Without it, you’re just a spectator.  And you’re not in this just to watch the game, you’re in it to win.  It’s your bankroll: your ammo, your lifeline, your ability to stay in the game.  If you’re doing it right, it is investable capital that produces returns.  There are plenty of skilled handicappers and patched-in gamblers that have access to the best information out there.  Success has eluded many, simply because they couldn’t manage their bankroll properly.

There’s no reason for you to fall into that group.  Whether you’ve got the skills or the connections, KEEPING your money and your winnings is a skill in itself.  If you treat your bankroll the way a well-run business treats its finances, strong handicapping ability can be converted to long-term success.  Creating this firm foundation requires emotional control, the proper use of capital, and a realistic understanding of your advantage.

The Role of Capital in the Business Life Cycle

A basic understanding of how a business uses cash effectively is part of this financial foundation.  Many entrepreneurs, MBAs, and savvy investors know that smart businesses manage capital differently depending on their life cycle stage.  The simplest model of this cycle is start-up, growth, and maturity; and sometimes includes transitional periods between stages.  Unless you or your team are starting with a mid-five figure head start, the progression of a sports wagering enterprise begins on the ground floor.

Infancy

Early growth in the start-up period demands two things: 1) the development of an approach that delivers a consistent advantage, and 2) cobbling together an adequate bankroll. For our purposes here imagine an initial stake of $500 – $1,000, supplemented with smaller monthly or quarterly amounts. Initial capital, or your stake, usually comes from sources outside of the business. The goal is to grow that initial investment organically through successful sports betting. In other words, you’re pumping cash into your bankroll to accelerate both its overall growth and the basis for your bet size.

Infancy is a critical stage, and it can be very easy to bust out, i.e., lose your initial bankroll. For example, without discipline a hot run can lead to overconfidence and over-betting the bankroll. Improper bet sizing, along with the two enemies of success – fear and greed – can also derail your plans. The key concept here is that too large of a bet size often leads to busting out during cold streaks (greed). If you do bust out, don’t despair. Hitting zero will instill financial discipline more effectively than hearing or reading about it. Under-betting your proven advantage can stunt growth in this critical life stage (fear).

If you supplement your bankroll with outside capital over a defined period of time, you can accelerate bankroll growth by inflating the standard betting unit. In the early stages of a sports betting enterprise, we typically advocate for a 2% – 5% unit size. This is a percentage of the total bankroll and assumes predominantly 1-unit bets to avoid undercapitalization. With cash coming in, the unit size can be calculated as a function of the anticipated stake within a 6-12 month period instead of the current amount of money in the bankroll. There is clearly more risk going down this path than by betting per what’s on hand. The downside to the accelerated risk/reward profile is partially mitigated because most busted-out bettors can re-stake themselves sooner after losing $2,500 versus $25,000.

Growth

A start-up that grows its bankroll organically, regardless of outside capital inputs, over a sufficient period of time is a success. Taking the training wheels off and letting it grow by winning bets is a hallmark of the growth stage. Bottom line, your bankroll is your treasury from here on out. It is your operating capital and the expectation is to rely solely on it to grow the business – and eventually starting peeling money away.

Growth is not linear in the handicapping world. Even if you or your team is successful, it will only appear linear when you view it from a season-by-season or yearly perspective. Days, weeks, and months are often choppy because variance is the nature of the beast. This is why proper bet sizing is critical to long-term success. Even though bankroll acceleration tails off when the “rocket fuel” lifeline of outside cash is cut, bankroll growth continues as the size of the bet unit increases. And the size of your bet should increase along the 2% – 5% range as confidence in your approach grows. Plowing profits back into the operation is conducive to stair-stepping higher and higher without significantly increasing risk. 

Maturity

A mature business can sustainably spin off cash to its owners. Think of major, established corporations like Procter & Gamble and more recently, Apple, that return excess cash flow back to investors in the form of dividends. Dividends are a form of return on investment provided when corporate leadership has determined them to be the best use of that money (versus reinvestment into R&D, physical expansion, acquisitions, etc.).

The ultimate goal of many sports bettors is to live off of the money made from long-term success. Akin to personal portfolio management during your retirement years, profits provide income while continuing to fuel growth at a lower rate. Though bankroll growth takes a backseat to income generation, a modest amount of reinvestment is needed to keep operating capital ahead of inflation. Identifying the amount that can be spun off without compromising the bankroll is a lengthy process that entails many personal variables.

Risk of Ruin and Understanding Your Skill

There are very, very few no-risk propositions in the sports betting world. Continuing to balance growth against risk requires finding an approach that is “just right”. RoR is a concept that has been theorized and explained in depth by several sources. One succinct, well-stated article from recent times was written for Pinnacle.com. This is recommended reading for aspiring and experienced sports bettors alike.

We touched on unit sizing earlier in the context of the betting enterprise’s life cycle stage, calling for a 2% – 5% range in the infancy and growth stages. This is a simplified blanket statement that should be adjusted according to your particular parameters, such as risk tolerance, ability to replace a lost bankroll, and skill level. Understanding your (or your team’s) skill level for an individual sport on a season-long basis is a big part of being appropriately aggressive.

Skill level, commonly reflected by return on investment, can be difficult for budding handicappers to accurately assess without being skewed by short-term bankroll fluctuations. This is where diligent tracking of your handicapping and game results is worth its weight in gold. Accurate record keeping can help separate fact from misconception, which is paramount in having an unbiased account of your work. You must fine tune your betting approach lock-step with an understanding of your edge to be as sharp as possible.

Short-Term View vs. Long-Run Perspective

Don’t be fixated on short-term results when success over the long haul is the desired outcome. Let’s start with an experience that BetCrushers team member JJ had in January and February of the 2017-18 NCAA basketball season. He banged out 25 units of profit in the first 7 weeks, supercharging growth to his bankroll as the wins kept piling up. On the eighth week, however, he lost 18 units! Fortunately, JJ knew that 25 units in 7 weeks was well beyond his expected profit rate because he had tracked previous years’ college basketball results on similar weekly wagering volume. He knew a reversion to his typical pace was likely, and sat tight for a solid season-long profit.

A disastrous error in the above scenario would have been to prematurely increase the bet unit size based solely on a hot run, even an extended one. It’s difficult to know how disastrous that could have been since there are many variables involved, but it wouldn’t have been pretty! Comprehension of your typical win rate (or similar metric for measuring success over the long run) is essential to setting realistic expectations. Making adjustments is a big part of success, but knowing what kind of adjustments and when to make them are hallmarks of sharp bettors.

Conclusions

• Understand the role of capital in the various stages of a sports betting enterprise: infancy, growth, and maturity.
• Over-betting your bankroll can be the a killer, especially with an unknown advantage and inevitable downswings.
• Fear of failure can hold back profits and bankroll growth; misplaced greed can increase your risk of ruin.
• Don’t be fixated on short-term results when success over the long haul is the desired outcome.
• Judge your abilities and edge over each sport objectively by thoroughly tracking results.