Sub Broker business is considered one of the most lucrative businesses, especially in the banking and finance industry, for all the right reasons.
There is no upper limit on the amount you can earn as a Sub Broker; the more clients you add, the more commission you generate, but is it that simple?
Can you generate 25 lakhs in a year from this Sub Brokers business, and if yes, how? Let’s find out!
How much Income can be generated from Sub Brokers Businesses?
The earning potential of Sub Brokers depends on the number of clients they onboard or the precise number of clients actively trading on the platform the Sub Broker offers.
In the stock broking industry, the usual rate of client activation is around 10%. This means if you get 50 people who open a Demat account with your broker, around 10 – 15 will be actively trading on the platform while the remaining wouldn’t.
So, given this fact, you can determine how much income you can generate from your client base.
The potential earning increases with the number of clients as the number of active clients increases with time when you add more clients to your list.
While you can earn any amount in a month as commission from the Sub Brokers business, even it can be zero if none of your clients trades in a month, but that’s a completely rare situation.
You are bound to get business if you provide the right platform and services.
The average commission that Sub Brokers earn in this industry varies from Rs.12 lakhs to Rs.25 lakhs in a year.
Monthly, this comes to around Rs. 1 lakh to Rs.2 Lakh and above, provided you have a decent active client base.
Expenses of a Sub Broker
To understand how much profit or earnings you can generate from a Sub Brokers business, you must first understand the expenses of being a Sub Broker. This will help you understand the profit margin of the business.
Becoming a Sub Broker primarily revolves around the security deposit that one needs to pay, which is completely refundable, and the SEBI registration and Stock Exchange terminal charges.
The average cost you have to bear initially to start the business is around Rs.61,800, of which Rs.50,000 is the security deposit, and the remaining Rs.11,800 is a summation of registration and other similar charges.
The security deposit can also increase if you choose a higher commission plan with the broker you associate with.
It usually varies between Rs.50,000 to Rs.2 lakhs in this country. The higher the security deposit, the higher the revenue share you will be entitled to.
Along with this, for day to day working, you will require to setup an office & hire 2 to 3 employees depending upon the size of your business.
In this case, your expenses will vary from Rs.20,000 to Rs.60,000 per month.
In certain cases, you can also incur zero investment, if you do all the work on your own during the initial stages of your business.
Similar Topics on Sub Broker
Revenue Generation for Sub Brokers
As mentioned above, the revenue share depends on the security deposit you keep with the broker.
The average range of revenue share for the brokers in the industry ranges between 50% and 70%, with few outliers.
To earn Rs.25 lakhs in a year, you must earn around Rs.2 lakhs monthly. This may seem like a huge amount at the beginning of the business, but it is achievable.
Usually, active clients, those who trade daily, generate around Rs.1000 in a day as brokerage.
If you get, say, 60% of the revenue share, then you will get Rs.600 from this client on an average daily, which means monthly Rs.14,000 (approx.).
Suppose you have a total client base of 100 clients in the first month and add around 50 clients every month at least.
Given the rate of client activation of 10%, in the beginning, only ten clients traded actively, which makes your commission Rs.14000*10 = Rs. 140000 in a month, so within three months, your client base will be around 200.
Out of that, if even 20 clients trade actively, then your monthly earnings will be around Rs. 280000, which makes it more than Rs. 25 lakhs in a year.
How often are Sub Brokers paid?
The monthly amount you earn is paid within 30 days, usually by the main brokerage house.
You can track your monthly and yearly earnings earning’s history on the dashboard offered to the Sub Brokers.
The pay-out period varies from one brokerage house to another. However, it is, on average, around a month.
How to get more clients for your Sub Brokers business?
While the above calculation portrays the idea of revenue generation but the main factor is client acquisition and client activation.
Of course, the earnings figures above are achievable, but only when you have enough clients who trade actively.
You can achieve this by offering a solid trading platform of the broker you are associated with.
So this means you must choose a brokerage house with high-end advanced technology for trading platforms at affordable brokerage charges.
Apart from low brokerage charges, platforms and services are two of the most important factors active clients look at.
So, you need to provide excellent services related to research and advisory or trading or dealing support, customer care, or others.
Make sure to provide daily market updates and stock suggestions to all your clients; this will help you get more business and also help you establish a good rapport with the clients.
To get more clients, you can offer trading courses on your website or conduct webinars and social media to reach out to most interest traders and investors nationwide.
For offline client acquisition, you can conduct seminars in your locality, distribute pamphlets and brochures, or do newspaper advertisements.
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Earn 25 Lakhs per year as Sub Broker – Conclusion
Thus, earning yearly Rs. 25 lakhs from Sub Brokers business is possible, provided you know how to acquire and retain clients by offering the best services and facilities.
With experience and knowledge of the market, the number of clients increases, and so is your earning potential.