How to open a security brokerage firm?
Want to start a security brokerage firm but don't know where to begin? Then you've come to the right place!
Our comprehensive guide covers everything related to opening a security brokerage firm - from choosing the right concept to setting out your marketing plan and financing your business.
You'll also learn how to assess the profitability of your business idea and decide whether or not it can be viable from a financial perspective.
Ready to kickstart your entrepreneurial journey? Let's begin!
Understanding how a security brokerage firm works
The very first step when exploring a business idea such as starting a security brokerage firm is to make sure you understand how the business operates and makes money (which is what we call the business model).
This will not only give you an initial idea of how profitable the business can be, but it will also enable you to make sure that this is the right business idea for you, given your skills, start-up capital and family or personal lifestyle, in particular.
The best ways to get to grips with the security brokerage firm's business model are to:
- Talk to security brokerage firm owners with experience
- Work a few months in a security brokerage firm already in operation
- Take a training course
Talk to security brokerage firm owners with experience
Experienced security brokerage firm owners have valuable insights and can provide practical advice based on their firsthand experiences.
They've likely encountered and overcome challenges that a newcomer might not anticipate. Learning from other’s mistakes can save you both time and money and potentially increase your venture’s chances of succeeding.
Work a few months in a security brokerage firm already in operation
Obtaining work experience in the industry can be a crucial factor in confirming whether you truly want to start a security brokerage firm, as it provides insight into the day-to-day activities.
For instance, if the working hours are longer than expected or if other business requirements don't align with your personal lifestyle or preferences, you might reconsider your entrepreneurial goals.
Even if you've decided that this business idea is a good fit for you, gaining work experience will still be valuable. It helps you better understand your target market and customer needs, which is likely to be beneficial when launching your own security brokerage firm.
Take a training course
Obtaining training within your chosen industry is another way to get a feel for how a security brokerage firm works before deciding to pursue a new venture.
Whatever approach you choose to familiarise yourself with the business, before going any further with your plans to open a security brokerage firm, make sure you understand:
- What skills are required to run the business (compare this with your own skills)
- What a typical week in the business is like (compare this with your personal or family life)
- What is the potential turnover of a security brokerage firm and the long-term growth prospects (compare this with your level of ambition)
- Your options once you decide to sell the business or retire (it's never too early to consider your exit)
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Assembling your security brokerage firm's founding team
The next step to opening your security brokerage firm is to think about the ideal founding team, or to decide to go in alone.
Starting and growing a successful business doesn't have to be a solo journey and setting up a security brokerage firm with several co-founders is generally easier. The business benefits from a management team with a wider skillset, decisions are made together, and the financial risk is shared among the partners, making the journey more collaborative and less daunting.
But, running a business with several partners brings its own challenges. Disagreements between co-founders are quite common, and these can pose risks to the business. That's why it's crucial to consider all aspects before starting your own business.
We won't go into too much detail here, as this is a complex topic that deserves its own guide, but we do recommend that you ask yourself the following questions:
- What is the ideal number of co-founders for this venture?
- Are you on the same wavelength as your potential partners in terms of vision and ambition?
- How will you deal with potential failure?
Let's look at each of these questions in more detail.
What is the ideal number of co-founders for this venture?
To answer this question you will need to consider the following:
- What skills do you need to run the business? Are you lacking any?
- How much startup capital do you need? How much do you have?
- How are key decisions going to be made? - It is usually advisable to have an odd number of partners (or a majority shareholder) to help break the tie.
Put simply, your co-founders contribute skills, capital, or both. Increasing the number of partners becomes advantageous when there is a deficiency in either of these resources.
Are you on the same wavelength as your potential partners in terms of vision and ambition?
Your business partners should share the same short and long-term vision, be it business expansion or social responsibility, to avoid future frustrations and simplify decision-making. Different views are natural, but alignment is ideal.
In any case, you should think of having an exit mechanism in place in case one of the partners wants to move on.
How will you deal with potential failure?
We wish you nothing but success when starting up and growing your security brokerage firm, but it's always wise to have a backup in case things don't go as planned.
How you deal with a potential failure can vary significantly based on the relationship you have with your business partner (close friend, spouse, ex-colleague, etc.) and the personal circumstances of each of you.
For instance, starting a business with your spouse might seem appealing, but if it doesn't succeed, you risk losing 100% of the household income at once, which could be stressful.
Similarly, going into a partnership with a friend can put pressure on the friendship in the event of failure or when you need to make difficult decisions.
There is no wrong answer, but it is essential to carefully evaluate your options before starting up to ensure you're well-prepared for any potential outcomes.
