertainment such as TVs, arcade machines, etc.
- Availability of food and drinks
- How you will avoid attracting unwanted attention
- Location / venue
- Potential legal issues
Each of these questions requires serious thought and planning. If you just decide to start a casino one night when you’re out drinking with your buddies, you need to slow down and really spend some time figuring out everything that goes into running an underground casino.
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Which games will you offer?
Figuring out the games list can be its own challenge. If you want to run games such as roulette, do you have the proper equipment? If so, are you OK with the high payouts that roulette offers? Some bets in roulette pay out 35 to 1. You need to have a lot of cash on hand in case people hit those long-shot wagers.
Once you have a list of games, you’ll have to figure out what kind of equipment you need to spread those games. Card games such as blackjack are pretty simple, but games such as roulette and craps require special tables. If you go to Wal-Mart and buy their casino-in-a-box, you might have a hard time getting people to take you seriously.
You can find casino equipment at local game shops, at online retailers and via Craigslist. Try to be as discreet as possible when purchasing these games. If you buy a bunch of casino games at one place or ask around to too many different people, you may bring unwanted attention to yourself. It’s not an underground casino if the whole world knows about it.
Who will deal the games?
At the same time, you’re going to have to figure out who will deal the games. Decent dealers are hard to find – especially if you want to find quality dealers who know how to be discreet. Putting out an ad on Craigslist is probably the worst thing you can do when looking for underground casino dealers. It’s not hard for someone to pose as a dealer, find the location of your casino and then cause all kinds of trouble for you.
If you just want to have a few friends deal the game, you’ll want to make sure you practice a lot with them. Your dealers don’t have to be professional-grade dealers, but they need to be able to count money quickly, pay out bets correctly and keep an eye out for cheating. This is an important part of building trust with your client base.
Start-Up Capital
This is one of the most important things of all to consider. It is best to way overestimate the amount of money you need to run your casino. If you run out of money and are unable to pay out winners, you could find yourself in some serious hot water. The best possible outcome is that your customers never come back again. The worst case scenario is that they call Big Tony to come collect the winnings.
Think about the types of wagers and potential payouts you’ll be paying. Games such as roulette pay out as much as 35 to 1. If a couple of buddies drop $100 a piece on the same number and catch a lucky hit, do you have $7,000 laying around to pay those two single bets?
Believe it or not, even the biggest casinos can have losing nights. Statistics can do very funny things in the short term. You’ll win over the long run, but you will see some crazy swings in the short term. You need to have a lot of cash on hand to run a proper underground casino – even if you set moderate betting limits.
Your Risk Tolerance
This is kind of a carry-on of the start-up capital section. Casinos can go through some crazy swings in the short run. Before you start an underground casino, you need to make sure you are good with the financial risk that comes with operating a casino. Although the statistics are on your side in the long run, you can still lose a lot of money if luck runs against you for a day or two.
This is not meant to discourage you – it’s just prudent to understand and accept the risks of any venture before you dive in head first. By understanding and accepting the risks in involved in running an underground casino, you can prepare yourself mentally and financially in case things don’t turn out how you had hoped.
Your Casino’s Betting Limits
There are several things to consider when setting the betting limits for your casino. First of all, you will have to consider your startup capital. The betting limits have a direct impact on how much money you will be paying out to your players. The higher your betting limits, the more money you need to have on hand.
Secondly, your betting limits will dictate how much money you can make from your underground casino. Higher betting limits bring with them the potential to make more money. At the same time, higher betting limits also increase your financial exposure.
Third, your betting limits will play a role in defining your customer base. If you set the betting limits at something like $5, you’ll end up with a lot of casual players and low rolllers. There’s nothing wrong with this if you’re in it to have fun, but you probably won’t make a lot of money off these players. Higher betting limits will attract people with more disposable income.
If you decide to go with higher betting limits, remember that this makes your underground casino a little more noticeable. Bigger people will hear about your casino and it will draw more attention to the fact that your casino exists. This can be a good thing, but it can also make your casino a juicier target for law enforcement and thieves.
Casino Chips
If you plan on using casino chips at your casino, you will have to make sure these are unique casino chips that are hard to find. If you use cheap chips that anyone can buy at Wal Mart, it will only be a matter of time before people show up with extra chips in their pocket and attempt to cash them out at the end of the night.
Make sure you find casino chips that are not easily replicated. You may also want to institute some kind of rule about casino chips not leaving the premises. Tell people up front that casino chips brought in from outside will not be honored. With that rule in place, you can change the casino chips up from time to time for security purposes.
If you institute a rule such as this, make sure you make it very clear up front. You do not want to jump out of nowhere and surprise your customers. Nasty disagreements are very bad for the underground casino business.
Record Keeping
Responsible business owners keep records of all transactions. At the very least, you need to know how much money you are paying out and how much you are taking in. You should also know exactly how many chips are in play and how much those chips are worth. If you just try to play it by the seat of your pants, you’ll be disorganized and may not even know how much money you casino is making/losing.
Financial records also help you keep track of cheating. If you have a total of $20,000 worth of chips on hand one night but then find that $25,000 worth of chips have been redeemed at the end of the night, something isn’t right. Proper record keeping helps you stay organized and on top of these things. It may also come in handy in case of disputes with the customers.
Make sure you keep your records hidden in a safe place. You do not want the wrong people to get their hands on your records. If you decide to operate your underground casino illegally (bad idea, by the way), financial records can be used as evidence against you and your associates.
