How to Start an Advertising Agency (and Make $500K/Year)

  • by Brandon Boushy
  • 1 month ago
  • Blog
  • 1
Advertising agency Socialistics and owner

One of the hottest industries to start a business in is the tech industry—more specifically social media marketing.

We’re going to walk you through the process of how to start an advertising agency so you can begin your path to success in digital marketing.

We talked to Jason Yormark, founder and Chief Social Officer of Socialistics, about how he started his company and has 4x the revenue since starting it 2.5 years ago.

He started off with Microsoft then started blogging during a year layoff before getting hired back.

He started the Socialistics advertising agency as a side project but has grown it to managing $2-5K social media marketing campaigns for 15 clients, including Habitat for Humanity and the U.S. Air Force.

We’ll give you everything you need to know when starting an advertising agency, including an overview of the industry, developing the business concept, getting all the licensing/business requirements, commonly asked questions about advertising and marketing, strategies for launching, and business operations. 

Throughout, we’ll provide input from Jason and myself on what we have found that works and doesn’t work. Keep reading to find out more.

Advertising Industry Overview

Business owners in all industries need marketing. Most small businesses don’t have the time and knowledge to run their own ad campaigns, so there’s a ton of opportunity for starting a new business in marketing or advertising.

Let’s start by discussing the state of the industry. Because of the global pandemic, marketing spending dropped to $1.28 Trillion in 2020 according to PQ media. Jason experienced a drop in revenue which he attributes to:

Companies trying to keep employees overspend on marketing.

I saw similar results in my marketing and blogging business from February through September of last year and then spending started ramping up again.

This year I’ve been getting approximately 3x the requests of previous years, which I attribute to my business maturing, combined with more business confidence.

Despite a drop in overall spending, according to Beroe Inc, global digital marketing was between $330-340 billion in 2020 and grew almost 13% over 2019.

Meanwhile, spending on legacy advertising formats like TV, billboards, and radio declined by 30%.

According to Safe Frog Marketing Group (through Hubspot), nearly 2/3 of companies hire an advertising agency or freelancer to manage part of their digital marketing needs. 

Combine this with the number of marketing companies staying the same ,and spending on advertising expected to increase by 8-15% according to Forbes, this is the perfect time for starting an advertising agency.

One of the opportunities Jason told us about in digital advertising is the ability to attract potential clients with reduced retainers. Here’s what he had to say,

Look for what companies hate about the industry. Then look to disrupt it. Month-to-month contracts have been a disruptor for us that has allowed us to do 3-4X growth in such a short time.

Major Advertising Agencies and Other Competitors

Globally, the 50 largest marketing/advertising agencies make over $460 million in revenue or more. The top ad agency, Accenture Interactive made over $4.4 Billion in 2018. Wow! They are killing it! If you want to see the full list check out this article by Agency Spotter.

According to IBIS World, there are 5,585 digital advertising agencies in the United States, so there is a ton of competition, but plenty of revenue to start your own agency and work for your ideal client.

I did a little estimation of what the average marketing agency makes based on these numbers, and it’s around $20 million.

Granted, some aren’t going to be anywhere near this, but even if you are making $75,000+ working from home as a one-man company, that’s not bad money.

Currently 2 years in, I make enough working part-time to pay the bills without stressing. It’s not nearly what Jason estimated:

I was making about $60k with 80-90% profit when it was just me.

Inspiration for Starting an Advertising Agency

The first step when you want to start an ad agency is to conduct research to determine what is right for you. Your marketing company should be focused on satisfying your potential client’s marketing needs while utilizing your current skill base. 

You may want to start a marketing company focused on a specific niche, such as Business to Business (B2B) or Business to Customer (B2C), a general marketing company, or you may want to start a digital marketing firm focused primarily on a specific social media network like Facebook.

You aren’t limited to just one type, but this decision will impact how to start a media company. This decision will drive every move going forward.