Conducting market research for a security brokerage firm
The next step in launching a security brokerage firm is to carry out market research. Let's take a look at what this involves.
The objectives of market research
The objective here is very simple: to assess the level of demand for your business and whether there is an opportunity for it to thrive in your chosen location.
The first step will be to check that the market is not saturated with competing offers and that there is room for a new player: your security brokerage firm.
Your market analysis will also help you identify a concept and market positioning that has every chance of being successful in your target market, thereby helping increase your business's chances of success.
Carrying out market research for your security brokerage firm will also enable you to better understand the expectations of your future customers and the most effective ways to communicate with them in your marketing plan.
Analyse key trends in the industry
Your market research should start with an industry analysis in order to gain a good understanding of the main players and current trends in your sector.
Once you've delved into the current state of the market, it will be time to assess what proportion of your target market can be seized by your security brokerage firm. To do this, you will need to consider both the demand and supply side of the market.
Assess the demand
After checking out the industry, let's shift our focus to figuring out what your potential customers want and how they like to buy.
A classic mistake made by first-time entrepreneurs is to assess demand on the global or national market instead of concentrating on their target market. Only the market share that can be captured by your company in the short term matters.
Your demand analysis should seek to find answers to the following questions:
- Who are your target customers?
- How many are there?
- What are their expectations?
- What are their buying habits?
- How much budget do they have?
- What are the different customer segments and their characteristics?
- What are the main distribution channels and means of communication for reaching each segment?
The aim of the demand analysis is to identify the customer segments that could be targeted by your security brokerage firm and what products and services you need to offer to meet their expectations.
Analyse the supply side
You will also have to familiarize yourself with the competing security brokerage firms on the market targeted by your future business.
Amongst other things, you’ll need to ask yourself:
- Who are the main competitors?
- How many competitors are already present?
- Where are they located?
- How many people do they employ?
- What is their turnover?
- How do they set their prices?
- Are they small independent businesses or national players?
- Do they seem to be in difficulty or are they flourishing?
- What is their market positioning?
- What types of products and services do they offer?
- What do customers seem to like about them?
The aim of the competitive analysis is to identify who your competitors will be and to gather information that will help you find a differentiating commercial positioning (more on that later in this guide).
Regulations
Conducting market research is also an opportunity to look at the regulations and conditions required to do business.
You should ask yourself the following questions:
- Do you need to have a specific degree to open a security brokerage firm?
- Do you need specific licences or permits?
- What are the main regulations applicable to your future business?
Given that your project is at an early stage, your focus should be to clear that there are no roadblocks from a regulatory standpoint before you deep dive into the planning process.
Once your project is more advanced, you will have the opportunity to talk about regulation more in-depth with your lawyer.
Concluding your market research
By the time your market research is completed, you should have either:
- Pinpointed an untapped business opportunity
- Or arrived at the realisation that the market is saturated, prompting the search for alternative business ideas or models.
If the conclusion is that there is an opportunity in the market to cater to one or more customer segments currently overlooked by competitors, that's great!
Conversely, if you come to the conclusion that the market is already saturated, don’t panic! The good news is that you won’t spend several years working hard on a project that has little chance of success. There is no shortage of business ideas either - at The Business Plan Shop, we have identified more than 1,300 potential business ideas!
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How should I position my security brokerage firm on the market?
The next step to start your security brokerage firm is to define precisely the market positioning your company will adopt in order to capitalise on the opportunity identified during your market research.
Market positioning refers to the place your product and service offering occupies in customers' minds and how they differ from the competition. Being perceived as a low-cost solution, for example.
To find a concept and a market positioning that will resonate with your customers, you need to address the following issues:
- How can you differentiate yourself from your competitors?
- Do you have the option of joining a franchise to reduce risk?
- Is it better to start or buy a security brokerage firm already in operation?
- How will you validate your concept and market positioning before investing in the business?
Let's look at these aspects in more detail.
How can you differentiate yourself from your competitors?
Opening a security brokerage firm means starting with a major disadvantage compared with competitors already active on the market.
While you will have to create everything from scratch, your competitors already have everything in place.
Your competitors' teams know the business well, whereas yours has only just been recruited, their customers are loyal and they benefit from word of mouth that you don't yet have.
So you're going to need a solid plan to succeed in taking market share from your competitors and making your mark.
There are a number of aspects to consider in order to try to avoid direct confrontation if possible:
- Can you target a different customer base than your competitors?
- Can you offer products or services that are different from or complementary to what your competitors already sell?
