When poker tournaments across the world started to offer huge prizes, and the online marketplace made the game more accessible, poker became a promising financial endeavour for a handful of hopefuls who were looking to make it big. Since then, thousands of players made their living playing poker, and most of them did it with hard work, determination and an understanding of business. Professional poker players have a lot in common with successful businesspeople. Both use wise investment strategies and reserved cashflow management to grow their funds and turn pennies into pounds. Both deal with high-pressure situations and the demands of rapid decision-making. Online players can spend 12 hours in a row at the tables — that’s as long a day as an executive! If you’re looking to start a business or are already running one now, here are six business skills you can learn from poker pros.
Both poker players and business owners must take calculated risks by evaluating potential gains against potential losses. Both poker and investment decisions require the same principles. Players should only make bets that they calculate, using maths and logic to be statistically profitable in the long-run. If the odds are in your favour, then you can make the play. Making the right plays results in positive expected value. This concept is simple in a way: you must make decisions based on what will make you money in the long run, even if the decision doesn’t necessarily lead to the desired outcome each time. In poker, a pair of aces beats a lower pair around 70 – 80 percent of the time. That means the bet is profitable to make. Sometimes, you will lose your money, but most of the time, you will win the bet. The same is true in investment, or in any risk-reward business decision. You need to weigh up all the factors and then take risks when the odds are high enough in your favour.
Another component of professional poker is bankroll management. It’s a method for regulating funds so that you don’t go bust, and it’s based on not putting your eggs in one basket. In poker, as in business, it’s critical not to spend all your cash at once and put yourself in a bad situation. The pros recommend that you spend no more than 5 percent of your available bankroll (your poker funds) on a single game, and some would say the percentage should be much less. It depends on the game, but the lesson is always the same: if you risk it all on one move, even if the odds are in your favour, you could lose everything, so don’t do it! By spreading the risk across many areas and over time, you reduce your chances of significant financial decline. For poker players, this means spreading their bankroll over hundreds of lower-stakes games rather than going for broke on one. For investors, this means diversifying portfolios and risking amounts that you can afford to lose. Small business owners can think about bankroll management as quite similar to cash flow management. Money spent, and money received should be balanced, and investing everything in fast growth is rarely a clever and stable solution. Build slowly using funds from business profits.
Master the ABCs
Poker players study the game to understand the fundamental mechanics behind the cards and betting. They must know the hand values and percentages as well as the expected returns in any given situation (of which there are millions). They must know when to make bets and what it means to ‘check’. They must also understand the dynamics of blind structures. There’s a lot going on when it comes to poker, and anyone who understands these components already has a significant advantage over players who don’t know a flush from a straight.
It’s the same in business. Anyone with the right resources can build a business, but it takes hard work and determination, and you won’t get anywhere without an understanding of the fundamental concepts and components at work in your company. So, learn what you can about customer relations, cost structures, revenue streams and business plans. The more you can learn, the more advantage you will have.
Adjusting to Other Players
Professional poker players don’t just follow the ABCs of the game. Optimal poker strategy suggests that you should adjust to the other players at the table. That’s achieved by observing other player’s tendencies and analysing their stats to build a strategy of how to play against them. Then adapt the fundamental concepts to work out the most profitable moves given the broader situation.
Once you understand the ABCs of business, it’s equally important that you adjust yourself according to your position in the marketplace. Who are your main competitors? What is the demographic of your target market? What resources do you have available and what slice of the pie do you need to get? These factors will all inform your decision-making, and adapting to your circumstances will give you the best chance of survival and growth.
Bluffing is Overrated
New poker players often think that bluffing is the key to winning the game. But the truth is decent players will see this coming a mile off and call you up on your bluff. It’s more critical to play solid starting hands and make bets when you have the best hand. You will gain most of your value by getting paid off when players have a weaker hand, and there are only certain situations (against a specific type of player) in which bluffing is profitable.
The same is true in business. Even more so. Honesty is the best policy and delivering on the promises you make will lead to higher customer satisfaction than trying to bluff your way through life. Whether you are offering online marketing or running an underwater restaurant, your customer needs to be happy for you to stay in business. For this to happen, you need to play your best hand and offer your customer the best value — bluffing isn’t going to cut it!
In any high-pressure situation, you will need a decent amount of emotional control. Both poker and business demand consistent decision-making over risks and rewards, but worst of all, the outcomes are always part chance. You can do everything right, and the cards won’t fall your way, not today anyway. That’s when you need to remember to keep calm and continue to make profitable decisions based on solid bankroll management. Stick to the principles and keep emotions in check so that they don’t rule over your decisions and make matters worse. Keep cool, and you will be a business pro!
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Infographic Credit: Napkin Finance