Some of the common types of marketing companies are:

  • Social Media Marketing – Focused on marketing through social media 
  • Email Marketing – Email-based marketing
  • Brand Management – Building a brand through a variety of techniques
  • Content Management – Managing the flow of content
  • Copywriting – Writing about products, services, tutorials, or website wording
  • Product Marketing – Focused on analyzing interest in a product then selling the product
  • Marketing Analysis – Analyzing how to improve through meeting market demand
  • Growth Marketing – Focused on increasing the market share through marketing
  • PR/Communications – Communicating with external stakeholders
  • Event Marketing – Marketing events like concerts or business conferences
  • SEO/SEM – Improving organic search results or paid search results
  • E-Commerce – Marketing products sold online

The Muse has a great article that describes what each type of marketing is like.

Socialistics focuses on social media marketing for B2B primarily. Jason told us,

It’s too hard to fight for every business out there. We look for clients who believe marketing is valuable, their business is ready to be marketed, and that we are confident we can help them. If either of those aren’t there, then we aren’t the right company for them.

Marketing is focused on helping people or companies become aware of a product or service and helping them move from unaware, to aware, to researching the offering, and finally to purchase.

Each business has a different model for accomplishing this. We’ll show you some of the ways to achieve this.

Keep reading for different types of marketing agencies.

Name Your Marketing Company

I can’t stress enough the importance of the name you choose when starting a marketing company. It will communicate what the company is all about. Keep reading for ideas about how to name your startup marketing agency.

Does the name explain the business?

A man sitting on a chair with his laptop

Socialistics’ name is a bit of a challenge for me to picture what it does. The name is unique, but here’s how I break it down:

Social – of or relating to human society, the interaction of the individual and the group, or the welfare of human beings as members of society” Merriam-Webster Dictionary

-istics- “of, relating to, or characteristic of” – Merriam-Webster Dictionary

It took me a minute to wrap my mind around the name to realize it meant relating to social media. I wonder whether Jason was going for something that made people think more about what it does.

He could be taking the exact opposite strategy of what I’d normally suggest, which could potentially offer similar results.

I tend to prefer including words like Marketing, Advertising, or something to identify what your company actually does, which can make it easier for people to think of it when they are looking for help.

Is it easy to spell?

Make sure your business name is easy to remember when using a search engine. A crazy name like Onomatopoeia Tees makes searching for your business difficult because it’s hard to spell.

Because people tend to type fast, it can be helpful to register domain names for common misspellings of your business name and forward them to your website to make it easier for customers to find you.

Location

Including your state, county, or city identifies you as a local business. For example, Sin City Modeling Agency would obviously be focused on models in Las Vegas.

I would typically discourage this for a marketing company unless you are specifically trying to narrow your business model to serve clients in the local area.

There is too much remote work available to limit yourself from the start. Later it might make sense, but in the beginning, it can be hard to get that first big client.

Branding

A man with a notepad writing the word "brand"

Does your name fit your branding? Some business owners focus on visual ideas for a logo before a name. Fortunately, Socialistics logo spells out what they do for people. Take a look:

As you can see, it has their name and “a social media agency.”

The “S” in the logo also hints at one of the advantages of social media marketing: the fact that internet marketing offers a closed-loop marketing strategy, while other forms of advertising do not.

Overall, I like it. It tells what the company does, suggests differentiation to those who know about the industry, and also could have ties to their belief in community service because what we put out into the world comes back to us.

Register a .com

Find a name for which the .com domain is available. It’s the most recognizable. You can conduct a search by clicking here. The longer you can purchase it for, the better. This helps communicate that you are in it for the long haul.

Some great places to buy a domain include:

Test Your Name!

See how people like it. Check Google Trends. Read articles like Five Tools for Naming a Business.

Make sure to check what happens if people shorten it. You wouldn’t want to name a business Sensational Product Advertising & Marketing because people might shorten it to SPAM, and that goes right to junk mail.

Once you’re satisfied with the name, register your business name with the government so you can protect someone else from getting it.

Write a Business Plan for Your Ad Agency

You need a business plan to help define the advertising agency’s objectives and strategy.

A business plan for your advertising agency guides decision-making, helps financiers consider whether to provide startup costs, and gives you something to show businesses who could be potential partners or clients. 

