If you've been in the competition world for any length of time, you've seen it happen: a company that seemed fine suddenly goes quiet. Draws get delayed. Then delayed again. Then... silence.
It's more common than you'd think. Let's talk about why.
The Brutal Economics
Running a competition business looks easy from the outside. Buy a prize, sell tickets, keep the difference. Simple, right?
Except it's not. Here's what actually goes into it:
- Prize procurement – Buying cars, houses, holidays at near-retail prices
- Marketing costs – Facebook ads aren't cheap, and you need a lot of them
- Payment processing fees – 2-3% on every transaction adds up
- Website and platform costs – Development, hosting, security
- Staff – Customer service, marketing, admin
- Legal and accounting – Compliance isn't optional
Many operators launch expecting easy profit and discover the margins are way tighter than they thought.
Common Reasons Companies Fail
1. Underestimating Marketing Costs
The single biggest killer. Getting people to buy tickets costs serious money. New operators often budget £5k for marketing and discover they need £50k.
2. Cash Flow Disasters
You've sold 70% of tickets but need 100% to cover the prize. Do you extend the draw (annoying customers), cover the shortfall yourself, or pray for a late surge? None of these options are great.
3. Over-Ambitious Prizes
Starting with a £100,000 prize when you've got no track record is a recipe for disaster. You can't sell enough tickets, so you either can't deliver or you go bust trying.
4. Platform Issues
Payment processors shutting them down. Web hosting problems. Technical failures. The infrastructure of this business is surprisingly fragile.
5. Regulatory Problems
Getting on the wrong side of the Gambling Commission or ASA can end a business overnight.
6. Simple Mismanagement
Some people just aren't good at running businesses. That's not a crime, but customers pay the price.
Warning Signs a Company Might Be Struggling
- Repeated draw extensions – Once is unfortunate. Twice is a pattern
- Silence on social media – Companies that stop posting are often in trouble
- Slow customer service responses – If they can't afford to reply, they probably can't afford prizes
- Increasingly aggressive sales tactics – Desperation shows
- Prize changes – Suddenly substituting "equivalent value" prizes
- Staff departures – Especially public-facing team members
What Happens When They Fail
Best case: they honour existing competitions and close properly. This does happen with responsible operators who recognise when to quit.
Worst case: they take the money and vanish. Customers are left with nothing, and legal recourse is limited (especially if the company had no assets).
Middle ground: draws get delayed indefinitely, prizes get substituted for lesser items, or refunds are offered (sometimes partial, sometimes not at all).
Protecting Yourself
Diversify
Don't put all your eggs in one basket. If you're spending £100/month on competitions, spread it across multiple operators.
Use Credit Cards Where Possible
Section 75 protection gives you recourse if a company doesn't deliver. Debit cards and bank transfers offer less protection.
Watch the Signs
If you notice warning signs, stop entering until things clarify. Don't throw good money after bad.
Keep Records
Screenshot your purchases, save confirmation emails. If things go wrong, you'll need evidence.
The Silver Lining
Company failures, while unfortunate, do clean up the industry. The operators who survive tend to be the better-run ones. Over time, this should mean a higher quality market.
Also, failed operators often get replaced by people who've learned from their mistakes. The industry evolves.
The Bottom Line
Competition companies fail regularly. It's an inherent risk of this hobby. Accept that some money you spend on entries might never result in a draw, let alone a prize.
Enter with operators who have track records where possible, watch for warning signs, and never spend money you can't afford to lose.
The good operators are out there. Finding them just requires a bit of due diligence.