Hi guys!

Do you include rakeback in your ROI calculations, if so how?
I think it should be included, how is the actual question:

Let's say you've spent $100 for buy-ins (including rake), and win $150, taking home a profit of $50.

(1) ROI = 50 / 100 = 50%

But then you get a rakeback of $5 for that period.

So it should either be added to the profit:
(2) ROI = 55 / 100 = 55%

or since rake was included in the "investment" and we are getting a discount from the investment it should be deducted from the investment:

(3) ROI = 55 / 95 = 58%
(This calculation is correct because when you remove $5 from the investment, the profit goes up by $5)


I use (2) for simplification but accounting-wise feel like (3) would be correct.
What's your take on this?

You've accounted for that $5 profit twice here, by both adding it to your profits and removing it from your expenses. You're double dipping. Do one or the other, not both.

If you count rakeback as pure profit then simply add it to your returns, 55/100=55%.

Alternatively, you could argue that you never really invested that $5 in the first place, in which case you'd subtract it from the amount you invested. 50/95 = 52.6%.

Thanks but nope not double dipping.
ROI is calculated as profit / investment right?
So the investment is 100-5=$95 but still we won $150, then the profit is 150-95=$55
hence 55/95=58% is correct.

If we know ahead of time that we'll get $5 rakeback for that tournament, regardless of any other factors like time spent at the casino and we actually get that money in cash or an equivalent, you can indeed just deduct it from the entry fee.

Let's say it's not rakeback. You took $5 out of your initial investment and locked it in a safe, along with other assets that you're not investing. You invest the remaining $95 in tournament entry fees, and make a $50 profit in tournament winnings.

Walk away with $145
Total investment = $95
ROI = 52.6%

The remaining $5 in the safe still counts towards your net worth, (along with other assets not invested), but since it was never at risk it doesn't count towards ROI.

There's some very weird logic going on here.


We start with $100
We pay that to enter so we have $0

We win $150, we now have $150

We get $5 rakeback, we now have $155

So we invested $100 to win $155
Profit = 155 - 100 = 55
ROI = 55 / 100 = 55%


Removing the $5 from our investment seems wrong, because we did actually pay $100, not $95
But let's assume it's an option.

We start with $95
We pay that to enter so we have $0

We still win $150, now we have $150

We don't get $5 rakeback, since we already removed it from our investment.

So we invested $95 to win $150
Profit = 150 - 95 = 55
ROI = 55 / 95 = 57.89%


Which makes both #2 and #3 viable.
But #3 just seems wrong imo.

You're suddenly only winning $145 instead of $150 here.
Though it was stated we won $150 (without rakeback)

So we would invest $95, but still win $150, making our profit go up with $5

You know what, I am wrong. Disregard my previous posts on this thread.

My general point was that you wouldn't count money not invested towards ROI, and some rakeback structures can be treated that way. But my math is just incorrect.

We already knew, glad you realized too
Thanks anyway

Yep, that's why I choose to go with #2, thanks!

It seems wrong if the $5 isn't guaranteed. If the $5 is money that we receive in any case, there's nothing wrong with deducting it from the buy-in.

Imagine a scenario where the tournament fee is $100 and the tournament director hands us $100 on the condition that we use the money to buy in to his tournament. Wouldn't you say we free roll the tournament?