A business plan should answer the following questions:

  1. What was your inspiration for starting an advertising agency?
  2. What problem are you solving for clients?
  3. What is the market opportunity? Who are your clients? What types of businesses need your services?
  4. What is different about your advertising agency? Why should other businesses believe you will be successful?
  5. What progress has your agency made so far?
  6. What startup costs have you already incurred by starting an agency?
  7. What do you need funding for? What are the costs associated with incremental sales?

A creative business plan goes a long way. It needs to be inspiring, informative, and factual. There are a ton of businesses in constantly changing environments, so you need to stand out to a potential client.

A business plan that is constantly evolving helps you keep your business plan in line with where the business is and where you want it to go. We’ve compiled some resources to help you build an awesome business plan.

Templates

We’ve gathered templates to help you develop your business plan. Here are some of the best:

  • One-page business plan
  • U.S. Small Business Administration (SBA) Business Guide
  • State-specific templates
  • Business Plan Template for a Startup Business

Resources

A keyboard with the word "resources"

It gets better! Here’s some free and low-cost education on business plans:

  • How to Write a Business Plan
  • SCORE’s free business plans and startup assistance resources
  • The Complete Business Plan Course (Includes 50 Templates)

How to Start an Online Advertising Agency

Most types of businesses have similar processes that have to be performed.

Whether you want to know how to start a digital marketing agency or how to start a social media marketing agency, there are related expenses that will be incurred. Every agency will need to:

  • Legally establish the advertising agency
  • Obtain necessary licenses and tax requirements
  • Obtain funding
  • Establish a location
  • Create a website
  • Create social media profiles
  • Have a tech stack that simplifies the operations of your small business

We’ll give you tips and information on how to get the most of your digital marketing company in each of these areas.

Legally Establish the Advertisement Agency

You’ve developed a plan and created a name for your advertising agency. It’s time to create the legal structure.

For best results, hire legal representation that has experience starting advertising agencies, like an attorney, accountant, or tax specialist.

It will simplify the process so you can get clients, build a team, and run creative campaigns.

There are five basic types of legal structures that most people will utilize: sole proprietorships, Limited Liability Corporations (LLC), Partnerships, Corporations, and Franchises.

Each has its pros and cons. You’ll have to decide which is best for you, but we’ve gathered information on each to make it easier.

Sole Proprietorship

A sole proprietorship is the easiest way to start a digital ad company, but the structure doesn’t protect the owner’s personal assets from legal issues. That means if something goes wrong, you could lose both your agency and your home.

This structure is the least difficult to set up, but I’d recommend agencies getting professional liability insurance and cybersecurity insurance because you’ll be a potential entry point to clients’ systems.

If your website, email, or other services get hacked, it could be detrimental to more than just your agency: it could cause client lawsuits.

To start a sole proprietorship, fill out a special tax form called a Schedule C. Sole proprietors can also join the American Independent Business Alliance.

Limited Liability Corporation (LLC)

Three cubes with the letter LLC

An LLC is the most common business structure used in the United States because an LLC protects the owner’s personal assets.

It’s similar to partnerships and corporations, but can be a single-member LLC in most states. An LLC requires a document called an operating agreement.

Each state has different requirements. Here’s a link to find your state’s requirements. Delaware and Nevada are common states to file an LLC because they are really business-friendly. Here’s a blog on the top 10 states to get an LLC.

Partnerships and Corporations

Partnerships and corporations are typically for massive organizations or legal firms.

Unless there is a specific reason you need a partnership, it is better to do a multi-person LLC. Investopedia has good information about partnerships and corporations here.

Franchise

There are several opportunities to purchase successful franchises. TopFranchise.com has a list of 10 advertising companies that you can start as a franchise.

This makes it where an entrepreneur can benefit from the reputation of an established clothing printer that has already worked out many of the kinks of starting from scratch.

Check out our BigFrog videos to learn more about franchise benefits. They are a t-shirt printing company, but they still have great advice on the business model.

Obtain Necessary Licenses

Each location has different licenses, permits, or tax forms required. Use the SBA License and Permits page to find requirements for your locations. Some locations have very confusing regulations.

If you don’t work with a legal representative, make sure to talk to the employees who work in the licensing and tax offices. They can give you advice on which licenses you actually need.

Make it a point to follow the laws. I once met a person who failed to follow the proper regulations, and it cost her a substantial fine and nearly 100 hours of community service per month.

