I was sitting in a conference room today learning all about better ways to control costs and predict what effect a new cost would have on a business and I couldn’t help but think how all this information could help me in poker.  I slowly started to realize something.

Poker is a business.

When you become a winning player, you start thinking about your game in term of expected earnings.  You expect to earn x big blinds per 100 if you’re a cash player and you expect to earn x% ROI if you’re a Sit ‘N Go player.  In a sense, you own a small business.

Our poker businesses are remarkably similar to stock traders businesses.  We use a lot of the same formulas like Risk of Ruin and we both depend on probabilities of success to make money.  But it’s deeper than that.

Take, for example, poker software.  Most of us decide whether or not to buy something like Hold’em Manager or SitNgo Wizard based on whether or not we have expendable income at the moment.  We see it as a toy – like a Wii or a new TV.  But it’s really a cost of doing business.  Here’s a scenario that shows how we should look at the investment:

Joe Average is a low stakes grinder.  I recently learned how to beat .50/1 for 3.5bb/100 while four tabling.  He likes Hold’em Manager and wants to buy it, but only if it pays for itself in two months.  How much would the program have to improve Joe’s win rate for Hold’em Manager to pay itself in two months.

Joe Average grinds 300 hands per day every day.  That’s roughly 9000 hands per month.  Since a big blind is $1, Joe would only have to increase his win rate by 0.5bb/100 to pay for the $80 program in two months (actually it’s a bit less).  Joe is losing money by not buying Hold’em Manager.

We can also diversify our poker business.  We can stake other players.  Chipmeup.com is a great place to get your feet wet in staking.  I’d encourage you to start off by staking players who you know and who have a proven track record.  I’m starting off by buying shares in my former prop bet adversary @wizardmickey and another player he recommended to me.  They may not win today or tomorrow, but their long-term stats tell me that I’ll make money over the long haul.

Obviously these examples are basic, but you can apply almost any finance model or business report to poker and improve your income. 

Start thinking about poker as a business.  How much are you making an hour?  What tools could you buy to increase that hourly rate?  How can you diversify your business?