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How to Start a Digital Marketing Agency

Updated on March 21, 2022

How to Start a Digital Marketing Agency

How to Start a Digital Marketing Agency

The average person spends nearly seven hours a day consuming online content, which is why companies annually spend more than $350 billion on digital marketing to reach them. You can start your own digital marketing agency, help those companies reach out to potential clients and put some of their spending in your pocket. You can start for a small investment, and run your agency from home, making up to $150 per hour.

While marketing skills are an important tool in running a business, there is much more to know to get a company off the ground. Luckily, this step-by-step guide provides all the business savvy you need to successfully launch your new digital marketing agency.

Fast Facts

Investment range

$1,850 - $16,200

Time to build

0 – 3 months

Industry trend

growing

Revenue potential

$124,800 - $624,000 p.a.

Profit potential

$112,320 - $187,200 p.a.

Commitment

flexible

Step 1: Decide if the Business Is Right for You

man holding sunglasses while writing in the table

Pros and cons

Starting a digital marketing agency has pros and cons to consider before deciding if it’s right for you. 

Pros

  • Cash Cow – High income, low expenses
  • High Demand – Large pool of potential customers
  • Flexibility – Work from home on your time

Cons

  • Competitive Market – Market is saturated with digital marketing agencies
  • Skills Needed – Digital marketing education and experience are necessary

Digital Marketing Industry trends

Global digital marketers spent more than $350 billion in 2020 and the market is expected to grow an impressive 30% by 2024.[1]https://www.statista.com/topics/1176/online-advertising/ Over half of that spending is in the U.S. 

Trends in digital marketing include:

  • Personalized marketing and content using data collection to create user profiles is in huge demand.
  • Segmented content targeting different customer segments based on demographics and preferences is increasing.

Challenges in digital marketing:

  • Privacy restrictions on data collection are making personalized marketing more challenging.
  • Since digital marketing trends and technology are evolving rapidly, keeping up with those trends presents a challenge for digital marketing agencies.

How much does it cost to start a digital marketing business?

Startup costs for a digital marketing agency range from $1,800 to $16,000. The low end assumes you’ll start your agency from home and that you’re already trained as a digital marketer and have a computer. You’ll just need a website and digital marketing software.

The high end includes the cost of a computer, rental of an office space, and digital marketing training and certification. You can get your certification from the Digital Marketing Institute in about 6 weeks for around $1,600.

Start-up CostsBallpark RangeAverage
Setting up a business name and corporation$150 - $200$175
Business licenses and permits$100 - $300$200
Insurance$100-$300$200
Business cards and brochures$200 - $300$250
Website setup$1,000 - $3,000$2,000
Computer$0 - $5,000$2,500
Software$300 - $500$400
Training and certification$0 - $1,600$800
Office space rental deposit$0 - $5,000$2,500
Total$1,850 - $16,200$9,025

How much can you earn from a digital marketing business?

Digital marketing agency rates range from $80 to $150 per hour. When you start, you should fall at the low end of the range until you build a reputation. Your ongoing expenses will be low, so your profit margin should be about 90%.

In your first year or two, you could work from home and work 30 hours a week at $80 per hour, bringing in about $125,000 in annual revenue. This would mean a tidy profit of more than $110,000, assuming that 90% margin. As your brand gains recognition and you begin to get referrals, you could reach 100 weekly hours and charge a higher rate of $120 per hour. At this stage, you’d rent a commercial office space and hire staff including other digital marketers, reducing your margin to around 30%. With annual revenue of nearly $625,000, you’d make an impressive $190,000.

What barriers to entry are there?

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

  • Competing in a saturated market
  • Funding the cost of your training if necessary

Step 2: Hone Your Idea

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

Why? Identify an opportunity

Research digital marketing agencies in your field of expertise to examine their services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the market is missing a digital marketing agency focused on personalized marketing.

