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The Art of the Deal

An often-overlooked skill set in tournament Texas hold’em poker is your ability to negotiate a sweet deal at the end of the tournament. At the end of a lot of tournaments when there are a few players left, the idea of a chop will be tossed around.

The Art of the DealWhat’s a chop? A chop (or a deal) is when you decide that the prize money will be split out before the tournament is over. Players will often do this when the money jumps are significant, and they don’t want to be playing with that much risk. This happens a lot between newer players and also with more experienced players who are looking to limit variance.

For example, let’s say you are a lower-limit player whose biggest win to date was about $500. You’re playing in a huge tournament, and you make it to the final three! The payouts are as follows for the last three spots:

  • 1st – $100,000
  • 2nd – $60,000
  • 3rd – $40,000

Do you really want to be playing for a difference of $60,000? Most likely that’s not something you’re a big fan of. Let’s say for discussion purposes that all three of you are equally skilled and have the exact same number of chips. Would you be open to splitting up the remaining prize money three ways? There is $200,000 total prize money left. If you split the pot three ways, each player would get just over $66,000.

If you agreed to the split, you’d be guaranteeing yourself an extra $26,000 (on top of the $40,000 you’d get if you got third). Yes, you’d be eliminating the chance to make $100,000, but locking up that extra cash is a pretty sexy proposal to a lot of players. In larger tournaments, this can be an even bigger deal. Imagine when the difference between spots is several hundred thousand dollars!

This doesn’t mean this isn’t important with smaller tournaments. The importance and benefits are clearer to see with bigger tournaments, though. Making deals can help you lower your variance and increase the steadiness of your poker bottom line.

Deals, however, are not always as simple as they were in our above example. Chip stacks will rarely be equal, skill levels will never be the same, and not everyone will be on board with the simplest or fairest proposal. Because of this, poker deals and chops always come down to some negotiation. If you’re able to negotiate yourself a better deal, then your bottom line is going to be a lot stronger. As these negotiations are going on at the end of the tournament when big money is on the line, they will have a profound effect on how profitable you are as a tournament player.

In this guide, we’re going to walk you through the art of making a poker tournament deal. We’ll give you some tips and tricks to make sure that you walk out of negotiations with the best possible deal and the most money. We’ll also walk you through some important factors you need to be aware of to make sure you aren’t cheating yourself out of some money by accident.

What’s really awesome about these tips and tricks is that they can be used for negotiations that aren’t poker related. Studying these tips will not only help you on the felt, but they will make you a stronger negotiator in everything you do in life. Poker has a strong history of crossing over into the mainstream world, and the negotiating tactics are no exception.

When NOT to Deal

The first thing you need to know about chopping or making a deal is when NOT to make a deal. If the other players at the table are insanely worried about a chop, it could be a time to consider not making one. Part of the reason that some players like to chop is that they are scared of the money jumps and know that it’s going to affect their play. They know they are going to play timidly and make incorrect decisions and want to avoid that at all costs.

If you are confident that you’re going to be able to play without fear and you feel that they won’t be able to, it might be time to play it out. Keep in mind that this only comes into play when the stacks are deep enough that there will be time for your skill and correct decisions to show a profit. If everyone has a short stack, you may not have an opportunity to exploit your opponents.

Take note of this. Even if you feel that you’ll play flawlessly and your opponents will make mistakes, you could still be interested in a deal, but not a “fair” deal. You can always push for a deal that you’re happy with that takes into account the skill disparity. We’re going to discuss this in much greater detail in the coming sections.

You also may want to avoid making a deal if the casino or online poker site is not going to assist in facilitating the chop. Sometimes the staff will assist and document the chop. They’ll distribute the money properly, and there will be no issues. However, sometimes the staff has a policy not to get involved with chops. They will allow the players to make a chop on their own, but they will pay everyone out as if the tournament finished normally. It’s then up to the players to live up to their end of the bargain and give the correct amounts of money to the correct players.

If you know the other players involved in the chop and trust them, this isn’t an issue. Frankly, we haven’t seen many issues with this, as long as the players have a good feel for each other. However, there have been times where the player who got first place decided they were going to screw over the other players at the table and leave with more money than they should.

There’s a semi-famous story from the World Series of Poker from a few years back when a few players decided to chop the daily deep stack tournament that runs during the series. First place in this tournament can easily move into the six figures. The players decided on a chop, and one player agreed that they would sign for first place (this will make sense in the tax section below).

When the money was paid out, the player requested security and asked them to escort him out to his car. Why did he ask for an escort? Because he was blowing off the other players and stealing the money that he had agreed to share with them as part of a chop. Could the casino stop him? They couldn’t. It was their policy not to get involved in chops, and so it was a gentleman’s deal amongst the players. Now, the casino did eventually ban him from playing there (from what we’ve heard), but he still was able to walk out with all of the money with no problems from the casino.

