Stud: More on staking
by Adam "STUDstood" Roberts
This week I want to continue on the topic of staking, but discuss where it is done as a package deal, which includes personal expenses, as opposed to where it is only in a "game-by-game" arrangement. Although this type of staking deal is usually only secured by poker players who are already well known and proven to be honest and hard working, it should be all poker players' goal, since for the player it is virtually risk-free.
Getting fully staked usually works this way:
The bankroll (BR) is used for both playing poker in agreed-upon types of games and limits, as well as for personal expenses. The player's expenses are considered a "draw" against his/her poker earn, and there usually is a maximum "cap" on how much will be covered.
For instance, one of the deals I have had is where I was given a $60K BR to compete in a $100/$200 Stud game in a live casino. That is the lowest amount of BR I felt was necessary to play that limit. I was allowed to draw $1,200 per week against that BR for personal expenses, whether I won or lost. That way, if I broke even for the year, all my living expenses were still paid for. But the arrangement was that expenses drawn had to be paid back from my profits before I was allowed to take any winnings for myself.
Actually that is just the theory. In practice, my results typically varied too much to where it never worked out exactly that way.
What is much more likely to happen is that you will end up at one of the extremes, due to the normal BR fluctuations that happen during a year. On the negative end, you may go completely through that $60K, especially when using it concurrently for expenses, and you will be "out of business." Or, on the positive side, you will have earned enough to where you will make an agreed percentage split with your backer, while keeping your BR at a high enough level and continuing to pay your weekly expenses.
Depending on the limit of the game(s) you are competing in, the percentage split can be adjusted. While playing $100/$200, I worked for 50% of my total profit. When I was getting fully staked at $300/$600, I worked for 33%. In that case, my backer took a higher risk, so deserved a higher potential reward. In my opinion, it is hard to get this type of deal for lower limits (i.e. less than $60/$120 live or $30/$60 online) because the backer does not have enough of an upside.
An average year for me would be to earn one big bet per hour. That expected earn goes down for everyone, including top players, as the limits go past $100/$200 live (which translates into $50/$100 online) because the higher limit players are generally more skilled.
For instance, I used to make enough money playing $100/$200 Stud in live casinos to where I was able to pay back my weekly $1,200 expenses draw, then make enough for my backer and I to take further profits.
If I played 1,000 hours live in a $100/$200 Stud game, I would average $200K earnings per year. During that time period, I took out $60K for expenses. My backer got that $60K returned incrementally as our bankroll reached a certain amount, say $80K or $100K. We also split up profits at those junctures, maintaining the initial $60K BR for play and expenses.
So, at the end of the year-long arrangement, if I made $200K above expenses, my backer got his $60K returned, which left $140K profit. Both he and I took $70K for ourselves and the BR remained at $60K.
Income taxes is another issue that must be ironed out before proceeding with this or any other type of staking deal. I have had different backers in my poker career (but only one at a given time). One of my backers insisted that he remain "totally silent," where I was responsible for all of the taxes on profits I earned (even though he got some of them). Another backer of mine wanted to pay the full tax on his share, and asked for a signed statement from me stating exactly what I earned and what his share was. Whatever the arrangement, it should be agreed on in advance, and in writing.
So far, I have only been talking about winning. That will never be the case, at least not consistently.
When things were going bad for me in poker, I was still taking out $1,200 per week in expenses. Assuming I ran bad for three months, $15,600 was automatically gone from the BR, plus however much I may have lost playing poker.
The clause I had in my contract was that any time my BR dipped below $20K, my backer had the option to replenish it to $40K or to quit, and allow me to take the $20K for use as I see fit, with my backer no longer having a part of any future profits or losses. There were a number of times when my BR did drop below $20K and my backer had to make that decision. Since I was a proven winner, he decided to stick with me, which enabled me to eventually make up the "red figure" (sometimes called "make-up") that I had with him.
In fact, I remember a couple of years where I earned less than $100K. In those cases, I still was able to return the $60K expense money, but the profits were far less for both of us. Thankfully, there were also years I made more than $200K.
The bottom line here is that in addition to having already proven yourself as a hard working, honest, winning player, you will need to find a backer who truly understands these concepts, is patient with you, and does not micro-manage either your habits on or off the table, or your results on the table. I've been lucky in that my long-term backers have all been high limit, winning poker players. Because of that, they understood these concepts wholeheartedly (especially the downside), and I had good experiences working for them.
It is possible, though, to find appropriate staking from either losing poker players who have lots of money, or just investors who want to try and reap more than average returns on their money. My experience has been that most of these types of backers do not understand these concepts, and this can create friction.
Here's a funny (to me, anyway), true story.
Before moving to Los Angeles and Las Vegas to play professionally, I honed my game at a rounder's club in Manhattan. One of the players there was a businessman who sold guard rail. He was a losing poker player, but had lots of money and liked to stake people. I think he did it more as "power trip" as opposed to a way to make money.
In early 1994, he contacted me and asked to stake me in five tournaments in that year's WSOP. We worked out all the details (I will cover tournament staking and tournament play in general as these blogs progress), and he wired me the necessary money.
I played in the first four tournaments, and did not cash in any of them. My backer then called me and said that he was pulling out of our deal, and that I should not play in the fifth event as we had planned. I sent him back his remaining money and decided to play in one satellite to see if I could get an entry into the 5th tournament (which was the $5,000 Stud event) at the right price (I will elaborate on this concept in future blogs).
I won the satellite (which cost me only $660), and then came 2nd in the actual event, cashing out for $102,600 (after a deal). The moral of this story is that this backer lost confidence far too quickly, and "pulled the plug" too soon.
In any case, I recommend that all staking deals, this type or otherwise, be clearly outlined in writing. Lots of details should be covered; for example, neither side should be able to discharge any money owed in bankruptcy.
I hope this was informative to you. Feel free to contact me with any questions on this or any other topic we have covered in these blogs.
In the meantime, you can find me in the $10/$20 and $30/$60 limit games in our Stud section, as well as in our weekend $215 buy-in tournaments for Stud games. Please check the starting times of each of those events under Tourney > Special in the PokerStars lobby.
Feel free to contact me with any questions, suggestions or thoughts at firstname.lastname@example.org. See you at the tables!