Security
Security is of utmost importance. Any time you are dealing with large amounts of cash, there is going to be the temptation for people to pull funny moves. Many underground casinos and poker games have been robbed at gunpoint by criminal scum. It is vital that you provide a safe experience for both yourself and your customers. The last thing anyone wants at an underground casino is a shooting.
Hiring security can be difficult in its own right, though. If you decide to hire professional security, you need to make sure they are discreet and legitimate. Tell them as little as you can about why you are hiring them. You do not want to accidentally hire someone who calls his buddies and tells them he’s going to be working at a high stakes underground casino.
If you hire amateur security, you will be taking on great legal risk. Your security team can cause major problems if one of them cracks a patron’s head open at your party. I can’t get into all the legal details on this one, so you’re going to have to do your own research and talk to people who know all about this stuff. The only thing I can tell you is that the law can turn against you very quickly when you pay big people to come keep an eye on things at your party.
Despite the legal complications of hiring security, you absolutely must not try to run an underground casino without security on hand. You have a lot of cash on hand and are a target for people to try funny things. If word gets out that you are running a casino without proper security, you might just find yourself at the wrong end of a shotgun barrel. Plus, a strong security presence inspires confidence in your customers.
Finding Customers
One of the greatest challenges of any business is finding customers. Not only do you need to give people a good reason to open their wallets and give you money, but you need to get your name out there and get people to remember you. As the owner of an underground casino, you also have to contend with the additional challenge of not wanting to get your name spread too far and wide.
How To Open A Casino
For example, you can’t just walk around the neighborhood and stick flyers up on every tree. Remember, this is an underground casino, not a normal casino. If you’re operating against the law (bad idea), you have to be very discreet about finding customers.
Your best bet is to start by only inviting your closest friends and family on the first night of business. You can treat this as a sort of dry run. This will give you a chance to work through all the kinks before you open your doors for normal business.
When you’re ready to find new casino customers, you will want to use an informal networking approach. It helps immensely if you are already connected to businessmen, athletes or other people with high disposable incomes and a reason to keep their mouths shut. People who work in high profile jobs are much less likely to go around yapping to all their friends about you.
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You open yourself to the biggest risk when you tell your customers to invite their friends. When you start seeing strange faces at your casino, it means you don’t know who all knows about your operation. Make it very clear to your customers that you do not want them talking to their friends about you. However, you have to remember that this is always somewhat out of your control. There are certain inherent risks that you simply cannot avoid 100% when you run an underground casino.
Side Entertainment / Food and Drinks
Side entertainment is always a great idea for an underground casino. You want to keep your customers as comfortable and happy as possible. There are a couple of reasons why side entertainment is a good idea.
Number one, side entertainment gives your casino an added air of legitimacy. If you have food, snacks, drinks and television on hand, you’ll seem like a legitimate organization. Plus, it will make people feel more comfortable – like they are a part of a social gathering as opposed to being a bunch of degenerate gamblers that are only there to get their fix.
Number two, side entertainment keeps your casino busier for longer. Let’s say a couple of people run out of money quickly. If you have a couple of arcade games and a few drinks on hand, those people might stick around, talk to their friends and keep the place feeling lively. If you don’t have side entertainment on hand, the losers will likely leave quickly and business will die down earlier.
Additionally, side entertainment helps your guests feel like they are getting something out of the deal. Everyone knows the casino wins in the long run, but people are more willing to accept that if they get a few perks along the way. It will feel like you are providing an all-around experience for them rather than preying on them.
Here are a couple of ideas for side entertainment: food, drinks, snacks, televisions with sports games or boxing matches, arcade machines, pool tables, women, additional tables for friendly poker games and anything else along those lines.
Avoiding Unwanted Attention
This is one of the crucial issues that will always haunt you as an owner of an underground casino. The difficulty is in striking a balance between attracting customers and maintaining a low profile. Ideally, you have enough personal friends that you can keep your casino running without ever having to invite strangers. However, this isn’t realistic for most people.
The main thing you need to do is keep a tight rein on your guest list. However you go about attracting casino clients, make sure you always know who to expect when you are open for business. If you find random people showing up at your front door, you’re doing it wrong. Strangers may be completely legitimate customers, or they may be undercover law enforcement or they may be shady characters with bad intentions.
If your underground casino is located in a residential location, don’t forget to take parking into consideration. Unwanted attention will surely be drawn to your house if there are cars lined up outside the house every weekend. The same thing goes for people coming and going all the time. If you live in a normal residential neighborhood, you should consider moving the casino to a more discreet location.
Speaking of which, that leads us to the next topic of consideration:
Location / Venue
The location of your underground casino should be carefully considered. If you locate the casino in your basement, you better be darn careful that you only bring close friends over to gamble. You also need to consider the parking situation (mentioned above) if you locate your casino somewhere on your personal property.
You can instead choose to rent out a building or even rent an apartment to host your casino nights. This will go a long ways in avoiding attracting unwanted attention at your personal residence. No matter where you locate the casino, make sure you consider things like parking, nosy neighbors, etc.
Potential Legal Issues
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I’m just going to tell you right now that it is your job to research all the potential legal issues associated with running an underground casino. The law is different everywhere you go, so there’s no way I can cover everything for you. It is strongly recommended that you do your own research and consult with professionals before you go into the casino business.
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In some locations, you are in good legal standing if you run your casino as a member’s only club. In other places, you are in hot water no matter what you do. Make sure you understand the entire legal situation before you get started. You should also make note of what happens in case you get caught operating against the law. Will you be facing hefty fines, jail time, etc.?