It’s up to you whether or not you feel safe about making a deal when the casino or poker room is not involved. When you make deals online, a lot of times the poker software will handle everything for you. They will make sure that everyone agrees to the deal and is paid out accordingly. If the poker site does not have the software to do this, you’re on your own again about making deals. We’d HIGHLY recommend not trusting people online unless you are very close to them and know them personally offline.

Now that you know the instances when you might not want to make a deal, let’s dive into the strategies that should help you to make better deals and walk away with more of the pot.

Offer Something Absurd First

This is the single best piece of deal-making advice that you can get. When you first offer a deal to the rest of the table, offer something that you think is absurd that you wouldn’t accept. You might think this is so you’ll have a good point to start negotiating from. While that is true, this is not the main reason for doing it.

The main reason for doing this is that you will be shocked at what people will accept! If someone hasn’t been deep in a tournament before, they may have no experience in negotiating deals or have any clue what is fair. While we’re not advocating that you take advantage of the person and offer a horrendous deal that is not at all fair, we are saying that you should push to get a deal favorable to you.

Remember, if they are happy with what they are getting, and you are happy with what you are getting, then it’s a fair deal.

When we say absurd, we don’t mean so outlandish that no one ever would accept it. What we do mean is offering something heavily skewed in your favor. For example, let’s say you are heads up with someone and you have slightly more chips than them. Let’s also say that first place is $100k and second place is $50k. An even split would be $75k a piece, but you have slightly more chips. You could probably start by offering them $65k, while you would take the rest ($85k).

While you would probably never accept this deal unless the chip differences were huge, they might. We asked our staff of experts about their deal-making history, and most of them had at least one or two stories of someone accepting an insane deal. We even had several staff members who had made deals where they were paid MORE than first place just so the other players could chop. Yes, you read that correctly. They were given more than first place in their deal.

Remember that for a deal to go through, ALL players have to agree to it. The other players wanted to chop so badly that they were willing to pay our staff members MORE than first just to convince them to take the chop.

Tell THEM What They’ll Get First

This is one of our favorite negotiation tips, and is one that is highly effective on the felt and off the felt. It might sound simple, but you’ll be shocked at how effective it is. Here’s the tip: when you propose a deal, you tell the other players what they are going to get first. That makes a difference? You betcha’ it does.

People are only concerned with themselves, especially when it comes to deal-making. If you tell them something they like to hear first, they’ll be much more open to whatever you have to say after it. In fact, you don’t even have to say what you’re getting most of the time.

For example, let’s look at our earlier example where it’s heads up, and first place is $100,000 and second place is $50,000. Here are two different ways you could propose the deal we mentioned where you would take $85k and your opponent would take $65k.

Option #1

You want to chop this thing up? I have more chips, but I’d be willing to give you $65k, and we could be done now. That’s a guaranteed extra $15k over second.

Option #2

You want to chop this thing up? I have more chips, so I want to take $85k, and then you can have $65k.

Which of these sounds more appealing to the other player? If you said the first one, you’re correct. They’re going to be so busy thinking about the extra $15k and $65k total they’d lock up that they won’t be concerned with the fact that you’re taking way more than you probably should be getting for your slight chip edge.

Offer the Hardware and Intangibles

We’re hoping that if you’re a serious Texas hold’em tournament player, you are most concerned with the money. We’re not saying to be money-hungry, but that should be your end-all goal of playing the game. That being said, there is usually a trophy and pride that get awarded to the winner of a tournament. What’s the dollar amount on these? Well, it’s usually about zero dollars, except in some special circumstances.

Let’s look at the trophy first. You would be shocked at how many people would be willing to give up prize money in order to take the trophy home and call themselves the winner. They’d be willing to give up thousands of dollars just for the ability to take home a plastic trophy and brag about it to their friends.

The takeaway here is that you shouldn’t immediately discount that the trophy has no value. Offer it to someone as part of what they will be getting, and you’d be shocked at how many people go for it.

You also want to be aware if the win has any implications for any of the players at the table. For example, let’s say you’re in one of the last events of a WSOP Circuit stop, and one of the players at the table is trying to get Player of the Series. This usually comes with a $10k bonus seat and some other perks. This is something you could use in your negotiations to get them to give you more money, “since they will be getting an extra $10k.”

This could also be a player who is looking to make a name for themselves to hopefully get sponsorships. You may not have access to this information, but if you notice a player that seems overly concerned about being listed as the winner, you may have some leverage. Keeping your eyes and ears open during the negotiations can go a long way if you pick up some information. A lot of people turn off their poker player brain when they start discussing a chop, but you should be turning up those abilities.

