Profitable Month / ROI vs PPH

I haven't had much time to play or write about poker in the last couple of months. I have been working on a project over seas and it has consumed a large portion of my time. However, the project is now in the close out phase, so I hope to get back to playing and writing again soon.

As for last month, I ended up making about $38 profit per hour from poker, which is lower than I would like to see, but acceptable given the amount of focus I was able to give to the game. You will note in this post and in future posts I will talk about profit per hour (PPI) as opposed to return on investment (ROI). If you have read through my previous posts you will see that I typically measured my performance in ROI. However, as I progress as a player and adjust the buy-in level and number of tables that I play at, ROI becomes a meaningless number. Ultimately, the number that matters is the amount of money you make per hour of play--your profit per hour (PPH).

Here's an example.

(Before I get into the example, thanks to Alex for identifing a calculation error in my original post!)

Let's say that you are playing at the $5 buy-in level for sit 'n go's and you only play single tables. You are very good at this level and as a result are able to maintain a 36% total ROI (which is different than average ROI--more on that in a future post!).

The formula to calculate total ROI is (Payout-(Stake+Rake))/(Stake+Rake).

So in the example lets say you play one sit and go per day or 30 per month. And for easy calculations we'll say you either finish first 1/3rd of the time (10 times) and do not cash the rest. Here's the numbers:

Payout=225
Stake=150
Rake=15

Based on this information your total ROI would be 36% for the month. Is that good? Many would LOVE a ROI of 36%, especially if they could maintain it. However, when we switch to looking at the profit per hour (PPH), it paints a slightly different story.

Using the same numbers, let's assume you spend 20 hours playing your 30 sit n go tournaments. The formula to calculate PPH is (Payout-(Stake+Rake))/(Hours Played).

Based on the forumla, your PPH is $3.00

ROI = 36% and PPH = $3.00

So how do you use this information to help you measure performance changes in your game.

Well, let's say you decide to play two sit n go's at the same time, but as a result, you are unable to focus as well and as a result you win 10% fewer tournaments (9 on each table instead of 10 on a single table). How will this affect your ROI??

Your ROI would drop to 23%. Many who look at ROI as their measure of performance might say to themselves, my ROI is suffering, therefore I should return to playing single tables. However, in this scenario your PPH increases from $3 to $3.75.

So even though your ROI drops, your actual profit per hour increases. And ultimately we are playing for profit, not ROI. In this scenario, moving from one table to two tables, even through ROI dropped, was a profitable move.

How about looking at this scenario from the perspective of moving up in stakes. Let's assume that as a result of moving up your two-table win rate remained the same (9 wins per table). Was this a profitable move??

ROI would still be 23%, no improvement there. So does this mean that you are doing the same at the $10 level than the $5 level? Not when you look at it from a PPH perspective. In this scenario PPH would double to $7.50. A good profitable move for this player.

For those readers that are getting frustrated over the small sample size of 30 games (or 60 for the two-tabling), yes, I agree with you. A much larger sample size must be used to measure your performance. This is intended as a simple example of how to use PPH to measure performance instead of the typical ROI measurement. I hope you get the point.

Anyway, my PPH last month from poker was about $38.00, which was profitable, but not where I want it to be. Your PPH target will vary depending on how you view poker. Is it a hobby? Or is it a source of income? Is it income that you depend on? or just some extra splashing around money? My recommendation for any player is to track your PPH and then make adjustments to the buy-in level and number of tables until you find your sweet spot (most profitable combination). By doing so you will make poker the most profitable for your skill level.