- How will your competitors react to your security brokerage firm entering their market?
- Can you build a sustainable competitive advantage that will enable you to compete with your current and future competitors?
Do you have the option of joining a franchise to reduce risk?
A proven way of reducing the risk of your business venture is to join a franchise.
Joining a security brokerage firm franchise means you don't have to start from scratch. You benefit from the brand recognition of a group and support with operational processes, relations with suppliers, recruitment, etc.
On the flip side, being part of a franchise will restrict your personal freedom, and you'll have to pay an entry fee and an annual royalty (typically a percentage of your sales).
Nevertheless, where possible, starting up as a franchise is generally a good way of reducing risks, especially if you're up against competitors with well-known brands.
Please note, however, that franchising opportunities vary from country to country and region to region, so there is no guarantee that you'll be able to find a franchise.
Is it better to start or buy a security brokerage firm already in operation?
The other alternative to setting up a new independent business is to buy out and take over a security brokerage firm already in operation.
Here too, a takeover is a good way of reducing the risk of your project compared with a pure start-up.
Taking over a business has two enormous advantages over setting up a new one: you start out on an equal footing with your competitors since you take over the team and the customer base, and you don't increase the supply on the market enabling you to maintain the existing balance on the market where the business operates.
However, as with franchising, the capital requirements for a takeover are higher because the business will have to be bought from its previous owners.
How will you validate your concept and market positioning before investing in the business?
However you decide to set up your business, you will need to ensure that there is a good fit between what you sell and what customers are looking to buy.
To do this, you'll need to meet your target customers to present your products or services and check that they meet their expectations.
Where should I base my security brokerage firm?
The next step in our guide on starting a security brokerage firm involves making a key choice about where you want your business to be located.
Picking the ideal location for your business is like selecting the perfect canvas for a painting. Without it, your business might not showcase its true colors.
We recommend that you take the following factors into account when making your decision:
- Visibility and foot traffic: A security brokerage firm relies on attracting clients and investors. Therefore, a location with high visibility and foot traffic, such as a busy commercial area or financial district, would be ideal.
- Parking space, road and public transport accessibility: Clients and employees of a security brokerage firm would appreciate a location with ample parking space and easy access via public transport. This would make it convenient for meetings and daily commute.
- Proximity to target customers: A security brokerage firm may have a specific target demographic, such as high net worth individuals or businesses. Being located near potential clients can make it easier to build relationships and attract new business.
- Competitor presence: While it may seem counterintuitive, having a few competitors nearby can be beneficial for a security brokerage firm. It can indicate a strong demand for financial services in the area and also provide opportunities for collaboration.
This list is not comprehensive and will have to be adjusted based on the details of your project.
The parameters to be taken into account will also depend on whether you opt to rent premises or buy them. If you are a tenant, you will need to consider the conditions attached to the lease: duration, rent increase, renewal conditions, etc.
Lease agreements differ widely from country to country, so it's essential to review the terms that apply to your situation. Before putting pen to paper, consider having your lawyer look carefully at the lease.
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Decide on a legal form for your security brokerage firm
It's now time to think about the legal structure for your security brokerage firm.
The legal form of a business simply means the legal structure it operates under. This structure outlines how the business is set up and defines its legal obligations and responsibilities.
What are the most common legal structures?
Naturally, the names and intricacies of business structures differ by country. However, they typically fit into two main categories:
- Individual businesses
- Companies
Individual businesses
Individual businesses are usually a good fit for self-employed individuals and freelancers who want limited administrative work. These types of entrepreneurs are commonly referred to as sole traders or sole proprietorships.
As mentioned above, the main benefit of being a sole trader is that minimal paperwork is required to launch and operate the business. Tax calculations are also relatively simple and annual accounts are not always required (and when they are, usually don't need to be audited) which saves a bit of time and money on bookkeeping and accounting fees.
Decision-making is also easy as the final decision is fully dependent on the sole trader (even if employees are hired).
However, being a sole trader also has drawbacks. The main disadvantage is that there is no separation between the individual running day-to-day operations and the business.
This means that if the business were to file for bankruptcy or legal disputes were to arise, the individual would be liable for any debts and their personal assets subsequently at risk. In essence, sole traders have unlimited liability.
This also means that profits earned by the business are usually taxed under the personal income tax category of the sole trader.
Another drawback is that sole traders might find it harder to finance their business. Debt (bank loan for example) is likely to be the only source of external financing given that the business doesn't have a share capital (effectively preventing equity investors from investing in their business).
