Business tips to open a stock broking agency

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Business tips to open a stock broking agency


If you are planning to start off in stock broking, you first question would be, is this a viable business proposition. There are no clear answers to this question and it will largely depend on how you run the show. Stock markets, by definition, are a cyclical business and hence the business of a stock broker will also be largely cyclical. Hence you need to learn to capitalize on the up cycles and consolidate and build your business gradually on the downsides of the cycle. Don’t imagine that the business will be good all the time. As a stock broker you are going to have to put up with challenges like low revenues, lacklustre market conditions, poaching by competition, falling brokerage rates etc. As a broker, what you require is a clear game plan to not only tide over the crisis but also to make the best of the downside risk.

Always keep your trading and broking business in perspective

When in trouble, try and pin point the core problem. Always look back at how you travelled a long distance and that should give you the courage, the reassurance and the confidence of getting the better of the market conditions. If you find yourself struggling to get to office, then it is either time to take a break or focus on some other temporary diversions.

Keep costs in check and don’t go overboard

As a broker you have a variety of fixed and variable costs to handle. Infrastructure costs, deposits, hardware and software costs are all fixed and you have to absorb these costs in the worst of times. Don’t increase your administrative costs and don’t go too aggressive on adding manpower. In the initial days, try to focus more on marketing manpower and have a strict control over costs. Try to work out a variable pay model where your sales persons will work more on a commission basis rather than a fixed pay basis. Don’t beat down brokerage rates too low as it is hard to pick up rates higher. In good times, don’t spend all you earn. Instead try and create a reserve that you can fall back upon in tough times.

You must be a 24X7 marketer; and don’t forget cold calls

As a broker, your primary focus should always be on adding new clients. Some amount of client attrition is part of the game and it may be due to no fault of yours. Try to build a good equity delivery franchise as that gives stable incomes, is less risky and is not too cyclical. A pure trading and F&O franchise can be a lot more risky and cyclical. Try to build various sources of improving your sales funnel. It can be cold calls, it can be mass mailing, you can do email campaigns; there are digital tools like SMS etc which are much cheaper and also more effective. Don’t go for very aggressive marketing and too much of glossy expenses. Above all, ensure that your client is taken care of bad times. That is when clients require the help of the brokers the most. Then they stay with you for a long time.

Micros will not take care of itself

This is a common misconception a lot of stock brokers have in the initial stages that they must focus on the macros and the micros will be taken care of. The answer is that micros will not be taken care of. On the other hand, if you take care of the micros then the macros will take care of itself. The moral of the story is that you need to get involved in every aspect of the business right from back office to audits to client marketing to infrastructure. It may sound like a tall task but unless you can do that you will never be able to get a complete hang of your business. You need to put yourself into a Do-It-Yourself mode. Obviously, you can handle everything on your own but this will ensure that you understand every facet of your business in depth.

Never lose touch with your clients

Try and build a long term engagement with your clients. Over a period of time you will find new clients coming in and old clients moving out. Keeping client feedback loop open to you is the most aspect part of your role. You obviously cannot touch base with every client but ensure three things. Firstly, have frequent coffee side chats with your clients and make it a point to be present. It reassures clients quite a bit. Secondly, keep a tab on client feedback and if you find the business losing clients regularly. These are the clients you must speak to directly. Lastly, keep a tab on social media for negative feedback about your services on various public for a. On these, you must act immediately.

Your are a 24-hour salesman

How do you expand your business spread? Obviously, marketing works but you need to network. Identify the right forums, position yourself as a thought leader, be seen in the right places and you will find a lot of enquiries flow in. A lot of business is lost just because business owners do not network adequately. When we say 24-hour salesman, we do not mean literally. What we means it to make the most of your working day. Time is a resource that you should make the most out of.