The First Mover Disadvantage and Advantage

Sometimes we wonder if we were born to come up with confusing section titles. We promise we don’t do it on purpose; it’s the best way to describe things sometimes. What we’re referring to here is what parts of the deal-making process you should be first on and what parts you should wait for your opponents to handle first.

Regarding the idea of the deal itself, we think that it’s best to let one of your opponents bring up the idea of a chop first. If you are the first one to mention it, you already lose some of your leverage. Whether it’s true or not, you automatically seem like the most desperate. You seem like the player that is the most concerned about the deal, which will put you at a bargaining disadvantage.

If you’re nonchalantly responding to someone else’s offer of a chop, then you have a much stronger position to work from. Trust us, someone will bring it up; they always do. When they do, don’t fly out of your chair in excitement. Respond calmly, and let them know that you may be interested in discussing a chop. This “too cool for school” attitude will allow you to play the part of someone who is not that concerned with getting a chop in place. This means the other players may be tempted to entice you with more money to make a deal.

After the chop has been suggested and everyone still in the tournament has agreed to begin discussions, you’ll have to decide if you should offer a deal first or wait to respond to other deals. Here are our thoughts: if it is a deal with two other people or one other person, you should propose a deal first. If there are more than two other people that will be in the deal, let someone else make an offer first, because you’ll get to see what is important to everyone else. You’ll be able to identify who the holdouts are going to be and who is going to require the most sweet-talking or the better side of the deal to move forward.

Note:

With only one or two other people, you can control the situation and push an agenda much faster than if you have to appease a bunch more people.

The important thing to take away from this is that you want to take control of the situation only when the time is right. If you’re too forward and gung-ho about the chop, people are going to know how important it is to you and you’ll be at a disadvantage. If you’re too chill or lackadaisical about it, people might think there’s no shot of getting you on board, and they’ll abandon the discussion. If there is a side to err on, though, it’s the chill side. Most people want chops, especially when the money gets bigger. Take advantage of that.

Stick to Your Guns

Whenever you’re negotiating, you’re going to run into people who are pushy. They’ll have their view of what is fair, and a lot of times they won’t be willing to budge off of that right away. In these situations, you can’t fold to the pressure. It’s okay to concede some and come to an agreement, but you shouldn’t fold completely off of your proposal.

In most cases, people will play hardball until they realize you aren’t budging, and then they will cave and offer something a little sweeter to you. What’s the secret to getting them to do this? You have to be patient and make sure NOT to turn it into an ego battle. If you hold your ground and stand there waving a big stick (acting like a tough guy or gal), they’re going to get defensive, and then it will be a matter of principle for them not to give in.

This is the worst thing that can happen. The only thing people care about more than their money is their ego. You can politely say no to their offers and then suggest you just start playing again if things aren’t going to budge. You’d be surprised how quickly people will start to sing a different tune when they realize that you’re not getting heated and are content with no deal.

It’s okay to budge some. Remember, we’re going to be offering them something absurd to begin with, so it’s only fair that we expect to move on that some. It’s called negotiating for a reason. Just know how far you are comfortable moving the deal and don’t let them push you any further over it. If you are forced to continue playing, keep playing fearlessly, and they may get even more spooked and want to deal even faster.

Pay Attention to the Taxes

Depending on where you’re playing, this may or may not be a big issue. In poker rooms where they handle the chop for you, they’ll usually be able to have you sign that you received the exact amount that you did receive. If the poker room or casino is not involved in the chop, they’ll still need people to sign for the normal prize money amounts as they were laid out. If it’s a small tournament, this won’t be a big deal for you to pay attention to.

If it’s a bigger tournament where the prizes are over about $5k, then you’re going to need to pay attention. There’s a certain threshold of profit where the IRS has to be notified with a W-2g for gambling winnings. This means that you are required to pay taxes on those winnings. Yes, you are required to pay taxes on all of your gambling winnings, but the IRS is only notified over a certain amount.

Remember, if you’re signing for the higher amount, you’re going to be owing more taxes than the other players. For example, let’s say that you are playing in a $1k buy-in tournament where first place is $15k and second place is $10k. There are two players left, and you decide to chop the tournament and receive $10k a piece. The casino says they are not involved in chops, so they need to pay out the tournament like normal, and then you are free to work things out.

Let’s say you trust the other player and say that this is fine.  The casino needs one of you to sign for second place and one of you to sign for first place, so they can tell the gaming board that they paid out the tournament properly. You agree to sign for the first-place prize, which was $15k. You’ll be receiving $10k from your chop, but the casino is going to be notifying the IRS that you owe taxes on $15k! This means that you’re actually getting LESS than the other player.

