It seems that you are thinking about venturing into the sub-brokership business. But are still not sure whether it is profitable? Becoming a sub-broker of a reputed stock brokerage house can not only be a profitable business venture but also a great avenue for your professional growth and networking.
This article will tell why a sub-brokership business can be a profitable venture, how much profit you can expect, and the benefits of becoming a sub broker.
Why is Sub-brokership a Profitable Business Venture?
To begin with, let’s directly check the reasons why sub-brokership is a profitable business venture.
- First of all, the investment you require to become a sub-broker with a stock brokerage house is quite low compared to other business ventures. You can start a sub-brokership business with a nominal security deposit of Rs. 1 lakh to Rs. 2 lakhs. The best part of becoming a sub-broker is that there is no investment you need to make. The above-mentioned figure is the security deposit you need to keep with the brokerage house with whom you are getting associated. While sub-brokership without deposit is not that common, some brokerage houses offer such provisions. So, the investment being low, the margin of profit becomes more.
- Then comes the reputation and brand value of the brokerage house, which helps you develop your business. In other businesses, you need to create brand value and popularity for your products and services. However, when you become a sub-broker of a stock brokerage house that already has a wide network and popularity in the market, you already have that setup. This helps you get more clients, increase revenue and earn more profit.
- You get the best training and support from the stock brokerage house. When you start your journey with a stock brokerage house, they not only train you about their products but also provide you with marketing support to help the business in your area or region. They also provide back-office support, which is necessary to track all the transactions of the clients and calculate the revenue generated by them. This helps in understanding and computing the amount of profit you generate in a month or so.
- Sub-brokership business is not only profitable from the monetary point of view, but it is also profitable when it comes to network building and skills development. As a sub-broker, you need to handle clients, pitch to them, handle their problems, and a lot of other services you need to provide. Also, you need to be aware of stock market updates, developments, and announcements. All these benefit the sub-broker and develop them professionally for a better future.
How Much Profit do Sub-brokers Make in a Month or Year?
Now you know why the sub-brokership business is profitable, but let’s see how much profit you can churn in a month and a year.
First, you need to understand the sub-brokership business model works on a revenue-sharing basis. Some brokerage houses share a percentage of revenue, while others share a lump sum.
Percentage-based revenue sharing is like a fixed percentage of the revenue generated by the sub-broker, which will be given to them as their earnings. Suppose you and the brokerage house you are working with shares revenue as 60% -40%. This means the stock brokerage house keeps 40% of the revenue while sharing 60% of the revenue with the sub-broker.
Now, you have generated revenue of Rs. 1 lakh in June. So, Rs. 60000 will come into your bank account as your earnings from the sub-brokership business, while the brokerage house will retain Rs. 40000. So, under this revenue-sharing model, the profit will vary as per the amount of revenue you generate for the broker.
Fixed or lump-sum revenue sharing means a fixed amount will be given to the sub-brokers every month or year irrespective of the revenue they generate. Suppose you and the stock brokerage house have agreed up to Rs. 12 lakhs per year as the revenue share. So, whether you generate Rs. 50 lakhs or Rs. 20 lakhs of revenue that won’t affect your revenue share.
However, in lump-sum revenue share, there is a revenue threshold that you have to meet usually so that the brokerage house gets the adequate business.
Final Thoughts All of these indicate that the sub-brokership business is a profitable venture with nominal investments and higher profit margins. However, you should always consider your networking skills and the stock brokerage house you are associating with before becoming a sub-broker.