If you’re considering launching an award-based competition, whether to advertise your company, or to run several competitions as a company in itself then you must conduct it in the correct way.
If you don’t, you’ll lose money while spending a lot of time and energy.
There is a chance that you could end up violating the law, and accidentally managing a gambling company or even an illegal lottery! If you do, you risk being closed.
As a lawyer I’ve dealt with numerous promoters to help them establish and manage their prize contest companies. Most successful companies use an approach similar to that I’ve laid out below.
The ones who fail do not.
Particularly, they miss the beginning and have unreal expectations about what they’re likely to achieve.
If you’re here following this, I’m guessing that you’re considering how to start a competition business. If so planning to start a business, it is essential to adhere to these 9 steps to ensure your company has the best chance to succeed.
In case you’ve got any queries regarding them, contact us for assistance.
1. Create an overall business plan as well as a cash flow forecast
Before you begin a new venture it is essential to be sure that the venture is likely to succeed. It is true that you cannot forecast the future or know that for certain, however, through the preparation of a comprehensive business plan, you’ll ensure that you have the best chance of knowing in advance how likely you are to be financially sustainable business.
The most vital element in your plan for business is the financial plan. It is a process of working out what your anticipated revenue and expenses will be , and using these figures, you can calculate your anticipated profits.
The cost of expenses is usually less difficult to predict than income (at at least in the beginning days) and even if aren’t sure how many sales you’ll be able to achieve, you’ll at the very least be able determine a reasonable target to target.
In addition to your business plan it is recommended to create your budget for cash flows. This will let you know the time when your costs will be incurred and when your earnings is expected to be paid. Then, you can use this data to figure out how much initial capital you’ll require for the start of your company.
Stage 2. Your prize should be as appealing as is possible for a certain audience
Your prize is the first thing to catch the attention of people who are entering your contest, so it has to be as appealing as you can. But, it can be the most expensive expense you’ll incur and, if you’re not careful it could be the thing that will stop you from earning a profit for your business.
It is therefore important to select the prize that is desired by a specific market segment and by selecting the right audience you can drastically cut down on costs associated with the prize.
As an example, suppose you were offering the chance to take a luxurious vacation as the prize. “Luxury” can refer to different things for different individuals. If your market is one with children, the prize should be offered during the school holidays. But, if your customer was an established couple without children, you could reap substantial savings by ensuring that your holiday is held during school hours which means the price is much less.
Stage 3: Determine what the contestants must complete to increase their chances of winning your contests
If it is a prize contest, where participants pay to participate and participate, they must demonstrate the required level of expertise and knowledge to stand an opportunity to win. If they don’t , and the winner is selected randomly, the contest could be classified as gambling or a lottery that is illegal and you could be at possibility of being closed.
There are loopholes in the law that promoters are able to profit from. For instance, if you offer a free entry to your contest, you could make the question for competitions very simple.
The issue is that providing the possibility of a free entry for your contest also raises concerns that you need to address.
In the beginning, it will impact the revenue of your company particularly if you’re selling a predetermined quantity of entries for every contest.
The second is that there are certain guidelines on how you can advertise the entry-free way to your contest. If you don’t comply with these rules, you’ll be in violation of the law. For instance, you shouldn’t conceal this option in the tiny print of your conditions and terms. It should be made clear to ensure that everyone who enters the site is informed of the option.
Step 4: Maximize the profit margins of your company
If you are confident that you’ve got an economically feasible business, you can concentrate on maximizing profits. In order to do this, you must look over your business plan and determine the areas where you can improve your the amount of income you earn and reduce expenses.
There are two methods to increase your earnings – either increase the number of entries sold or increase the price to ensure you earn more with every sale.
In the ideal scenario, you’ll try to combine both.
Some promoters opt to establish specific odds on the likelihood of winning by limiting entry at a particular level. It may initially seem odd to limit the sales you make, but in the event that contestants have a greater chance of winning , they could be more willing to pay to enter.
Alongside increasing revenue You should also consider ways to reduce costs. For instance, if you’re offering a luxurious holiday for a prize, would you be able to get a discount on the cost (or maybe a completely free vacation) in exchange for advertising the holiday provider?
There are numerous ways to increase the profit of a business with a prize contest It’s just a matter of having to think outside the box in your ideas!
Stage 5: Determine a realistic dates for opening and closing for your contest
Establishing the dates of opening and closing is an easy task. However, it’s an area of business that promoters frequently make mistakes and could result in them violating the law.
