Team Play, how much should investors get paid.

[BlackHead]

I am currently involved in a 2 person team with a fixed bankroll of $15,000. We were lucky enough to have a friend who wanted to get involved in any way possible and decided to invest $5000 with a 15% return rate on his investment. I agreed, with the conditions that once I reached my EV for 100 hours of play I would pay him. So, I improvised and wrote out all the conditions in our team manual including that there is a risk that his investment could be lost. Luckily, everything went according to plan in our trip and we paid him in less than 3 weeks. Now, he wants to invest $10,000 with another 15%. But, it got me thinking maybe I might be missing a variable here and I could be shooting my self in the foot or vice versa ripping him off unknowingly . I added up the extra EV I would gain from the investment and subtracted by 10% and proposed that we split the extra EV from the investment in three instead of the 15%. Ive heard of many different ways of paying off investors by using CE but I haven't found much on our particular issue.

[moo321]

Ugh. You've basically given him some sort of preferred stock. I don't think this is a good way to structure it.

Equity is almost always better in these cases. A percentage of the win, not a fixed amount.

[blackjackomaha]

I've usually split winnings based on the % donated, makeup of BR, effort, etc. I try to match profits with how much "skin in the game" everyone has. I've always split profits based on a 50/50 rule. 50% of the profits are divided among investors based on their contribution amount to the BR. The other 50% of the profits are divided among the individuals putting the time/effort into grinding hours and making profits (players).

For example, my 2-man team once had an investor that matched our contributions, so at the end of the arrangement, 50% of the profits were split 3 ways (evenly), and the other 50% was mine/my teammates.

[muckz]

Need more information. By 15% return you would be paying him 1500$ when you reach 100 hours of ev? How does your goal EV thing work? You made your EV in cash without playing 100 hours? If so then you are screwing yourself.

I suggest you change the point in which you break your bank. You may want at least 3 months of play time without deductions from BR. You can always set a stopping point goal as well. It is a small team, you may want to split everything 50/50 Investor/player. What about expenses?

Most books have a team play section that discusses this sort of thing. Choose what you think would be best. Just make sure you aren't paying out a large portion of your Theoretical EV NOT your actual $ amount earned, especially when you are playing so few hours.

[BlackHead]

Wow three great post back to back each one has me thinking. I think ill go with your example omaha considering I have a very similar situation we are investing $15,000 and he is $10,000 so im guessing ill split 35% evenly between the three and the other 65% for us for the "skin of the game".Mucks correct I was going to pay him $1500 after 100 hours of EV. Thats were i figured i screwed my self because we only put 80 hours in our Vegas trip in 5 days. I will also try using a stopping point instead and use actually dollars earned seems like alot less stressful. But, lets say I lost half my bankroll after 2 month and had to re size to keep my risk under 5% what percentage of his bankroll would i return to him if he wanted to come to a stopping point..... the same formula but vice versa?

[bigplayer]

The more frequently the bank is broken the bigger the percentage to investors otherwise they're essentially giving a free-roll. If you play for a weekend I'd say investors should get no less than 80% or sometimes even 90%. If you play for a six month bank with no set win goal I'd say 60% would be fair for investors. If your on a long term bank (say 1 split per year) with a very high win goal and players take care of their own expenses then a 50-50 split might be appropriate.

Anyone who automatically demands a 50-50 split saying it is "standard" is either uninformed or a con-man. It is neither standard nor mathematically preferred. I think for most cases a 60-40 split where 60% goes to the investors is probably right. The investors need a bigger split because the final bank of almost every team is a losing one and the investors need a bigger split to cover that final loss. If the 20% spread of a 60/40 split seems too large then trim it to 55-45 but either way the investors need to be getting the biggest split.

[RS]

What bigplayer said. The investors get 60% of win (or 55% or 50%), and the remaining 40-50% goes to the players. Individually, the investor would get a percentage of that 60% of how much he's invested. Players would get a percentage of that 40% based on how much work they did (measured in rounds, hours, shoes, EV, or however you measure "work" done by players).

If you're playing a game with high variance, the investors should get a bigger chunk of the win, because they are the ones who have to eat the loss, while players have no risk (other than time put in). If it's a low variance game, investors have a lower chance of eating a loss, so the difference split between players and investors doesn't need to be that great.