Companies
Companies are more flexible and more robust than individual businesses. They are suitable for projects of all sizes and can be formed by one or more individuals, working on their own or with employees.
Unlike individual businesses, companies are recognised as distinct entities that have their own legal personality. Usually, there is also a limited liability which means that founders and investors cannot lose more than the capital they have invested into the business.
This means that there is a clear legal separation between the company and its owners (co-founders and investors), which protects the latter's personal assets in the event of legal disputes or bankruptcy.
Entrepreneurs using companies also gain the advantage of being able to attract equity investment by selling shares in the business.
As you can see companies offer better protection and more financing options, but this comes at a trade-off in terms of red-tape and complexity.
From a taxation perspective, companies are usually liable for corporation tax on their profits, and the income received by the owners running the business is taxed separately (like normal employees).
Normally, companies also have to produce annual accounts, which might have to be audited, and hold general assemblies, among other formalities.
How should I choose my security brokerage firm's legal setup?
Choosing the right legal setup is often simple once you figure out things like how many partners you'll have, if you hire employees, and how much money you expect to make.
Remember, a great business idea can work well no matter which legal structure you pick. Tax laws change often, so you shouldn't rely too much on getting specific tax benefits from a certain structure when getting started.
You could start by looking at the legal structures most commonly utilised by your competitors. As your idea evolves and you're ready to officially register your business, it's a good idea to confirm your choice using inputs from a lawyer and an accountant.
Can I switch my security brokerage firm's legal structure if I get it wrong?
Yes, you have the flexibility to change your legal setup later, which might include selling the existing one and adopting a new structure in certain situations. Keep in mind, though, that this restructuring comes with additional expenses, so making the right choice from the start is usually more cost-effective.
Can your business idea be profitable?
Just enter your data and let The Business Plan Shop crunch the numbers. We will tell if your business idea can generate profits and cash flows, and how much you need to get started.
Calculating the budget to open a security brokerage firm
The next step to opening a security brokerage firm involves thinking about the equipment and staff needed to launch and run your business on a day-to-day basis.
Each project has its own characteristics, which means that it is not possible to estimate the budget for opening a security brokerage firm without building a complete financial forecast.
So be careful when you see estimates circulating on the Internet. As with all figures, ask yourself these questions:
- Is my project similar (location, concept, size, etc.)?
- How recent is the information?
- Is it from a trustworthy source?
Startup costs and investments to open a security brokerage firm
For a security brokerage firm, the initial working capital requirements and investments may include the following elements:
- Technology Upgrades: As a security brokerage firm, you will need to constantly stay up-to-date with the latest technology to ensure the safety and security of your clients' investments. This may include purchasing new computer equipment, software, and other technological tools to enhance your services.
- Office Renovations: Your office space is a reflection of your company's professionalism and credibility. As your brokerage firm grows, you may need to invest in office renovations and upgrades to accommodate more staff, improve the layout and design, and create a comfortable and professional environment for your clients.
- Security Measures: In the financial industry, security is of utmost importance. As a security brokerage firm, you will need to invest in various security measures such as security cameras, alarm systems, and other security tools to protect your clients' confidential information and assets.
- Training and Development: While this may not fall under operating expenses, investing in the training and development of your employees is crucial for the success and growth of your brokerage firm. This may include attending conferences, workshops, and other training programs to stay updated on industry trends and regulations.
- Marketing and Advertising: Though not typically considered a capital expenditure, investing in marketing and advertising efforts can be a valuable asset for a security brokerage firm. This may include creating a professional website, developing marketing materials, and advertising in relevant publications to attract potential clients and increase brand awareness.
Of course, you will need to adapt this list to your company's specific needs.
Staffing plan to operate a security brokerage firm
To establish an accurate financial forecast for your security brokerage firm, you will also need to assess your staffing requirements.
The extent to which you need to recruit will of course depend on your ambitions for the company's growth, but you might consider recruiting for the following positions:
Once again, this list is only indicative and will need to be adjusted according to the specifics of your security brokerage firm.
Other operating expenses required to run a security brokerage firm
You also need to consider operating expenses to run the business:
- Staff Costs: This includes salaries, bonuses, and benefits for employees such as brokers, analysts, and support staff.
- Accountancy Fees: You will need to hire an accountant or accounting firm to handle your financial records and tax obligations.
- Insurance Costs: As a security brokerage firm, you will need to have insurance to protect against potential lawsuits or other risks.
- Software Licences: You will need to purchase licenses for software programs that are necessary for your business operations, such as trading platforms and data analysis tools.