When you think about your deadline, it is important be sure to have enough time to get enough entries sold for your contest to be successful. But, you shouldn’t keep to keep the competition running for too long or people might be discouraged from entering.
Many promoters violate the law by prolonging the closing date to allow an opportunity to market more entries.
It’s not a good idea to do this.
It is essential to prepare to distribute the prize when the deadline is set regardless of the number of entries you’ve sold.
Step 6: Create all the legal documents you’ll need to establish your company.
A well-drafted legal document is vital to protect your company.
If someone purchases an entry into your competition you are committing them to follow the rules you set. To enforce these rules both parties are bound through a legally binding contract. This contract outlines the conditions and terms that the participants accept when they pay for entry.
However, your rules need to be clear and be in line with the law that governs prizes, so you might have to consult an attorney, like me, to assist you create the rules.
The copying of terms and conditions of an other website is a poor idea. I’ve examined a number of instances of conditions and terms on the internet and only a handful are legally valid!
Additionally, you will be collecting the personal information of entrants’ information, so in order to be compliant with GDPR, you’ll require a privacy policy that explains the data you collect and how you intend to utilize it.
As with any business operating online, you need to adhere to various laws that require you to provide specific pieces of information regarding your company. It is also important to ensure the protection of the rights to intellectual property and minimize the potential for liability in the case of an occurrence of dispute.
The best method to ensure the legal requirements is to put the competition’s terms and conditions as well as the terms of use for your website and a privacy declaration on your site.
7. Create the infrastructure needed to conduct and manage your competitions
There are four major pieces of infrastructure you’ll need to operate and manage your prize competition company. They are:
Your website
Customer relation administration (CRM) program;
A payment processor as well as
A account with a bank.
It’s possible to think it’s not the right time to begin building websites and a blog, but there’s no sense in starting this process until you’re sure that you can run a business.
Your website will serve as the hub of your company. It is where contestants discover the details of the contest, prizes, and how to participate. It is also crucial in ensuring your legal compliance, as the policies and documents that you made in the 6th stage will be included in it.
Then you will require a CRM system that can collect entries and track the correct answer to the competition’s question.
The CRM system could be used to build an entry database that contains entries from those who might be interested in joining future contests. But, this should be done in line to your privacy policies and in compliance with regulations regarding data protection.
The ability to receive payments is essential, so an online payment service and a bank account will be required. The problem is that companies participating in prize competitions could be viewed as risky.
My clients have had difficulty negotiating the terms of payment with their providers and opening banks until they prove they have a solid business strategy and that their company is legal. When they can prove this, their company is seen as less risky. This is why you must make sure that you pay close focus on the stages 1 , 6 and 7 of this procedure.
8. Ensure that the publicizing and promotion of your prize contests are legal
Every advertisement must be honest, legal and honest. There are specific rules which govern the advertising of competitions for prizes. For instance, you should not exaggerate the chances of winning.
For the majority of promoters social media will be their main source of advertising and promotion. However, prizes for contests are more likely to be included in “restricted contents” categories, which means that advertisements might not be approved right immediately.
This means that you must to ensure to ensure that your advertisement is completely compliant with applicable laws like the Advertising Standards Authority’s (ASA’s) CAP Code.
Additionally, if you’re giving away products of a particular brand as prizes, you need to be cautious not to violate someone other person’s trademarks or rights to intellectual property. In the event that you violate their rights, you could run the possibility getting sued, and needing to pay compensation.
9. Ensure that the selection of the winner and awarding prizes is equitable and completely transparent
If you’re ready to pick the winner, you must make sure that the selection procedure is fair and completely transparent. If not, you’ll likely get complaints from those who did not get the prize.
Sometimes, you might not be able contact the winner in the first place and you will have to select a different winner. If you choose to do so, there’s an opportunity that the original winner may be contacted in the future. This is something that you can include within your conditions and terms of service. However, it is important to ensure that the process of how and when you select an alternate winner must be fair and transparent.
Also, there might exist situations where you cannot give away the prize you advertised. If you have to give away a different prize, be certain of what it will be and when it could occur.
Offering a cash prize, which is a portion of the entry fee that you have earned is not legal. While many promoters do it however, they are not allowed to do it. ASA is clear that it is against the CAP Code.
If you adhere to these steps that you follow, you’ll have the best chance to run an efficient and profitable competition business. Additionally, you will be able rest assured knowing that everything is legal and up to par and the authorities aren’t likely to attempt to disqualify you for operating a gambling enterprise or an illegal lottery.
© Jenson Racing Archives
- January 15, 2025 5:58 pm