Obtain Funding

People sitting and planning about funding a business

Ad Agency startup costs can be achieved for under $1,000. You basically need some space in your home, a website, social media, and some time.

If you are going to rent an office space or run a ton of paid ad campaigns, the cost goes dramatically up.

That’s not really necessary unless you are starting a franchise or have a local team that needs a space to all work together. When it’s just you, an advertising agency can be started for less than a few hundred per month.

If you do need to obtain external funding, other options include:

  • Loan from family or friends
  • Business partner(s)
  • Government programs

The SBA offers free courses on financing options and funding programs. For info on using personal funds to start a business, check out this article from The Hartford.

Alternative sources of funding include:

  1. Crowdfunding 
  2. Credit cards
  3. Home equity loan
  4. Rollover for business startups (ROBS)

Establish a Location

For most small business owners, an advertising agency can be a home-based business until you’ve reached profitability. Many will meet a client at a local coffee shop.

If you feel you need a more professional location to book the job, I’d recommend looking into office-sharing services like WeWork. They let you share space with others, reducing the expenses of having an office.

Some things to consider if you go other routes are:

  1. How many people will be on my team?
  2. How many people will come to a client meeting?
  3. How can I display my campaigns?
  4. Does space encourage the exchange of ideas?
  5. How quickly is the company growing?
  6. Will we have a sales team to answer client calls?
  7. Are we 24/7 because we offer services across the world?

Contact a local commercial real estate agent to assist you in the search. You can search for them by your area here.

Create a Website

A notepad with web design ideas

A website is critical to a marketing company. It’s often the first thing people see, and if the job isn’t done right, why should they trust you to do their advertising right?

From a marketing perspective, your website needs to show you get results. But what does that mean?

Some things I look for when I search for businesses include:

  • Do they come up when I search them? With Target, Yes they do.
  • Does it show Wikipedia or Google My Business information in the search? If not, make sure you fix that.
  • When I click on the link, how fast does it load? I want instantaneous on desktop or less than 3 seconds if over cell phone data. Any less, and you are losing customers. Google has extensive data on what is expected to rank high in search.
  • Now that I’m on the site, does it look professional? If not, I’m probably going to run unless I can tell they use it for experimentation.

Building a great website is so important. Fortunately, there’s a lot of things that make it easy. Using web builders has never been easier. They have tons of plugins and drag-and-drop functionality. I’d recommend the following:

  1. Easiest to use: Wix
  2. Best features: WordPress
  3. Other Options: Great List

Add the list of website builders into the article. Get affiliate links from Serge.

Alternatively, you can hire a web developer, but they’ll probably charge you up to $25k to do the same setup you would anyways. They just accomplish it quicker because they know what they are doing.

Create Social Media Profiles

I’d recommend having all possible social media profiles because you never know where you’ll find a client. For B2B, the best is LinkedIn, but I’d also make sure you are on:

  • YouTube – Best for Video 
  • Instagram – Best for products and other marketing that uses pictures
  • Facebook – Best for B2C marketing
  • Twitter – Financial markets, political, and crypto are big industries on Twitter
  • TikTok – Short fun videos primarily targeted to ages 30 and under

You can start with one and focus on it or try them all and narrow them down based on the results. Hootsuite has some good information on best practices. You’ll need to keep up to date on these if you are starting an advertising agency.

Have a tech stack that simplifies the operations of your advertising agency

Every advertising agency will need a tech stack to make running the business easier.

I’m not going to go into great detail on each of them as they all have great educational resources available that I suggest you utilize as you’ll be using them a lot. Here’s the list of some I love:

  1. HootSuite or other social media management tools that put all your social accounts in one place and let you manage it from their dashboard.
  2. Google Workspace for email, spreadsheets, presentations, and cloud storage.
  3. Integrated accounting software that connects to your bank and allows automation so you only have to set a rule once. PC Mag has a great article about various options.
  4. Customer Relationship Management (CRM) software to keep all your information in one place. Agencies have a ton of content they handle for a lot of clients. Being able to keep track of it in one place is crucial for the success of the business.
  5. Content Management Software (CMS) is used for storing, labeling, and sorting content. A CMS may be part of a CRM, or it may have to be integrated, but easy access to files is critical to assist clients.
  6. Analytics Software will be needed and attached to all web assets so you can track how you are performing. This will be true for both the advertising agency and your clients. You can’t improve results if you aren’t measuring them.

