Top 10 Mistakes to Avoid When Starting a Competition Business in the UK
Dec 7, 2024
Top 10 Mistakes to Avoid When Starting a Competition Business in the UK
The competition industry in the UK is booming, offering entrepreneurs an exciting opportunity to build a profitable business. However, starting a competition business isn’t without its challenges. At StartComps, we help businesses launch successfully, and we’ve seen where many beginners trip up. To help you avoid costly errors, here are the top 10 mistakes to steer clear of when starting your own competition business.
1. Not Proving Your Exemption from the Gambling Act
To legally operate a competition business in the UK, you must either obtain a Remote Management Gambling (RMG) license OR prove that your business is exempt from the Gambling Act. Many entrepreneurs assume they’re exempt but fail to provide the required evidence, leading to legal issues and disabled ad accounts.
To qualify as exempt, your competition must either be a legitimate free draw or a prize competition. This involves:
Including a free entry route to ensure accessibility for participants who do not wish to pay.
Designing competitions based on skill, knowledge, or judgment rather than chance.
It’s important to note that simple questions (e.g., “What is 2 + 2?”) typically do not satisfy the legal definition of skill. The challenge must require a reasonable degree of effort or expertise to answer correctly. This is why almost all competition sites in the UK include a free entry route — it’s a way to meet compliance requirements and avoid the need for an RMG license.
Failing to structure your competitions properly or provide sufficient evidence of exemption can jeopardize your business.
Learn more about RMG license requirements and exemptions in our detailed guide here.
2. Underestimating the Importance of Audience Building
Many new businesses assume “if you build it, they will come.” Unfortunately, without a solid audience, even the most enticing prizes won’t sell tickets. Social media, email marketing, and consistent engagement are key to building a loyal audience. Be prepared to invest time, money and resources in marketing to grow your reach.
3. Mispricing Competition Tickets
Setting ticket prices too high can discourage entries, while pricing them too low might not cover your costs. Striking the right balance is essential. Research your audience’s willingness to pay and structure your ticket tiers strategically to maximize both participation and profits.
4. Failing to Comply with UK Competition Laws
The UK has strict regulations governing competition businesses, from advertising standards to prize fulfillment. A lack of compliance can result in fines or the forced shutdown of your business. Consulting with legal experts who specialize in this area is a wise investment.
5. Poor Website Design and User Experience
Your website is the heart of your competition business. A poorly designed site with confusing navigation, slow load times, or an unappealing layout can drive potential customers away. Ensure your website is professionally designed, mobile-friendly, and optimized for a seamless user experience. Cheapest is not always best in the long run!
6. Neglecting Marketing and Advertising Strategies
Even the best competition business won’t succeed without a robust marketing plan. Neglecting paid ads, social media campaigns, and email marketing can leave you struggling to gain traction. Effective marketing requires a budget, creativity, and consistent effort to attract and convert potential entrants.
7. Using Low-Quality Prizes That Don’t Appeal to Your Audience
The success of your competitions heavily relies on the quality of your prizes. Offering items with low perceived value will struggle to generate interest. Focus on high-demand prizes like tech gadgets, cash, cars, and vacations that align with your audience’s preferences. If the market feels oversaturated, consider operating within a niche.
8. Not Investing in Secure Payment Systems
Trust is vital in the competition industry. If your payment system isn’t secure or user-friendly, you risk losing customers and damaging your reputation. Ensure you use reliable payment gateways that protect customer data and provide a smooth checkout experience. Also ensure you use a payment gateway that works with the competition industry. Many gateways will shut you down if they see you as a 'gambling' business.
9. Ignoring Data Protection Regulations (GDPR Compliance)
With personal data being collected for entries, compliance with GDPR (General Data Protection Regulation) is non-negotiable. Mishandling customer data can lead to severe penalties and loss of trust. Work with experts to ensure your business complies with data protection laws.
10. Trying to Do Everything Alone
Starting a competition business requires expertise in multiple areas: legal compliance, web design, marketing, and prize sourcing. Trying to juggle everything yourself can lead to burnout and mistakes. Partnering with experienced professionals like StartComps can save you time, money, and stress, ensuring your business launches successfully.
Avoiding Mistakes: How StartComps Can Help
At StartComps, we specialize in helping entrepreneurs start successful competition businesses. From custom website design and branding to legal guidance and marketing advice, we provide everything you need to avoid these common pitfalls.
Whether you’re just starting out or looking to improve your existing business, our tailored packages are designed to fit your needs and budget. Ready to get started? Contact us today to learn more!
