How do prop firms make money?

The revenue side:

• Challenge fees: the price of each evaluation, scaled by account size.
• Resets and retries: a discounted second attempt after a breach.
• Add-ons: options such as a higher profit split, faster payouts or no time limit, sold for an extra fee.

The cost side:

• Payouts: the profit share paid to funded traders, usually the largest cost.
• Acquisition: affiliate commission and advertising.
• Operations: platform, payments, KYC, support and staff.

Some firms also copy their most consistent funded traders into real markets and keep the trading profit, but that is a separate risk activity. The core model depends on pricing challenges so that fee revenue comfortably exceeds expected payouts. Keeping per-account platform cost predictable helps: on PropExecutor, each trading account uses one prepaid credit whatever its size.

A simple illustration

If 100 traders buy a $200 challenge, revenue is $20,000. If ten pass and four of them later receive average payouts of $1,500, payouts are $6,000. After marketing, payment fees and operating costs, the remainder is the firm's margin. Every assumption in that example varies by firm, which is why measuring your own figures matters.