These are the bare minimum I would suggest before starting an advertising agency.

Business Expansion

Now that you have everything you need to start an advertising agency, it’s time to find clients and expand the business.

Marketing and Advertising Strategy for an Advertising Agency

Finding clients can be done in a variety of ways. Agencies can use their personal network, the same ad strategies you plan to use for clients, conventions, and other techniques. The biggest thing is to be sincere.

Jason told us about how he managed to land the Air Force and Habitat for Humanity. He told us,

The  Air Force was more about nurturing them than pursuing. They were frustrated with 30-page reports they didn’t understand. So I sat down with them and took my time, understanding what was really important to them.

In other words, always be ready to listen because that might be enough to land a client.

Here’s what he had to say about Habitat for Humanity:

They had somebody at an event. Heard a speech and liked what they heard. We had to pursue them though. We had to follow up because it was a strategic decision. It’s feel-good work and brings us clients because it speaks about our morals.

In that scenario, he had to do lots of follow up and be patient. When clients say “no,” they mean they aren’t ready yet.

Potential Partnerships and Collaborations for an Advertising Agency

Partnerships and collaboration for an advertising agency may come from selling other tech that they find useful, being listed in blogs and reviews, or through fields like photographers, graphic designers, and developers.

Another source of partnerships is non-profit institutions. As Jason pointed out:

Habitat for Humanity wasn’t so much about the money as the message it sends about our business and our values.

If you can get a client that people know and share their values, it makes expansion so much easier.

Contact List Building for an Advertising Agency

Every person you come in contact with is a referral. Anything you do you should be trying to get followers, likes, and people signing up for your email list.

This makes a huge difference. You can then share more content with them to help them get closer to becoming a client. Even if they don’t own a business one day, they might soon.

Some useful tools include:

  1. Hubspot – Free email marketing tools, including forms, databases, analytics, and templates
  2. MailChimp – Similar to Hubspot’s marketing services but started as an email marketing company.
  3. SendGrid – Most of my software development clients prefer SendGrid. It’s more tech-heavy though

Advertising Agency Daily Operations

An advertising agency makes its money from retainers and is mostly a time-intensive business.

The reason digital marketers use scheduling tools for as much of their work as possible is they need someone to be available when their clients need them.

People tend to use Facebook at specific times every day. If no one is available to respond to comments because they are working on something else, that is going to harm the advertising agency’s clients.

If you are unable to satisfy your clients’ needs, they’ll go somewhere else.

Jason focuses on “service over revenue growth” because the revenue growth will come with time.

As long as they retain the customers they have, they know they’ll have around $40k/month coming in consistently while managing 15 clients.

Remote Workforce in Advertising Agencies

A man at his desk working remotely

Jason was concerned that his team being spread across the world would hurt him.

The idea that your team couldn’t be all together was something he viewed as a challenge at first, but now he views it as one of the main sales points.  He told us:

Turn weaknesses into strengths. Remote saves clients money and gives more access to talent. It also gives the client 24/7 service.
You can expect each client to be around $2,000-5,000 and require 20-40 man-hours to give them proper service.

There are a ton of great resources to be able to utilize the global workforce. Companies like Upwork are a great place to start. You can find reviews of other places to find marketing freelancers in this blog.

Top Advertising/Marketing Influencers

  • Neil Patel – He’s marketed everything and has over 2 million followers across all channels. His blog gets over 4 million views per month.
  • Matt Bailey – Over 20 years in Marketing and author of Internet Marketing: An Hour a Day (2011)
  • Gary Vaynerchuk – Over 30 Million followers across his platforms. 

Conclusion

Starting an ad agency can be a highly rewarding career. We used insights from Jason Yormark and myself to help you get an inside look at what life in the marketing business is like.

We provided you with the knowledge and resources to learn about the industry and name your company.

You have tons of resources to get the business up and running, ideas on where to find clients, and ways to operate the business.

Now it’s up to you. Will you be the world’s next great advertising agency?

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