The Poker Business Plan
by Dusty Schmidt | Published: Mar 19, 2014
Having a plan can help every poker player. Whether you play in a casino, cardroom, home game, or online, there are great benefits in knowing exactly what you want to get out of poker and how you’re going to get it. Even if you consider yourself a recreational player, it’s a good idea to have a budget for poker and to ensure you can play as much poker as you want without jeopardizing your personal finances. But if you have illusions of playing for a living or for supplemental income, or if you’re a professional player already, then formulating a poker business plan (PBP) is an essential step toward maximizing your profits while minimizing your risk.
Why do so many businesses fail?
Most small businesses lose money over their first year or two of existence. They suck wind. Many of these businesses ultimately fail without ever turning a profit, while others turn the corner and eventually prosper. What separates the winners from the losers?
Every business has a plan of some sort. Its founders begin with an idea of how they’re going to make money and why it’s going to work. Even if their original priority is just to create something cool, there’s a reason they’re putting effort into doing what they’re doing. They have a plan.
Some of these plans exist only in the head of the proprietor. Others involve back-of-the-envelope calculations. The best business plans usually involve much more rigor, requiring significant effort. The result is a written document that can be shown to potential investors.
Why do some detailed plans fail and some hastily contrived plans succeed? As in poker, variance exists in business. But for a plan to succeed, there are two important considerations:
How well do the assumptions match reality?
Do the conclusions follow logically from the assumptions?
Given the fact that you play poker, you should recognize these two considerations. They are why you win or lose at the tables. If your assumptions don’t match reality, that means you’re misreading your opponents’ ranges. Without good assumptions, logic will get you nowhere. But the converse is also true. Your opponent could show you his cards and that would be useless if you fail to understand poker logic. If he moves all-in and shows you a pair of aces against your straight draw, logic will tell you whether to call or fold.
When a plan succeeds, it’s because it is based upon accurate assumptions and uses logic to anticipate potential forms of negative variance. A good plan is not foolproof, but it does minimize risk.
What Is A Poker Business Plan?
If you want to play for a living, your PBP is a statement of how you will support yourself (and possibly your family) by playing poker. It’s a blueprint for success.
The PBP includes all of your expenses, including taxes. It projects your income, taking into account your projected win rate, volume, and variance. Using these same metrics, it dictates what bankroll you require to play at each limit. It can also present a path for growth, declaring how you intend to improve your game, increase your volume, and move up in stakes. It outlines not just how many days a week you will work, but how many weeks a year.
It’s preparation for good months and bad months. It spells out how you will deal with variance. Can you move down in stakes and still meet your goals or will you dig your heels in at a certain minimum limit? If the latter is your choice, the business plan makes sure that you have the bankroll to minimize your chance of failing.
The poker business plan accounts for withdrawals from your bankroll, and calculates how those affect your risk of ruin and your plans for increasing stakes.
Do I Need a Poker Business Plan?
The majority of professional poker players probably became such without putting together a proper business plan. If that’s true, then why should you bother to have one?
First of all, most of these pros at least had an improper business plan. They did some back-of-the-envelope calculations using their estimated win rate and the volume they expected to put in, and came up with numbers that exceeded their expenses. That’s not much of a plan, but it’s better than nothing.
Secondly, things are much more difficult now than they were five or ten years ago. The games get tougher every year, so it’s more important than ever to plan properly. There is still a lot of money to be made in the game of poker, but it’s no longer a walk in the park. It’s a game for hard workers, and a business plan gives you your best chance for success.
Not only will a proper business plan make you more likely to succeed, it will help you maximize that success. A good one can help you plan for growth and prepare for unexpected expenses. It gives you something to draw inspiration from when variance is cruel, and helps you keep your head when you suffer from an overabundance of luck.
What manner of suffering could an overabundance of luck possibly inflict? Overconfidence and lack of perspective. Sticking to your plan will help you deal with the variance rollercoaster that poker players live on. Think of the plan as your seatbelt.
Finally, while your PBP is primarily for personal use, it can be a useful document to produce when you’re applying for a lease, a loan, or a stake. Few people outside of the poker world really understand how it all works, but if you lay it out for them, there’s a chance that they will. It’s a lot more likely than if you just use words. In business, numbers talk.
If you’re a successful poker player, it’s still a good idea to make a business plan. A PBP will help you maximize your profits. But if you play poker for fun, then a plan can help you minimize your losses and set you on the path to winning or breaking even instead of losing.
So no, you don’t need a poker business plan. But if your goal is to thrive, do yourself a favor and make one. In a game that’s all about maximizing your expectation at every turn, start off by maximizing the expectation of your entire path.
How Do I Make A Poker Business Plan?
The simple version requires the following information:
Hourly Win Rate (WR): Your hourly expectation at the tables. Total cash won divided by total hours played.
Hours of Volume (H): How much you plan to play.
Monthly Expenses (E): How much money you need to make before taxes. Start with your expenses, then add the taxes you’ll have to pay. That’s your total monthly nut.
If WR * H > E is a true statement, then you’ve got a chance. Once you take variance into account, you’d prefer your winnings to double your expenses, because there is no certainty in one month’s results. If you’re going pro, you’d do well to have some living expenses set aside so you’re not constantly pulling money out of your bankroll.
If you are or want to be a professional player, you should have a more detailed plan. That’s the subject of Part II.
With over $5 million in cash game winnings in his 9-year career, Dusty “leatherass” Schmidt is the consummate grinder. He posted the world’s highest $5/$10 win rates in 2007 and 2008. In 2007, Dusty became one of the first SuperNova Elites and later became a member of PokerStars Team Online. He is currently the player ambassador for America’s Cardroom. He is the author of Treat Your Poker Like A Business and Don’t Listen To Phil Hellmuth, available at cardoza.com. Schmidt’s newest book, Poker In Practice: Critical Concepts, can be found at pokerinpractice.com. His many poker exploits have made him the subject of a feature article in Sports Illustrated.
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