All In: A Small Business Lesson From The Blackjack Table

To celebrate my husband's birthday this year, we spent four days in Las Vegas.

It was the first time visiting for both of us.
We both had a great time, but we enjoyed very different things.

While the iconic hotels were gorgeous and exciting, I'm still completely baffled by the gambling. I just don't understand the allure of risking hundreds of dollars on chance...and a little strategy.

Maybe it's because I'm from a small town in a state that doesn't even have a lottery?
Maybe I'm too risk averse?
Maybe I've come to realize that keeping money is sometimes harder than making it in the first place?

Whatever the reason, it's now official since I've been to Las Vegas: casinos are simply not “my thing.”

But my husband grew up where state lotteries and Atlantic City were just a car ride away. He enjoys the thrill of it all. He's the guy that always gets a lottery ticket when he travels.

One afternoon we decided to split up and enjoy our own “things.”
I laid by the pool and finished a great book. He explored the strip and tried his luck at a few tables. Later, he returned to the hotel and we caught each other up on our afternoons.

He found himself at a blackjack table where he turned $200 in $700!
Even someone like me can appreciate that ROI.

As he shared his strategy, I couldn't help but think about small business owners.

You see, if he starts out with $100 and somehow (through sheer luck or strategy...you decide) turns that into $150, he'll put that initial $100 aside and then only continue to play with the “profit” he's made.

In recounting his big win, he proudly stated that he had made about $200 on his first $200. So, he put $200 of his now $400 aside so that he knew in a worst case scenario he wouldn't lose anymore than he came in with. He only continued to bet with the “profit.”

At one point, he went "all in" on one hand ($250).
If he lost, he lost the $250. If he won, he'd have $500.
Luckily, he won the hand, took his money, and met me by the pool...$500 richer.
But in either scenario -- win or lose -- he would have "broken even" on his time at the table.

Sounds smart.
After all, just breaking even sounds like a pretty great goal. You get hours of entertainment, drama, and competition for basically free. At no cost to you.

This is a wise decision when it comes to gambling, but no one would ever admit to applying the same strategy in their business.

Blackjack is recreation (for most).
Business is business.

Would you start a business with the goal of breaking even?
Would you invest $10,000 only to make $10,000 in a year?
Would you work 60 hours a week and not expect to take home any of the profit from your work?

Of course not.
Most people start their own business to either make more money or make more time in their lives.

Unfortunately, though, a lot of small business owners unknowingly treat it like a game of blackjack – using all the profits to keep playing the game.

This is usually cloaked by the excuse of wanting to grow the business.
Business owners want to grow their business, so they put everything (sometimes sacrificing their own salaries) back into the business in order to make that growth happen.

But what's the point of growing the business if you don't get any profit from it?

No one starts a job and expects to be paid the same amount over the life of their career. They want more. They work harder to earn more. Yet, a lot of small business owners I know pay themselves less than minimum wage when you calculate how much they work in their business.

There's truth in the idea of re-investing the profits into the business.
But it's also true that you do not have to invest all of them in order to grow.

I first discovered this concept when reading the book, Profit First by Mike Michalowicz. I highly recommend this if you own a business or are thinking about starting your own business. You can buy it here.

The idea is that you actually pre plan how much profit you want to make.
Then, reverse engineer your business model around that goal.

In my husband's scenario, when he made the first $100 off his $200 (so $300 total in his hands), he would have simply put a few bucks of that profit aside along with his initial investment. So, let's call it $225 instead of just $200 that's now in his pocket. He'd continue playing with the extra $75 of profit. And every hand that made money, he'd commit to taking a little sliver of that profit and tucking it away, then enjoy playing with the rest.

This means that if you “lose it all” in the next hand, you still walk away with more money than you started with.

Pretty easy concept to follow, right?

How much more should the Profit First strategy work for your business – assuming you've picked a business with better odds than a Las Vegas casino.

Having a plan for your profit does two things:

1. It gives you a reward for the risk of your time, capacity, & resources.
2. It proves that the business can (and should) function without 100% profit reinvestment.

The important thing to remember is that your profit plan doesn't have to be a huge percentage. In fact, starting with a small percentage of just 1% each month can be just as impactful and life changing as taking home an extra 25% of the profits. Small, consistent steps are often how we create the most meaningful, long term effects.

I'm sure you're at least familiar with Dave Ramsey.
He is a popular money managing expert and has helped millions of people get out of debt.

There are a lot of money gurus out there, so I was surprised to learn exactly WHY his debt strategy was so effective for so many people. Anyone who begins his program, starts by organizing all their debts from smallest to largest.

Sounds logical.
You need to know what you owe in order to come up with some sort of payment plan. But here's the reason why it works:

You begin by paying off the smallest debts first.

The numbers person in me thinks this is irrational.
For instance, $1,000 at 18% interest in credit card debt is “costing” you way more than the $100 cable bill that's one month late. But the Dave Ramsey plan encourages you to pay that smaller $100 debt first.

The reason why this plan helps so many people to get out and stay out of debt is because it implements consistency over intensity. It teaches you to whittle away at your seemingly insurmountable pile of debt one little bill at a time. By scratching off those small debts first, it gives you the emotional experience of small “wins,” consistently, at the very beginning of the process. Which keeps you engaged and committed to the process of getting out of debt.

And because of those small wins, you eventually tackle the $1,000 at 18% interest.

This is why the Profit First plan can be so revolutionary to your business.
By starting small and allocating as little as 1% of profits into your pocket, it gives you small, manageable, and consistent “wins.”

You quickly realize not only does it feel good to see 1% of that profit in your bank account, but taking 1% doesn't endanger the growth (or life) of your business. You can enjoy a small reward for your work without worrying that your business will fall apart next month because of that 1%.

And really, you know that if 1% is a “make or break” decision for your business, you probably don't have a good business model to begin with! But, this process of starting small is a way of realizing both the emotional reward of earning your profits and realizing what truly impacts your profit margin the most.

Once you start small, you can slowly increase that 1% to 1.5%, then next year to 2%, until you get to the ideal profit goal you want as a small business owner.

Stop using all your profits to keep playing the game.

Create a strategy so that you can enjoy experience and even if your next bet doesn't pan out, you leave the table with more money than you started with.