International edition
September 20, 2021

By Ron Mendelson, Fast Offshore Founding Partner

How to open your online lottery business

How to open your online lottery business
Ron Mendelson says that more and more entrepreneurs are looking to set up new online gambling businesses in various jurisdictions.
Costa Rica | 09/14/2020

In this column, the expert provides detailed guidance through some of the main steps, including insights of the industry, drafting a business plan, mapping out finances, evaluating jurisdictions, incorporating an online lottery company, getting licensed, hiring staff, opening settlement and merchant accounts, starting marketing, setting up the customer service department, among others.

Ron Mendelson is the Director of Costa-Rica based International Business & Corporate Services consultancy firm, Fast Offshore. With ... (+ Info)


re you thinking about starting an online lottery platform? iGaming is booming and the industry shows no sign of slowing down. More and more entrepreneurs are looking to set up new online gambling businesses in various jurisdictions. Lottery is one of the most well known and most popular online gambling businesses and has relatively low overheads and a simple technical set up process.

In this article, we'll guide you through some of the main steps you need to take to open your online lottery business.

Understand the industry

Before you dive into planning your online lottery business or setting up a company, you need to have an understanding of what you’re getting into. Online lottery is popular but it has really started to grow in popularity over the last couple of years. This is due to operators new approach to games and promotion, drawing in new audiences that were previously not catered to. Overall, the industry is growing at a rate of around 1.2% a year.

As a potential lottery operator, you need to understand what is driving lottery growth and what can be done to increase it. A good place to start is by looking at what is available in the market at the moment. Your competitors, whether stand-alone lotto platforms or offering integrated games, will be a great indicator of what players want. But you should also consider what is being currently offered may not be servicing exactly what clients need or want.

Thorough market research on competitors, client preferences, demographics of lotto and other game players, and emerging technologies should be an important part of your process. Based on this information, you can create an idea of what your product should be like and who you will be targeting it to.

At this point, you must also look at possible threats and challenges that your enterprise could face. Poor economy, regulatory changes, emerging technologies, and competition are all things you will need to evaluate and factor into your research process. Every entrepreneur should do their best to educate themselves about things that could go wrong in their industry of operation.

Most importantly, you need to be completely sure that your idea for a lottery business will be a worthwhile venture with a potential for success.

Draft a business plan

Once you’ve done your research, it’s time to put it into a solid, actionable, and justified business plan.

Your business plan must include the following:

  • Who your clients are, where they are based, their age, gender, income and needs. Include what they like, their preferences, and what they want from a lotto platform.
  • Get an overview of the local lottery sector or the jurisdictions you will be offering lotto in, including information on competitors.
  • Find your niche and what channels are mostly used to reach the audience you've selected.
    What your product is, why there is a need for it, what makes it different from other products on the market.
  • A detailed description of your product including technical details.
  • Create a company name and ensure that your domain and social media handles are available.
  • Establish your corporate identity, brand name, logo, theme line, graphics, colour palette, sounds. Also, give your brand a voice and a personality
  • Define how you are going to position your brand and differentiate yourself. What's your brand's promise?
  • How you will promote, sell and market your online lottery company?
  • A financial plan for the next one, two and five years. Define how much money is required to open and maintain your business.
  • Consider as many business expenses as possible including ongoing business expenses, insurance, marketing, salaries, materials, office supplies, amongst others
  • Create a financial projection for the next one, two and five years
  • Establish your operations plan and how it will function. Also, define what are the key roles and responsibilities to keep it running smoothly
  • Who your management team will be or should be as well as information on general staff members and departments.

This list is not exhaustive and, remember, it can change and develop as your project progresses. It’s wise to get a corporate services provider with experience in the sector to review your plan to make sure you haven’t missed anything out.

Map out your finances

A part of the business plan process is mapping out finances for both the startup stage and at least two years into the future. You need to consider all startup costs including legal and administrative fees, licensing fees, corporate service fees, office rent, utility bills, staff hiring costs, office supplies, internet and phone connections, hardware, software, and insurance.

In terms of ongoing costs, you could be liable to pay annual licensing fees, taxes, compliance fees, staff bonuses, additional hiring costs, expansions costs, domain and hosting renewals, new software licenses, hardware maintenance and more. Most of the startup costs will also still need to be paid on a monthly and yearly basis as your business matures.

As well as figuring out your outgoings, you need to estimate how much you will bring in. This should be based on the number of clients you anticipate, average spend, amount of transactions (incoming and outgoing) and the odds of people winning. 

All of these numbers need to be carefully estimated and considered to come up with a solid financial forecast for the first one, two, and five years. Remember to leave yourself enough flexibility to weather any financial issues, surprises, or unexpected costs.

Engage a corporate services provider

If you want to incorporate an online lottery company, it's advisable to engage a corporate services provider to help you navigate the process. License applications and corporate matters can involve a lot of paperwork and adherence to legal requirements. Therefore, having an experienced, multi-disciplinary, cross-border professional such as Fast Offshore to take care of it for you can save you a lot of time, stress, and money.

When picking a provider, the most important thing to check for is whether they have demonstrable experience in the field. This means that they are experienced in company incorporation, compliance, licensing, online gambling, and lotto, as well as being familiar with a range of jurisdictions. 

Evaluate jurisdictions

The type of legal structure you opt for and where it’s located is incredibly important for your online lottery platform. Picking the right jurisdiction can allow cost-efficiency, quick setup times, low or zero tax liabilities, and enhanced privacy. But picking the wrong jurisdiction can be disastrous and cost you dearly if things go wrong.

