How to Start a Creative Agency

Creative agencies offer a variety of services, including creating advertising campaigns, logo and marketing materials design, and media production services. Their goal is to build a brand image for the companies they serve. Creative agencies are part of the advertising agencies industry, which is a more than $70 billion industry in the U.S.

If you have creative skills and experience, you could put your skills to work with your own creative agency.

But you’ll also need some business know-how. Fortunately, this step-by-step guide has you covered with all the insights you need to start a lucrative creative agency.

Step 1: Decide if the Business Is Right for You

Pros and cons

Creative agency industry trends

Industry size and growth

As mentioned, creative agencies are part of the advertising agencies industry.

• Industry size and past growth – The U.S. advertising agencies industry is worth $73.3 billion in 2023 after growing 2.5% annually for the last five years.((https://www.ibisworld.com/united-states/market-research-reports/advertising-agencies-industry/))
• Growth forecast – The U.S. advertising agencies industry is projected to grow .4% in 2023.
• Number of businesses – In 2023, 89,651 advertising agencies are operating in the U.S.
• Number of people employed – In 2023, the U.S. advertising agencies industry employs 267,601 people.

Trends and challenges

Trends

• Companies are focusing on brand building rather than promotional strategies, giving creative agencies a boost.
• Video marketing is increasingly popular and effective, creating an opportunity for creative agencies that offer media production.

Challenges

• Creative agencies are seeing increased competition when trying to recruit employees.
• Trends are constantly changing in the advertising world, forcing creative agencies to continuously evolve.

Demand hotspots

• Most popular states – The most popular states for creative directors are California, New York, and Washington.((https://www.zippia.com/creative-director-jobs/best-states/))
• Least popular states – The least popular states for creative directors are South Carolina, Arkansas, and Nebraska.

What kind of people work in creative agencies?

• Gender – 35% of creative directors are female, while 65% are male.((https://www.zippia.com/creative-director-jobs/demographics/))
• Average level of education – The average creative director has a bachelor’s degree.
• Average age – The average creative director in the US is 40.2 years old.

How much does it cost to start a creative agency business?

If you start your agency by yourself from home, startup costs will range from $2,500 to $6,000. Costs include a computer, design software, and a marketing budget.

You’ll need a handful of items to successfully launch your creative agency business, including: 

• Computer
• Design software

How much can you earn from a creative agency business?

Generally, creative agencies charge a monthly fee for a certain amount of hours, which for small agencies is about $2,500. Your profit margin should be about 90%. 

In your first year or two, you could work from home for two clients a month, bringing in $60,000 in revenue. This would mean $54,000 in profit, assuming that 90% margin. 

As you gain traction, you might have 15 monthly clients. At this stage, you’d have an office and a creative staff, reducing your margin to around 30%. With annual revenue of $450,000, you’d make a tidy profit of $135,000.

What barriers to entry are there?

There are a few barriers to entry for a creative agency. Your biggest challenges will be:

• Having the required skills and experience
• Breaking into a competitive market

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Step 2: Hone Your Idea

Now that you know what’s involved in starting a creative agency, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research could give you the upper hand even if you’ve got the perfect product. Conducting robust market research is crucial, as it will help you better understand your customers, your competitors, and the broader business landscape.

Analyze your competitors 

Research creative agencies in your area and online to examine their services, price points, and customer reviews.

• Make a list of creative agencies that offer similar services. 
• Review your competitors’ services – their features, pricing, and quality – and marketing strategies.
• Check out their online reviews and ratings on Google, Yelp, and Facebook to get an idea of what their customers like and dislike.
• Identify your competitors’ strengths and weaknesses. 

This should identify areas where you can strengthen your business and gain a competitive edge to make better business decisions.

Why? Identify an opportunity

You’re looking for a market gap to fill. For instance, maybe the local market is missing a creative agency that offers digital marketing or a branding agency that offers media production. 

You might consider targeting a niche, such as the graphic design of marketing materials. This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your services

Your services will be based on your skills and experience. You might be a specialized design agency, or a full digital marketing agency. You could also be more of a branding agency if you choose. Here are the common services offered by creative agencies:

1. Branding: Development or refresh of company logos, identity design, and brand guidelines.
2. Graphic Design: Design of marketing collateral, packaging, print materials, and more.
3. Website Design & Development: Creating responsive and user-friendly websites.
4. Advertising: Development and execution of ad campaigns across various mediums.
5. Content Creation: Writing, photography, video production, and other multimedia content.
6. Social Media Management: Strategy, content planning, posting, and monitoring.
7. SEO (Search Engine Optimization): Improving online visibility and ranking on search engines.
8. Digital Marketing: Online ad campaigns, email marketing, and other digital strategies.
9. Strategy & Consulting: Market research, competitive analysis, and strategy development.
10. Media Planning & Buying: Identifying and purchasing ad space in suitable media channels.

How much should you charge for creative services?

Your prices should be based on market prices in your area, but also on your costs once you have a staff.

Once you know your costs, use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be business owners who you can connect with on LinkedIn or call on directly. 