[BlackHead]

The more frequently the bank is broken the bigger the percentage to investors otherwise they're essentially giving a free-roll. If you play for a weekend I'd say investors should get no less than 80% or sometimes even 90%. If you play for a six month bank with no set win goal I'd say 60% would be fair for investors. If your on a long term bank (say 1 split per year) with a very high win goal and players take care of their own expenses then a 50-50 split might be appropriate.

Anyone who automatically demands a 50-50 split saying it is "standard" is either uninformed or a con-man. It is neither standard nor mathematically preferred. I think for most cases a 60-40 split where 60% goes to the investors is probably right. The investors need a bigger split because the final bank of almost every team is a losing one and the investors need a bigger split to cover that final loss. If the 20% spread of a 60/40 split seems too large then trim it to 55-45 but either way the investors need to be getting the biggest split.

Interesting, so lets say we decided to play for 2 month and for simplicity sake we use $10,000 of our own money and $10,000 from the investor. Lets say we made another $10,000 in profits expenses not included. How much out of that would you give the investor.

[bigplayer]

Interesting, so lets say we decided to play for 2 month and for simplicity sake we use $10,000 of our own money and $10,000 from the investor. Lets say we made another $10,000 in profits expenses not included. How much out of that would you give the investor.

I would allocate for a short term bank like that something like 70% to investors and 30% to players. So your outside investors would get 35% of the win and your player/investors would get another 35% of the win. Using a split like this I would make players responsible for their own expenses (but let them keep any mail coupons they might get as an offset). The split would look something like

Investors $3500
Players based on investment $3500
Players based on their play $3000

How you chop up the player share has been subject to all sorts of discussions. I believe strongly in a small amount of hourly pay with the rest of the win chopped up based on win contribution for that bank. So if Player A plays 100 hours and Player B plays 20 hours and the hourly rate is $15 then player A would get $1500 and player B would get $300 and the remaining $1200 of the player share of the win would be chopped up based on player win contribution to that bank. If Player A won $8000 and Player B won $2000 then player A would get 80% of the $1200 ($960) and Player B would get 20% of the $1200 ($240). Player A's Total Pay would be $2,460 and player B's Total Pay would be $540.

You could, simply choose to chop up the player share weighted by hours played, EV generated, Certainty Equivalent, or totally by win contribution. Regardless, I am a believer that each bank should allow for a fresh start and any player who loses on a previous bank should begin at $0. If you allow losses to carry forward you are expecting a player to go possibly multiple banks without pay simply because he/she had a bad flux. That is not only incredibly unfair but you're basically incentivizing one banks losing players to quit any future bank should they experience a loss early on and in that situation the other players and investors would be on the hook for that loss. The key of any team pay structure is to create incentive to keep on playing no matter how far ahead or behind a player might get. Players who are way behind in one bank have incentive to keep on playing, even though they might not get anything other than hourly pay in the current bank, simply because the quicker the team recovers as a group the quicker that losing player can start back over at $0. The possibilities are endless, but whatever method you choose should be easy to understand and for players to keep track of.

[Nyne]

I like that concept in general. What happens if there is a win, but not a sufficient win to cover the base hourly rate? Does the player share then get split based on hours only? I'm thinking of situations where the win is still $10,000, with $3,000 allocated to the player share, but Player A played 150 hours and Player B played 100 hours. The $3,000 is not enough to cover the $15 hourly rate. Do the players take a haircut and get $12/hr or do they still get $15/hr at the expense of the investors?

And to the OP, whatever structure you choose, be sure to consider all of the possible outcomes and make sure the incentives work to keep everyone playing at every point along the way.

[BlackHead]

Great concept... I would now have to calculate the added EV gained with the investor. Then compare if the venture would be worth it or not. Also, im guessing that if 1/4 of the entire bankroll was lost players/investors would each receive back 1/4 of there investment in worse case scenario.

[moo321]

I usually do 50-70% of the win to investors after expenses, depending on the length of the bank, and I keep 10% for management. I usually play half kelly. I think this properly compensates them because they are taking all the risk, while still giving an incentive to players to play.

For a larger team with a large bank and a lot of players, I think management should get more money (20% seems better) and 40% to investors could be fair.

Another option that works well for a lot of pros is doing "chops" where every puts in the same amount on a game, and gets the same share. This is great for a weekend play.