- Banking Fees: This expense includes fees for maintaining a business bank account, wire transfers, and other banking services you may need.
- Rent: You will need a physical office space to operate your business, which will incur monthly rent expenses.
- Marketing and Advertising: To attract clients and promote your services, you will need to allocate a budget for marketing and advertising efforts.
- Training and Education: As the financial industry is constantly evolving, you will need to invest in ongoing training and education for your employees to stay updated on market trends and regulations.
- Telecommunications: This includes expenses for phone and internet services, which are essential for communication and conducting business transactions.
- Office Supplies: This includes expenses for necessary office supplies such as stationery, printer ink, and other materials.
- Professional Memberships: To stay connected with the industry and access valuable resources, you may need to pay for memberships to professional organizations or associations.
- Travel Expenses: You may need to travel for business meetings, conferences, or client visits, which will incur expenses for transportation, lodging, and meals.
- Legal Fees: As a security brokerage firm, you may need to seek legal counsel for various matters, which will incur legal fees.
- Compliance Costs: You will need to comply with various regulations and laws, which may include hiring compliance officers or investing in compliance software.
- Office Equipment and Supplies: This includes expenses for purchasing or leasing office equipment such as computers, printers, and furniture.
This list will need to be adapted to the specifics of your security brokerage firm but should be a good starting point for your budget.
Create a sales & marketing plan for your security brokerage firm
The next step to launching your security brokerage firm is to think about the actions you need to take to promote your products and services and build customer loyalty.
Here, you'll be looking at the following issues:
- What is the best method to attract as many new customers as possible?
- How to build customer loyalty and spread word of mouth?
- What human and financial resources will be required to implement the planned actions?
- What level of sales can I expect to generate in return?
The precise sales and marketing levers to activate will depend on the size of your security brokerage firm. But you could potentially leverage some of the initiatives below.
Besides your sales and marketing plan, your sales forecast will be affected by seasonal patterns related to the nature of your business, such as fluctuations during the holiday season, and your competitive landscape.
Can your business idea be profitable?
Just enter your data and let The Business Plan Shop crunch the numbers. We will tell if your business idea can generate profits and cash flows, and how much you need to get started.
Building your security brokerage firm's financial forecast
The next step to opening a security brokerage firm is to create your financial forecast.
What is a security brokerage firm financial forecast?
A security brokerage firm financial forecast is a forward-looking tool that projects the financial performance of your business over a specific period (usually 3 years for start-ups).
A forecast looks at your business finances in detail - from income to operating costs and investments - to evaluate its expected profitability and future cash flows.
Building a financial forecast enables you to determine the precise amount of initial financing required to start your security brokerage firm.
There are many promising business ideas but very few are actually viable and making a financial forecast is the only way to ensure that your project holds up economically and financially.
Your financial forecast will also be part of your overall business plan (which we will detail in a later step), which is the document you will need to secure financing.
Financial forecasts are used to drive your security brokerage firm and make key decisions, both in the pre and post-launch phases:
- Should we go ahead with the business or scrap the idea?
- Should we hire staff or use an external service provider?
- Which development project offers the best growth prospects?
- Etc.
Creating a financial forecast for starting a security brokerage firm is an iterative process as you will need to refine your numbers as your business idea matures.
As your security brokerage firm grows, your forecasts will become more accurate. You will also need to test different scenarios to ensure that your business model holds true even if economic conditions deteriorate (lower sales than expected, difficulties in recruiting, sudden cost increases or equipment failure problems, for example).
Once you’ve launched your business, it will also be important to regularly compare your accounting data to your financial projections in order to keep your forecast up-to-date and maintain visibility on future cash flows.
What does a financial projection look like?
The following financial tables will be used to present your security brokerage firm's financial forecast.
The projected P&L statement
Your security brokerage firm's forecasted P&L statement will enable you to visualise your security brokerage firm's expected growth and profitability over the next three to five years.
The projected balance sheet of your security brokerage firm
The projected balance sheet gives an overview of your security brokerage firm's financial structure at the end of the financial year.
The cash flow projection
A cash flow forecast for a security brokerage firm shows the projected inflows and outflows of cash over a specific period, providing insights into liquidity and financial health.
What is the best financial forecasting tool for starting your security brokerage firm?
The simplest and easiest way to create your security brokerage firm's projections is to use professional online financial forecasting software such as the one we offer at The Business Plan Shop.
