I was working with a mentoring client a few days ago who was thinking about starting her own business as an Authorised Representative. However, she was concerned about where to start out, and what she needed to know beforehand.
Overall, when you are thinking of starting your own Authorised Representative (AR) business, there are a few main thing that you need to know and consider. The most important of which being which model of AR will you choose to use. In the industry, there are two main models for small businesses, one where the business is partnered with a brokering firm and one where they go solo.
Type one is the brokering partnership, where the firm owns your business and pay you approximately a third of the total commission. The main advantage of this model is that you are saved the hassle of building up your own business portfolio as one is provided for you to manage, while the firm keeps ownership of it. However, this method has less freedom in terms of what your business can do with the license and puts more pressure to grow the assigned portfolio.
Type two has more freedom as it is essentially going solo from the firm while still using their license.
This model relies on the business owner to build up their own client portfolio, and business system without the firm’s assistance in decision making. In return, the business owner pays the firm a licensing fee of between 15-30% of their commission per client.
Starting out as an AR on your own with either model can be tough, here are the main 4 things you should know before becoming an AR.
1- Income will be low for the first few months.
Like setting up any business, when you are first starting out, business will be slow, so it’s important to have enough savings in the bank and time to put in extra hours to cover your own debts. One of the main problems that new AR’s face is building a client profile, if you are in the broker contracted AR model this won’t be as much of a problem as the profile is provided to you. However, those in the second type will have to start from scratch, forcing them to build their own profile. One for type 2’s to get around this is to purchase an existing book of clients from brokers. The other way is to join forces with referral partners to share client leads around.
As the market fluctuates so does the demand for brokers. Starting off at the wrong time can lead to a disaster for your small business. Look at the market demand for your services and use them to determine when to formally launch your business.
3- Know your Skills.
Your strengths and weaknesses are also crucial to success. Some people may have the best skills in the world for the job but fail because they don’t know how to sell themselves. Work with someone who can help you build your sales skills, confidence and your client book.
4- Find a Mentor
When you are first thinking of starting out as an AR it’s best to find a mentor who has a success business already to help walk you through your options, including: helping you weigh the pros and cons of each of the two different AR types and deciding what model is best for you, spending time working on your business plans and offering important advice on running a business. Not only will your mentor give you an idea of when it is the right time to set up your own business, but they can help you develop skills that you are lacking in areas like sales and finding clients.
In Australia, small business makes up approximately 90% of the companies operating in the country. Starting your own business as an AR makes your company part of that statistic. Consider if you are fully prepared both mentally and financially to make the step into business ownership, and don’t be afraid to discuss your plans and concerns with a mentor.
Want to see if and how I can help you? I offer a 30-minute business review session. During that session I provide my advice on if and how I can help with any of these steps in your business. To find out more email me at firstname.lastname@example.org or phone 0401 109 324.