Of course, you are not expected to know the intricacies of every country's online gambling, lottery, and corporate structure legislation. This is why having a corporate services provider is so useful. They will be able to suggest jurisdictions that suit your needs and business requirements, as well as then take over the whole process for you.

In terms of lottery companies, most jurisdictions require a license to be acquired and a company to be incorporated. 

Incorporate an online lottery company

Once you have picked the jurisdiction for you, it’s time to incorporate the company. Your corporate services provider will take care of this and will present you with a list of required documents. These typically include copies of passports, proof of address, credentials, police conduct certificates, and information on directors and shareholders. At this stage, the Memorandum and Articles of Association will also be drafted.

Depending on where you will incorporate the lottery company, you will have to wait between a couple of days and a few weeks for the company to be active.

Get licensed

Once your company has been incorporated, your corporate service provider will start the application process for your online gambling license. You will need to submit the business plan, due diligence and KYC documents for all individuals involved, and an application form. Different jurisdictions will also require additional documentation and certifications on a case by case basis.

Some of the most popular jurisdictions for online lotto are Kahnawake, Curacao and Malta. They offer fiscal benefits, a great reputation, and varying costs/set up times depending on what the business requires. Remember to consult your service provider before making any decisions as they are experienced in knowing which jurisdiction is best for which kind of business. Be sure to engage a professional to take care of it for you and factor the timescale into your business plan.

Hire staff

Every successful business has a strong team behind it and your lottery company should be no exception. You need to hire a director, manager, and team members in the following areas:

  • Operations
  • Human resources
  • Finance and accounting
  • Compliance & legal
  • Marketing & advertising
  • IT
  • Games/development
  • Customer service
  • Website & app management

Don’t be tempted to cut corners when it comes to onboarding team members. Ultimately, they will represent your lotto brand and will be a key determiner of your businesses success.

Open settlement and merchant accounts

To receive deposits, facilitate payouts and conduct financial transactions, you need to open an account and sign agreements with payment providers.

Payment providers and merchants allow you to receive deposits from clients and in some cases, send payouts as well. There are many different providers to choose from including solely fiat providers and those providing cryptocurrency transactions as well. The more payment methods you have on your site, the more customers will be able to access your product. 

Your corporate services provider will be able to open the accounts for you. A good service provider will also be able to negotiate favourable terms and rates with all the popular payment providers, saving you money and time.

Consider maintenance

Once you have your license and company, that doesn’t mean you need to stop thinking about corporate matters. There are many ongoing obligations including periodic financial reporting, auditing, accounting, statements, updating company description/directors/shareholders, ensuring compliance, renewing gambling licenses and much more. 

This can be a bit of a headache when you’re head of a successful company so it’s best to hand this work to a professional. This way, all of the paperwork gets completed and submitted on time and you have more time to take your business to the next level.

Start marketing

Online lotto is a competitive market so you need to make sure your brand stands out, through the use of clever marketing. You need to create a solid marketing strategy and then implement it across multiple platforms and different channels, making sure you reach as many people as possible.

The information gathered during your business plan then can be used to tailor your marketing efforts to reflect what they want and need. It will also allow you to place different kinds of content in specific places where your target audience are likely to see it.

  • Create a blog on your website. Here you can post news, updates, tips, and information on bonuses and special offers. These articles can then be shared on social media with the relevant hashtags.
  • Set up a mailing list and send out newsletters, information, special offers, and bonuses to those that are subscribed.
  • Place adverts for your site on other sites, ideally ones with a lot of traffic or that are also visited by your target audience.
  • Constantly monitor your social media accounts so you can connect directly with your customers and keep them up to date with all that’s new with your online lotto platform.
  • SEO optimize your website to give yourself the best chances of being discovered when people are searching for online lottery games.
  • Set up a VIP scheme and a loyalty program to attract customers and retain loyal ones.
  • Ensure your website is well designed, easy to use, easy to navigate, is in full working order.
  • Your site should be fun to use and interact with. It should also work on all operating systems and screen sizes as well as tablet and mobile.
  • Launch an app for iOS and Android. Ensure it is well designed, doesn’t take up too much memory, reflects your branding, and offers the same quality of experience as your website.
  • Consider sponsoring events to get your name known.
  • Attend industry events, get a stand, sit on a panel and engage and network with other names in the industry.

How well you market your product will ultimately have a hand in how successful it is. Therefore, it’s wise to engage a professional marketing team including graphic designers, web and app designers, content writers, affiliate managers, advertising managers, UX experts, social media manager and a Marketing Manager to oversee the team and ensure they are all in tune.

Set up the customer service department

Every business owner knows that customer service is king. Serve your clients efficiently and fairly and they will keep coming back, upset them and you risk losing them forever. Furthermore, they’re likely to tell their friends and nothing spreads quicker than a bad reputation.

Your online lottery platform needs to have several different customer service routes and it needs to be immediately obvious to the user where and how they can contact you. You need to offer the following:

  • 24/7 service 365 days a year.
  • Email service with a maximum response time of 24 hours.
  • Online webchat. You should consider both a chatbot for FAQs and live agents for more complex queries.
  • Telephone ideally with a free phone number and multilingual staff.
  • Social media platforms should allow users to send messages and tag with any issues that they have.
  • You should always acknowledge your clients immediately. If you cannot help them straight away, you should manage their expectations by giving and sticking to a specific time frame.
  • It is wise to also include the contact details of your license issuer and any other applicable third parties who can mediate disputes if the need arises.

Go live!

It’s time to go live! Of course, there are many more steps to the process and these will depend on the exact nature of your business. If you engage with us to assist, you can be assured that we will make the entire journey as efficient, cost-effective, and stress-free as possible. 

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