There are several advantages to using specialised software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- The software helps you identify and correct any inconsistencies in your figures
- You can create scenarios to stress-test your forecast's main assumptions to stress-test the robustness of your business model
- After you start trading, you can easily track your actual financial performance against your financial forecast, and recalibrate your forecast to maintain visibility on your future cash flows
- You have a friendly support team on standby to assist you when you are stuck
If you are interested in this type of solution, you can try our forecasting software for free by signing up here.
Finding a name and registering your security brokerage firm
The next step in starting a security brokerage firm is to decide on a name for your entity.
For starters, you cannot take a name similar to a name already registered by a competitor or protected by a trademark without inevitably risking getting sued. So you’ll need to find a name available, and reserve it before others can.
In addition, you will probably want to use the same name for:
- Your company’s legal name - Example LTD or Example Inc
- Your trading name - Example
- A trademark - Example ®
- Your company’s domain name - Example.com
The issue is that you’ll need to register your name in three different places almost simultaneously, but with each place having its own timeframes:
- Registering a domain name is instantaneous
- Registering a trademark takes at least 3 months (if your application is accepted)
- Registering a company depends on the country, but it's generally fairly quick
You will therefore be faced with the choice of either registering everything at once in the hope that your name will be accepted everywhere, or proceeding step by step in order to minimise costs, but taking the risk that someone else will register one of the names you wanted in the meantime.
Our advice is to discuss the strategy with your legal counsel (see further down in this guide) and to give priority to your domain names and your registered trademark. You'll always have the option of using a trading name that's different from your company's legal name, and that's not a big deal.
To check that the name you want is not already in use, you should consult:
- Your country's business register
- The register of trademarks where you wish to obtain protection
- Your preferred search engine
- A domain name reservation company (such as GoDaddy)
If the name you want is available, you can go ahead and register it.
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Develop your security brokerage firm's corporate identity
The next step to launching a security brokerage firm: defining your company's visual identity.
Your corporate identity defines how your company's values are communicated visually. It makes you unique and allows you to stand out visually from your competitors and be recognized by your customers.
Defining your corporate identity can easily be done by you and your co-founders, using the many free tools available to generate color palettes, logos and other graphic elements. Nevertheless, this task is often best entrusted to a designer or agency to achieve a professional result.
Your security brokerage firm's visual identity will include the following elements:
- Logo
- Brand guidelines
- Business cards
- Website theme
Logo
The goal is to have stakeholders identify your business logo quickly and relate to it. Your logo will be used for media purposes (website, social networks, business cards, etc.) and legal documents (invoices, contracts, etc.).
The design of your logo must be emblematic, but it's also important that it can be seen on any type of support. To achieve this, it should be easily available in a range of colors, so that it stands out on both light and dark backgrounds.
Brand guidelines
The brand guidelines of your security brokerage firm act as a safeguard to ensure that your image is consistent whatever the medium used.
Brand guidelines lay out the details like the typography and colors to use to represent your company.
Typography refers to the fonts used (family and size). For example, Arial in size 26 for your titles and Tahoma in size 15 for your texts.
When it comes to the colors representing your brand, it's generally a good idea to stick to five or fewer:
- The main colour,
- A secondary colour (the accent),
- A dark background colour (blue or black),
- A grey background colour (to vary from white),
- Possibly another secondary colour.
Business cards
A rare paper medium that continues to survive digitalization, business cards are still a must-have for communicating your security brokerage firm contact details to your customers, suppliers and other partners.
In principle, they will include your logo and the brand guidelines we mentioned above.
Website theme
Likewise, the theme of your security brokerage firm website will include your logo and follow the brand guidelines we discussed earlier.
This will also define the look and feel of the main visual elements on your website:
- Buttons
- Menus
- Forms
- Banners
- Etc.
Understanding the legal and regulatory steps involved in opening a security brokerage firm
The next step in opening a security brokerage firm is to take the necessary legal and regulatory steps.
We recommend that you be accompanied by a law firm for all of the steps outlined below.
Registering a trademark and protecting the intellectual property of your security brokerage firm
The first step is to protect your company's intellectual property.
As mentioned earlier in this guide, you have the option to register a trademark. Your lawyer can assist you with a thorough search to ensure your chosen trademark is unique and doesn't conflict with existing ones and help select the classes (economic activities) and jurisdictions in which to register your trademark.
Your lawyer will also be able to advise you on other steps you could take to protect your company's other intellectual property assets.
Drafting the contractual documents for your security brokerage firm
Your security brokerage firm will rely on a set of contracts and legal documents for day-to-day operations.
Once again, we strongly recommend that you have these documents drawn up by a lawyer.
Your exact needs will depend on the country in which you are launching your security brokerage firm and the size of the company you are planning.
