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The bookmaker is central to the sports betting industry and can be found trackside as well as on the high street and online. They enable betting by setting the odds, accepting bets and paying out on winnings. But exactly how do bookies make money? We take a look at the bookmaker’s business model.

What is a bookmaker?

Bookmaking is a regulated industry which was formalised back in 1928. This took bookmaking beyond the racetrack and created off course bookmakers that elevated horse race and sports betting into the multi-million-pound industry it is today.

Also known as a bookie or turf accountant, a bookmaker can be an individual or a business that effectively facilitates gambling across the sporting world, including horse racing and football, as well as non-sporting events. They work by accepting bets on pre-set odds and paying out on any winning wagers. Bookmakers actually make their money by adding a margin to their odds, so in effect charging a ‘transaction fee’ on each bet. So, even if they have to pay out, they still make a profit as long as they balance the level of stakes and pay-outs in their favour. This is known as the bookmaker’s business model, and here is how it works.

The basic principle of the bookmaker’s business model        

While a bookie cannot control the outcome of a sporting event, they can, to a larger extent, control how much they will potentially win – or lose – on any given result. And the basic principle of their business model is to take in more money than they have to pay out. To do this, they pre-set odds that are not just based on probabilities but also include a margin to ensure they make a profit, however small, on every bet they lay.

Setting the odds

Odds compilers set the odds so that they have a built-in profit margin for the bookmaker. As a very simple example, a toss of a coin with a bet of £100 would be 50/50 (or evens) for heads or tails so whichever way it fell, the bookmaker would make no profit.

But if the bookmaker built in a margin – 1.9 instead of 2 (evans) – he would pay out £90 and make £10 on the bet, whichever way it went.

With this in mind, the aim of a bookmaker is to rake a wide range of bets at different odds to ensure a profit regardless of the event’s outcome. Odds can also be adjusted in line with the amount of money placed on each option and a bookmaker can also lay off bets when their liability goes beyond their accepted level of risk. 

Balancing the book

The ideal scenario for a bookmaker is a ‘balanced book’ and they work to ensure the balance of transaction and pay-outs are always in their favour. A simple equation makes this clearer – margin x turnover = profit.

Ultimately, a balanced book means a bookmaker is guaranteed a profit, regardless of the result of a horse race or sporting event.

How to place a good bet

So, now you know the business model of the bookmaker and how they build in a margin to make a profit, win or lose, can you actually ‘beat the bookie’? Well, you can increase your chances of scoring more wins than losses by doing your own homework, knowing your chosen sport inside out and playing a more strategic betting game. And play a long game, for more enjoyment and consistent wins over time. Betting on the naps of the day is a great way to be confident placing a bet even if you don’t know much about horse racing.

Please gamble responsibly.