Where? Choose your business premises

In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Creative Agency Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “creative agency” or “creative branding”, boosts SEO
• Name should allow for expansion, for ex: “Imagine Innovate” or “VisionVoyage” over “PixelPulse Studios” or “Design Dream Dynamics”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead and reserve your business name with your state, start the trademark registration process, and complete your domain registration and social media account creation. 

Your business name is one of the key differentiators that sets your business apart. Once you pick a name, reserve it and start with the branding, it’s hard to switch to a new name. So be sure to carefully consider your choice before moving forward. 

Step 4: Create a Creative Agency Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: Summarize the key aspects of your creative agency business plan, highlighting your goals and what sets your agency apart.
• Business Overview: Provide an overview of your creative agency, including its size, location, and the range of creative services it offers, such as graphic design, marketing, or web development.
• Product and Services: Detail the specific creative services your agency provides to clients, emphasizing your areas of expertise and any unique offerings.
• Market Analysis: Analyze the creative services market, considering factors like demand for design and marketing services, target industries, and emerging trends.
• Competitive Analysis: Identify other creative agencies in your niche or region, and explain how your agency differentiates itself, whether through pricing, quality, or specialized services.
• Sales and Marketing: Outline your strategies for acquiring clients and promoting your agency’s services, including digital marketing, networking, and client referrals.
• Management Team: Introduce key team members, such as creative directors, designers, and project managers, highlighting their relevant experience and skills.
• Operations Plan: Describe the day-to-day operations of your agency, covering project management, client communication, and creative workflow processes.
• Financial Plan: Present financial projections, including startup costs, revenue expectations, and profitability estimates based on your pricing structure and client acquisition targets.
• Appendix: Include samples of your agency’s creative work, client testimonials, and any industry certifications or awards.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to creative agencies. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your creative agency will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts. Here’s how to form an LLC.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation. Read how to start a corporation here.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Form Your LLC

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Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
• Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a creative agency business. You might also try crowdfunding if you have an innovative concept.  

Step 8: Apply for Business Licenses and Permits

Starting a creative agency business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your creative agency business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use industry-specific software, such as workamajig, Brandfolder, or Function Point, to manage your projects, leads, estimates, and staff.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Create a website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Your customers are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. 

Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Schedule Consultation Now”. This can sharply increase purchases. 

Marketing

Here are some powerful marketing strategies for your future business:

1. Content Marketing with a Niche Focus: Create high-quality blog posts, videos, or infographics that showcase your expertise in a specific niche within the creative industry. This positions your agency as a go-to resource for clients seeking specialized services.
2. Partnerships and Collaborations: Forge strategic partnerships with complementary businesses, such as PR firms, printing companies, or event planners. Cross-promotion can expand your reach and introduce your services to new audiences.
3. Case Studies and Success Stories: Develop detailed case studies highlighting your successful projects, emphasizing the challenges faced and how your agency provided innovative solutions. This adds credibility and demonstrates your ability to deliver results.
4. Interactive Workshops and Webinars: Host workshops or webinars showcasing your creative process, industry trends, or practical tips. This not only positions your agency as an authority but also provides a platform to engage with potential clients directly.
5. Social Proof and Testimonials: Leverage client testimonials and positive feedback on your website and social media platforms. Authentic endorsements build trust and serve as powerful marketing tools.
6. Localized Advertising: Invest in targeted advertising on local platforms, such as community newsletters, local magazines, or radio stations. This can help you connect with businesses in your immediate vicinity.
7. Attend Niche Events and Conferences: Attend and actively participate in events and conferences related to your creative niche. This allows you to network with potential clients, stay updated on industry trends, and showcase your agency’s expertise.
8. Leverage Social Media Creatively: Use social media platforms not just for promotion, but also to share behind-the-scenes glimpses, creative processes, and engage with your audience. This humanizes your agency and builds a loyal online community.
9. Referral Programs: Implement a referral program where satisfied clients or partners are incentivized to refer new business to your agency. Word of mouth remains a powerful and cost-effective marketing tool.
10. Consistent Branding Across Platforms: Ensure your agency’s branding is consistent across all channels, from your website to social media profiles. A cohesive and visually appealing brand identity reinforces your professionalism and makes a lasting impression on potential clients.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your creative agency meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your creative agency business could be:

• Creative strategies to build your brand image
• Fresh strategies to refresh your brand
• Creative advertising to maximize your ROI

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a creative agency business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in creative agencies for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in creative agencies. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a creative agency business include:

• Marketing Specialists – create and implement marketing strategies
• Designers – design logos and marketing materials
• Writers – write content for marketing
• Media Producers – produce videos and advertisements
• General Manager – scheduling, accounting

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Creative Agency – Start Making Money!

Are you ready to get creative? Owning a creative agency is a challenge, but it also could be fun and rewarding. You’ll be helping companies in your community grow and thrive, while growing your own business at the same time. There’s also plenty of money to be made in a $70 billion industry.

You’ve got some business savvy now, so you’re ready to start your creative entrepreneurial journey!