However, you may wish to consider the following documents at a minimum:
- Employment contracts
- General terms and conditions of sale
- General terms and conditions of use for your website
- Privacy Policy for your website
- Cookie Policy for your website
- Invoices
- Etc.
Applying for licences and permits and registering for various taxes
The licenses and permits needed for your business will depend on the country where you are establishing it. Your lawyer can guide you on the regulations relevant to your activity.
Similarly, your chartered accountant will be able to help you register for taxes and take the necessary steps to comply with the tax authorities.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast and write a business plan to help convince investors that your business idea can be profitable.
How do I write a business plan for a security brokerage firm?
Once you've completed all the above steps, you can start writing the business plan for your security brokerage firm.
What is a security brokerage firm's business plan?
The business plan is a document containing:
- The financial forecast (discussed earlier in this guide), highlighting the project's financing requirements and profitability potential,
- A written presentation, which presents your project in detail and provides the necessary context for the reader to assess the relevance and coherence of your forecast.
The business plan is particularly important: it will help you validate your business idea and ensure its coherence and financial viability.
But it's also the document you'll send to your bank and potential investors to present your plan to open a security brokerage firm and make them want to support you.
So it's best to draw up a professional, reliable and error-free business plan.
How to write a business plan for my security brokerage firm?
If you're not used to writing business plans, or if you want to save time, a good solution is to use an online business plan software for startups like the one we offer at The Business Plan Shop.
Using The Business Plan Shop to create a business plan for a security brokerage firm has several advantages:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You are guided through the writing process by detailed instructions and examples for each part of the plan
- You can access a library of dozens of complete startup business plan samples and templates for inspiration
- You get a professional business plan, formatted and ready to be sent to your bank or investors
- You can create scenarios to stress test your forecast's main assumptions
- You can easily track your actual financial performance against your financial forecast by importing accounting data
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
Interested? If so, you can try The Business Plan Shop for free by signing up here.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast and write a business plan to help convince investors that your business idea can be profitable.
How to raise finance for my security brokerage firm?
Once your business plan has been drafted, you’ll need to think about how you might secure the financing necessary to open your security brokerage firm.
The amount of initial financing required will obviously depend on the size of your security brokerage firm and the country in which you wish to set up.
Businesses have access to two main categories of financing: equity and debt. Let's take a closer look at how they work and what sources are available.
Equity funding
At a high level, the equity of your security brokerage firm will consist of the money that founders and potential investors will invest to launch the company.
Equity is indispensable as it provides the company with a source of long-term (often permanent) financing and demonstrates the founders' conviction in the company's chances of success, since their investments would be lost in the event of bankruptcy.
Equity investors can generate a return on their investment through dividends (which can only be paid out if the company is profitable) or capital gains on the resale of their shares (if the company is attractive enough to attract a buyer).
As you can see, the equity investors' position is extremely risky, since their capital is at risk and can be lost in the event of bankruptcy, and the company must be profitable or resellable before they can hope to generate a return on their investment.
On the other hand, the return on investment that equity investors can expect to generate by investing in a security brokerage firm can be very substantial if the company is successful.
This is why equity investors look for start-up ideas with very high growth or profitability potential, in order to offset their risk with a high potential return on investment.
In technical terms, equity includes:
- Share capital and premiums: which represent the amount invested by the shareholders. This capital is considered permanent as it is non-refundable. In return for their investment, shareholders receive shares that entitle them to information, decision-making power (voting in general assembly), and the potential to receive a portion of any dividends distributed by the company.
- Director loans: these are examples of non-permanent capital advanced to the company by the shareholders. This is a more flexible way of injecting some liquidity into your company than doing so as you can repay director loans at any time.
- Reserves: these represent the share of profits set aside to strengthen the company's equity. Allocating a percentage of your profits to the reserves can be mandatory in certain cases (legal or statutory requirement depending on the legal form of your company). Once allocated in reserves, these profits can no longer be distributed as dividends.
- Investment grants: these represent any non-refundable amounts received by the company to help it invest in long-term assets.
- Other equity: which includes the equity items which don't fit in the other categories. Mostly convertible or derivative instruments. For a small business, it is likely that you won't have any other equity items.
The main sources of equity are as follows:
- Money put into the business from the founders' personal savings.
- Money invested by private individuals, which can include business angels, friends, and family members.
- Funds raised through crowdfunding, which can take the form of either equity or donations (often in exchange for a reward).
- Government support to start-ups, for example, loans on favourable terms to help founders build up their start-up capital.
