ROI – why bigger isn’t necessarily better.

Percentages can be deceptive. It’s cash that matters.

 

I’ve been involved with betting (and more to the point, the creation, development and day-to-day running of betting syndicates) for over 25 years.

It’s the only proper full-time job I’ve ever done, the only career I’ve ever pursued…

And so I spend every day either at work, or the few days I get off, thinking about work.

Just ask my wife!!

And one of the things that has been on my mind recently – prompted by an email from James, a member of the Scottish Football Income Booster – is the thorny issue of Return On Investment (ROI).

This is, in case you’re not familiar with the term…

“Return on Investment (ROI) measures the gain generated on an investment relative to the amount of money invested. ROI is usually expressed as a percentage and is typically used for personal financial decisions, to compare a company’s profitability or to compare the efficiency of different investments.”

Now the basic formula for calculating the ROI percentage is – Profit/Total Investment x 100

So to use a simple example in the case of betting…

If you have 10 bets of £10 each, your outlay (or your “total investment”) = £100

If these 10 bets return a total of £110, then you’ve made yourself a “profit” of £10.

And 10 divided by 100 x 100 (to get the percentage figure) = 10% ROI

Pretty simple maths, but it’s worth repeating as it’s something not every one of us can readily recall at a moment’s notice.

And when it comes to betting, the ROI of someone providing premium soccer bets or a service that promises expert golf betting advice is fundamental to an individual’s choice of whether to join up with (and then stay a member of) this particular source of betting information.

Over the years it’s one of the standard questions that I get asked time-and-again about a service by prospective members.

Along with the two favourites, “What’s your longest losing run?”…

And “What’s your strike rate?”…

The next cab-in-the-rank of my online inquisitors will often be… “So what’s the return like on this service?”.

And this is, you would think, a much more sensible question to ask (as the first two answers, whatever the figure, are almost irrelevant when viewed in isolation).

Is a 10% ROI twice as good as 5%?

This is the real meat of the question. And this is what got me thinking the other day.

Because most of my working life is spent dealing with three types of betting service – by that I mean, services which cover three different sports. These are football, horseracing and golf.

And if you’re familiar with the betting game, and understand how things work, you’ll know that when it comes to ROI, and here I’m talking specifically about football tips, those who class themselves as “professionals” (and I speak to a lot of these guys – traders, odds compilers, system builders, private fund managers), they would say that an ROI of anything around 5%-7% on soccer betting is pretty damn good.

More than that, over a long-term period, is very good… but even less than this figure, I’m talking about 3%-4%, is still a workable margin.

[And let’s not forget, this represents more than most of us would get by putting our money in a long-term savings account, where we have little control of our finances, tie up a large lump sum for a substantial period, and aren’t allowed to withdraw money as/when we desire.]

Horseracing.

When it comes to the horses, I’m used to seeing figures generally between 10% to 20% (and certainly any service that delivers more than 20% ROI is one to take very seriously).

And the golf.

Since starting 6 years ago, the golf service I currently operate for members – Golf Insider – has seen an overall Return On Investment in excess of 20%, nearer 25% in fact. Again, something that you should consider very closely indeed if you’re serious about making your betting pay.

So, a simple question, is football a worse option than horseracing, or the golf?

Well, if you’re driven purely by what ROI dictates, then you might well believe this to be the case.

But just look at the illustration below, and you might think again.

Proving why a bigger ROI isn’t always better

Now through my experiences of running many different types of syndicate, I’m well aware of how many bets members like to receive, the average staking levels they play to, and the rate of return they’d expect to see from their betting.

And, simply put, if a service has lots of bets… they tend to, on average, stake less money on each one.

Alternatively, a service that delivers just a handful of bets each month… these are the ones they often back more heavily.

(Of course, this decision is often driven by the average price of these bets, and the strike rate)

So take the example of a golf service…

One that regularly backs 50/1 shots, has a strike rate of 12%, and provides members with 10 bets per week…

This will mean roughly 40 bets per month.

And a member places £5 each-way on each bet (small stakes on what are commonly big-priced bets)… and the service, like Golf Insider, is a good one, and serves them up a very tidy 20% Return on Investment.

This ROI means this particular golf member will stake £400 per month, and return £480 = £80 profit.

Compare this to a racing service…

One that bets on shorter priced bets (let’s say an average of less than 5/1) has a 35% strike rate, and delivers 5 bets a week, making a total of just 20 per month…

Here our typical member stakes £30 per bet.

Now this service has only a 15% ROI – a clear 5% shy of the golf – making it a “worse” service you might therefore argue.

But do the calculation for yourself…

This 15% ROI means the racing member will stake £600 per month, and return £690 = £90 profit.

More, in cash terms, than the golf.

And finally let’s turn our attention to the football punter…

His service, that deals with Asian Handicaps, has a 52% strike rate, and also sends out 5 bets per week…

That’s just 20 bets per month.

Here our member is able to stake £100 per bet (as the strike rate is much higher, and the risk of a big drawdown is markedly lower, than the other services).

So despite a seemingly poor 5% rate of return, although, as stated above, this is quite common among football services…

This ROI means the football subscriber will stake £2,000 per month, and return £2,100 = £100 profit.

More money per month than either the golf or the horseracing.

Come one! You’ve fiddled the figures simply to prove your argument

Well, to a point, yes.

But I think it’s perfectly logical to say that members would stake higher amounts on a service that provided fewer bets, and had a much higher strike rate – in this example, upwards of 50%. Why? Because the drawdown would be less, the strain on one’s bank reduced, and there would be less stress caused by long losing runs.

So, I think it’s reasonable to assume this, wouldn’t you?

What’s more, it would almost certainly deal with bets at shorter prices, and so getting these bigger bets on would be less of an issue as well.

You could argue the point, but I think for the purposes of this article the size of stakes used (or at least their proportion relative to each other) isn’t fiddled in any way.

And so what does this tell us…

Well, a bit like my previous comment that a service’s strike rate and the length of its longest losing run can be quite meaningless figures, when viewed in isolation, same goes for Return On Investment.

A service that runs off a 5% ROI can still generate, in cash terms, a higher monthly profit than one that has a 15% or even a 20% rate.

And let’s face it, we bet to win money. Cash. We don’t bet primarily to be able to say… “My return on investment is 12% or 18% or 25%”.

Now some do, but the point is this…

A 25% ROI isn’t necessarily better than 12%. It all depends on what you bet on, and how you stake it. And that’s what you need to remember.

 

OPINION: It’s good to question popular wisdom. So when it comes to strike rate, winning runs, the volume of bets on a service, bet frequency, or in this case the Return on Investment (ROI), don’t blindly gravitate towards the biggest figure every time. And, crucially, don’t apply the same level of performance on one sport across to another. Because staking levels, market liquidity, and the rate of return, can make for vastly different amounts of turnover which must be brought into a debate about which ROI is better. It’s not simply the percentage, it’s the monetary value which that figure equates to… I’ll take 1% on £1,000,000 over 5% on £100,000 any day.