A game worth playing

© July 2008 Anthony Lawrence

I recently wrote about a new poker site that pays cash prizes (link dead, sorry) . It's a good place to play because of the serious competition, but if you looked at it from a strictly financial objective, they only offer one game that pays enough to be worthwhile: the $5,000.00 Sunday game that pays $1500.00 for first place. Anything else just has too little money in it to be worth spending time on (assuming that your only interest in playing is the money).

There can be other reasons to play poker, of course. But when it comes to your business, you need to look at the return for your investment, whether that investment is money or time. This seems obvious for some things: you aren't going to buy a $700.00 airplane ticket for an opportunity to earn $500.00 in another state. The opportunity cost for things like that are easy to see, but small businesses often miss the small things.

For example, you may sell a product that requires support after the sale. If the profit margin isn't high enough to cover that time, that product isn't worth selling. Again, that's often easier to spot with larger ticket items: the $10,000 sale with a $2,000 profit is easier to notice than the $20 sale with the $4 profit, but if you have to spend just a few minutes on that sale (how long does it take you to prepare and mail the invoice?), that small sale may not be worth the effort,

If your billing rate is $120.00 per hour, you need to make $2 a minute. Spending two minutes to make $4.00 profit is fine, but spending more than that is not. However, just as you might have other reasons for playing poker, you may have other reasons to process that small sale - it might be for an important customer, for example. However, small businesses, especially one person shops, need to watch these small money sinks carefully.

Got something to add? Send me email.

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