Debt funding
The other way to finance your security brokerage firm is to borrow. From a financial point of view, the risk/return profile of debt is the opposite of that of equity: lenders' return on investment is guaranteed, but limited.
When it borrows, your company makes a contractual commitment to pay the lenders by interest, and to repay the capital borrowed according to a pre-agreed schedule.
As you can see, the lenders' return on investment is independent of whether or not the company is profitable. In fact, the only risk taken by lenders is the risk of the company going bankrupt.
To avoid this risk, lenders are very cautious, only agreeing to finance when they are convinced that the borrowing company will be able to repay them without problems.
From the point of view of the company and its stakeholders (workforce, customers, suppliers, etc.), debt increases the risk of the venture, since the company is committed to repaying the capital whether or not it is profitable. So there's a certain distrust towards heavily indebted companies.
Companies borrow in two ways:
- Against their assets: this is the most common way of borrowing. The bank finances a percentage of the price of an asset (a vehicle or a building, for example) and takes the asset as collateral. If the company cannot repay, the bank seizes the asset and sells it to limit its losses.
- Against their future cash flows: the bank reviews the company's financial forecast to estimate how much the company can comfortably borrow and repay, and what terms (amount, interest rate, term, etc.) the bank is prepared to offer given the credit risk posed by the company.
When creating a security brokerage firm, the first option is often the only one available, as lenders are often reluctant to lend on the basis of future cash flows to a structure that has no track record.
The type of assets that can be financed using the first method is also limited. Lenders will want to be sure that they can dispose of foreclosed assets if needed, so they need to be assets that have an established second-hand market.
That being said, terms and conditions also depend on the lender: some banks are prepared to finance riskier projects, and not all have the same view of your company's credit risk. It also depends on the collateral you can offer to reduce risk, and on your relationship with the bank.
In terms of possible sources of borrowing, the main sources here are banks and credit institutions.
In some countries, it's also possible to borrow from private investors (directly or via crowdlending platforms) or other companies, but not everywhere.
Takeaways on how to finance a security brokerage firm
Multiple options are available to help you raise the initial financing you need to launch your security brokerage firm.
There are two types of financing available to companies. To open a security brokerage firm, an equity investment will be required and may be supplemented by bank financing.
Track your actuals against your forecast
You've reached the end of the road and are ready to launch your security brokerage firm.
Congratulations and welcome to the fantastic world of entrepreneurship! Celebrate the work you've done so far, and get back to work quickly, because this is where the real work begins.
Your first priority will be to do everything you can to make your business sustainable (and thus avoid being one of the 50% of start-ups that fail within five years of launching).
Your business plan will be your best ally to ensure that you're on track to achieve your objectives, or to help rectify the situation if necessary.
The key to financial management is to regularly compare your actual accounting data with your security brokerage firm forecasts, in order to be able to :
- Quantify the gaps between what you planned and what you achieved
- Adjust your financial forecasts as the year progresses to maintain visibility over your future cash flow
No one can predict the future with certainty, but by closely monitoring the variances between actuals and forecasts, regularly adjusting your forecasts and simulating several scenarios, you can prepare your security brokerage firm for the worst while hoping for the best.
It's the only way to keep an eye on your cash flow and actively manage the development of your security brokerage firm, ultimately reducing the risk to your company.
There's nothing worse than waiting for your company's annual accounts to close, which can be many months after the end of your financial year (up to nine months in the UK for example), only to realize that you've fallen far short of your forecasts for the past year, and that your security brokerage firm urgently needs a cash injection to keep going.
That's why it's strongly recommended to use a financial planning and analysis solution that integrates forecasting, scenario analysis, and actuals vs. forecast tracking, like we do at The Business Plan Shop with our financial dashboards.
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Key takeaways
- To open a security brokerage firm you need to go through each of the 15 steps we have outlined in this guide.
- The financial forecast is the tool that will enable you to check that your project can be profitable and to estimate the investment and initial financing requirements.
- The business plan is the document that your financial partners will ask you to produce when seeking finance.
- Once you have started trading, it will be essential to keep your financial forecasts up to date in order to maintain visibility of the future cash flow of your security brokerage firm.
- Leveraging a financial planning and analysis platform that seamlessly integrates forecasts, business plans, and real-time performance monitoring — like The Business Plan Shop — simplifies the process and mitigates risks associated with launching a business.
We hope this practical guide has given you a better understanding of how to open a security brokerage firm. Please do not hesitate to contact our team if you have any questions or if you would like to share your experience of setting up your own business.
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Founder & CEO at The Business Plan Shop Ltd