If you assume 15% taxes on gambling winnings, the other player is receiving $10k minus their $1k buy-in, which equals $9k in profit. 15% of $9k for taxes is $1,350. The other player will be profiting $7,650 from this tournament. You on the other hand, now owe 15% of $15k-$1k, or $14k. 15% of $14k is $2,100. If you had been paid out $15k, you would be walking away with $12,900 in profit. Instead, you only got $10k from the tournament minus your $1k buy-in. This means that you are only profiting $9k minus $2,100, or $6,900.

Your opponent is profiting an extra $750, even though you are both walking out with the same amount of money. How do you fix this? Adjust the payouts accordingly. You should be receiving extra money to cover the tax liability or asking the other player to sign for first. Make sure that during negotiations people don’t try and treat this as you getting extra money. They do this a lot, and it’s not the case. You aren’t making a single extra penny if they’re giving you money to cover the tax liability. If they disagree, ask them to sign for first, and you’ll happily give that “extra” money back.

Chip Chop vs. ICM

The one thing about poker tournament deals that we haven’t covered yet is how you go about figuring out how much is fair to offer. There are a few different schools of thought about the right way to go about this. It’s honestly going to be up to you which you think is best and which suits your situation the most.

Method #1

One of the more popular methods of deal-making is doing what’s called a chip chop. A chip chop is where you figure out what percentage of the chips each player has, and then you divide the prize pool based on that number. For example, let’s take a look at a tournament that has three players left. The stack sizes and payouts are listed as follows:

  • 1st – $100,000
  • 2nd – $60,000
  • 3rd – $40,000
  • Player 1 – 826,000 in chips
  • Player 2 – 561,000 in chips
  • Player 3 – 113,000 in chips
  • Total Chips in play = 1,500,000
  • Total prize money left = $200,000

Let’s start by figuring out what percentage of the chips each player has.

  • Player 1 – 826,000 in chips           55.06%
  • Player 2 – 561,000 in chips           37.04%
  • Player 3 – 113,000 in chips             7.53%

(These numbers are rounded).

If we were to do a chip chop, each player would get the same percentage of chips they have from the prize pool. Those amounts would be:

  • Player 1                $110,120
  • Player 2                $74,080
  • Player 3                $15,060

As you can imagine, player three is not going to be happy about this, as they are guaranteed $40k without any sort of deal. Chip chops only work well when the players are very close in stacks.

Method #2

The second option you have is what is known as the Independent Chip Model. Known as ICM, this is a complex mathematical formula which takes into account each player’s chances of winning the tournament. We’re going to spare you the math today and just point you to this handy calculator that will calculate ICM for you.

Let’s calculate the ICM for this situation. The results of the calculator show the payouts as follows:

  • Player 1                $80,517
  • Player 2                $72,216
  • Player 3                $47,266

As you can see, this is a much more acceptable offer that you could imagine all three players getting behind.

Method #3

The final method is one of our favorites, as it gives you the best chance of pulling off a deal in your favor. It’s known as the PIOOYR method which stands for “Pull It Out of Your Rear” method. This method is one where you come up with numbers that you think are best without using mathematical calculations. If you’re playing with seasoned players, this probably isn’t going to fly. They’re going to demand ICM or at least some form of chop that has mathematical reasoning behind it.

But this method does work well with newer players or those who aren’t as accustomed to final table deal-making decisions. You can use simple rationalizations like “well, I have a lot more chips.” Some people will advocate bringing skill into the equation, but the problem with that is that everyone today thinks they’re the best. Unless you are a big-name pro that everyone knows, you’re only going to ignite an ego battle if you bring this into the equation.

You can also mix this method with one of the earlier methods to come up with a proposed deal. For example, you could personally use ICM to get to a starting point, and then shave some money off of the other numbers and add them to yours. For example, if you took the ICM calculations from method #2, you could probably leave player three alone and take five or six thousand off of player two and add to your payout number. Player 2 would probably be happy with like $66k, and you could take $86k and leave $47k for player 3.

It’s all a big dance about what you can get away with and still keep everyone happy.

The Big Picture – Putting It All Together

Deal-making is all about knowing who you’re dealing with and what is important to them. If they’re inexperienced, weak, and terrified of the money jumps, then you have a lot of leverage. If you keep your cool, you’ll be negotiating from the high ground. Sometimes, though, you’ll be dealing with people who are more stubborn or feel that they deserve more than they actually do. It’s also possible they’re a good negotiator.

When you run into these people, be prepared to take it back to the felt and play your A-game. The trump card of deal-making is always the offer to stop negotiating and continue playing. If the player you’re negotiating with is concerned about the money and scared of the pay jumps, your willingness to play for the big bucks and big swings should scare them into submission.

Just remember that when it’s time to make a deal, you need to keep your poker player mind cranking. The ability to make a strong deal can have a much more profound effect on your career bottom line than any piece of strategy or playing skill you can pick up. Take your time when you negotiate, keep your cool, and don’t let your emotions show if they aren’t to your advantage. Sound a lot like poker?