To Profit, or Not to Profit…

I saw a snarky comment today on another house raffle blog. The author was concerned about the per ticket “processing fee” some house raffle hosts keep when the raffle is canceled. In the house raffle rules I’ve read, 1% is kept by the host and the remaining 99% is returned to the ticket buyer.

The complaint was the house raffle host would profit even if the raffle wasn’t held. For example, if the host is required to sell 5,000 house raffle tickets but only sells 2,000 tickets, the raffle would be canceled.

Mr. Snarky Blogger’s concern was that for a $100 house raffle ticket, the host would be keeping $1 from each ticket and profit $2,000 overall.

I’m here to tell you that it just ain’t so. The house raffle host would keep $2,000, but much—and maybe all—of that $2,000 would be spent returning money to ticket buyers. If there was anything left from returning ticket money, repaying the house raffle’s startup expenses would eat it up. See for yourself…

How Much It Costs to Cancel a House Raffle

Imagine that you need to mail a check. This is an easy and familiar task for most folks. Here’s what the process looks like when it is listed step-by-step:

• Write and sign a check
• Put the check into an envelope and seal it
• Write a delivery and return address on the envelope
• Put a stamp on the envelope
• Take the envelope to the mailbox and drop it in the slot

Easy! Simple! And the envelope + postage = 45¢

Now imagine that you need to mail 2,000 checks.

If it were you or me at our kitchen tables, that would mean a lot of lickin’ and stickin’! Fortunately, it’s not you or me mailing those 2,000 checks. Most likely it’s a non-profit that does many mass mailings and has an electronic or digital postage meter that seals the envelopes as it adds postage.

They may have a computer program that can quickly process and print 2,000 checks, but each check must be verified and maybe signed or signature stamped. They may use envelopes with little address windows to avoid printing envelopers or labels, but each check may need to be put in an envelope by hand.

So while technology can take a lot of the busy work away, there’s still some things that will need to be done by hand.

Let’s say that Tom the Temp could verify the signed checks and stuff envelopes at 60 envelopes per hour, it would take Tom over 33 hours to stuff those 2,000 envelopes. This is what that would cost:

$216	33 hours at $6.55/hr (minimum wage)

Mailing supplies cost money, too. Here are the best prices from a large office supply store:

$160	2000 computer checks
$134	2 boxes of windowed security envelopes ($62/1000)
$648	Non-profit mass mail postage rate @ 32.4¢ each
$942	Total cost of mailing supplies

$1,158

Total supplies + labor to return money for 2,000 tickets

See? In our example, more than half the 1% processing fee money was spent returning the house raffle ticket money to the ticket buyers. That leaves only $842. And that needs to go toward the money that was put out to get the house raffle started.

The Costs to Start A House Raffle

Getting a house raffle up and running has expenses, too:

• Advertising and promotion
• Raffle ticket printing
• Payment processing fees for raffle tickets purchased with credit cards
• Envelopes and postage to mail out raffle tickets purchased online or by mail
• And more hours of hands-on labor from Tom the Temp

House Raffles: Failing Doesn’t Pay

With all those expenses to cover, there is little to no benefit to canceling a house raffle if the house raffle host only earns $1 per ticket.

Why settle for $2,000 when they can have $200,000? That’s how much was kept from the successful San Mar house raffle in Maryland. California’s Ocean Institute kept over $800,000!

• House raffle rules: 50/50 raffle: Worthington House Raffle
• House raffle rules: 1% cancel fee: Food Link House Raffle
• Successful house raffles: San Mar Children’s Home , The Ocean Institute

Obviously, it is far more profitable to hold a successful house raffle than to cancel a failing one.