You might consider targeting a niche market by specializing in a certain aspect of your industry, such as digital marketing for retail companies. This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products or services

You should offer a full range of digital marketing services unless you want to specialize in one. Your services can include:

  • SEO and PPC strategies
  • Content creation
  • Email marketing
  • Social media marketing
  • Affiliate marketing
  • Influencer marketing

How much should you charge for digital marketing services?

Digital marketing goes for $80 to $150 per hour. Until your business gains traction, you should stay at the lower end. Your ongoing expenses will be mainly for marketing yourself, so you should aim for a profit margin of about 90%.

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price point. 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, mainly small business owners. You can find them on LinkedIn or other business-related sites, but you should also call on them 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. 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
Should you start a digital marketing business

Step 3: Brainstorm a Business 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 “marketing” or “digital marketing”, boosts SEO
  • Name should allow for expansion, for ex: “Jim’s Bakery” over “Jim’s Cookies”
  • 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 with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a 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: Brief overview of the entire business plan; should be written after the plan is complete.
  • Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
  • Product and Services: Describe your offerings in detail.
  • Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
  • Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
  • Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
  • Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
  • Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
  • Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
  • Appendix: Include any additional financial or business-related documents.

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

Step 5: Register Your Business

Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running. 

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 digital marketing 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 digital marketing 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.
  • 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.
  • 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 ZenBusiness’s 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. 

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 digital marketing business. You might also try crowdfunding if you have an innovative concept. If at some point, your business has the potential to grow rapidly, you might be able to attract venture capital or angel investors.

Step 8: Apply for Licenses/Permits

signing document for business permit

Starting a digital marketing 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.

This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties. 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 digital marketing 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. 

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

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.

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 mosaic, SEMRUSH, or productive, to manage your leads, data, projects, budgeting, estimates, and invoices.

Online Marketing

Some of your business will come from the casual online visitors, but you should still invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness. 

Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products: 

  • Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area. 
  • Instagram: Same benefits as Facebook but with different target audiences.
  • Website: 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.
  • Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers. 

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 digital marketing 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 digital marketing business could be:

  • Complete digital marketing with analytics to track your ROI
  • Digital marketing solutions for retailers
  • Effective digital marketing with guaranteed results

Kickstart Marketing

Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:

  • In-Person Sales – Offer your digital marketing services to local businesses
  • Sponsor events – You can pay to be a sponsor at events that are relevant to your target market
  • Post a video – Post a video about your digital marketing. Use humor and maybe it will go viral!
  • Email marketing/newsletter – Send regular emails to customers and prospects. Make them personal. 
  • Start a blog – Start a blog and post regularly. Change up your content and share on multiple sites. 
  • Press releases – Do press releases about new products, sales, etc.
  • Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
  • Payper-click marketing – Use Google AdWords to perform better in searches. Research your keywords first.

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 digital marketing business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been in digital marketing 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 digital marketing. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business. 

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. 

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 digital marketing business include:

  • Digital Marketers – provide marketing services
  • Office Assistant – set appointments, customer service
  • General Manager – staff management, 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: Start Making Money!

Digital marketers can provide a lot of value to businesses, which is why digital marketing is a booming industry and will continue to be for the foreseeable future. You can make a lot of money with a digital marketing agency, and you can start from home with a very small investment and become a sizable marketing firm.

You’ve got business knowledge in your corner now, so get your plan together and be on your way to launching your new digital marketing agency!

Digital Marketing Business FAQs

How much does it cost to start a digital marketing agency?

You can start a digital marketing agency from home for under $2,000 if you are already trained and have a computer. You just need a website and some digital marketing software.

How profitable is digital marketing?

Digital marketing is an industry worth hundreds of billions of dollars, so it can be a very profitable business. Rates between $80 and $150 can put a lot of cash in your pocket!

Do I need a license to start a digital marketing agency?

You may need various licenses and permits at the state and local levels. Check with your local governments for requirements or visit MyCorporation’s Business License Compliance page.

How much can my digital marketing agency charge for services?

Rates range from $80 to $150 per hour. If you’re just starting out, you should be at the lower end until you’ve built a brand and a track record.