I think the projections don’t matter as much as product delivery at this point. I live in South Africa and there are easily 50k customers in this market if the solution is accessible. That says something to what available market there is out there. Hundreds of thousands of people have been burned by the CFD/Forex platforms and a pure investment stockbroker is in huge demand. The market size is so big that there is space for literally hundreds of firms as long as the UX meets requirements. If product momentum is kept up, the numbers will be easily achievable.
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If you look at the actual values though, they needed to be making something like £20 per month off each paying customer, ~£200 per year. Even if you have a £10k account, that’s still 2% fees which is insanely high.
The revenue income did not make sense to me.
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I agree with this. The problem comes down to average balances. If the average balance is too low then either people will be paying too much in fees or Freetrade won’t make enough money. It is not just customer growth but also balance growth which is key.
Hi - 2 % does obviously seem high but i am unable to replicate your numbers. Page 16 of the pitch deck does give annual revenues per customer (which do reconcile back to total revenue and average customers). FT also provide average assumed portfolio size. Rev per customer annually moves from 20 per customer in 2020 to 70 annually in 2023. % of portfolio falls from .66% to 0.5%. This is not trivial but includes ISAs Sipps. Cash drag. FXetc and no trading cost. Obviously this is a forecast but I don’t think implausible. Depends on how the competitive landscape evolves.
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Hey! I did this calc a few weeks ago, so this was from memory, but I have checked again now. I am assuming that the majority of the revenue will come from Plus customers, as I have not seen any other significant income sources. Does this seem like a fair calculation:
| Year | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|
| Revenue | £5,226,282.00 | £33,231,862.00 | £92,880,779.00 | £241,934,032.00 |
| Plus Customers | 25,052 | 92,024 | 239,089 | 514,484 |
| Revenue / Plus Customer | £208.62 | £361.12 | £388.48 | £470.25 |
| Revenue / Plus Customer (per month) | £17.38 | £30.09 | £32.37 | £39.19 |
Then, using assumed revenue per plus customer and the average portfolio size, you get the percentage fees per annum:
| Year | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|
| Revenue / Plus Customer | £208.62 | £361.12 | £388.48 | £470.25 |
| Average porfolio size | £3,136.00 | £5,678.00 | £9,298.00 | £14,030.00 |
| Percentage Fees (per year) | 6.65% | 6.36% | 4.18% | 3.35% |
Some assumptions here:
- The majority of revenue will come from Plus subscriptions (other sources include FX fees, interest on balances…?)
- The average Plus Customer will actually probably have a larger account that regular customers, but even if you double their portfolio size, the fees are still >1% per year, in the best case scenario.
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