How to Start a Social Media Marketing Agency

Social media platforms mainly provide entertainment and connection to others, but they’re also a powerful marketing tool. In 2022 alone, global social media ad spending hit $230 billion, and that number is set to grow sharply in the years ahead.

If you’re social media savvy and have a marketing background, you could start your own social media marketing operation to join a fast-growing industry.

But before you do the digital dive, you’ll need to understand the business side. Fortunately, in this handy step-by-step guide, you’ll find all the business insights you need to launch a lucrative social media marketing agency. 

Step 1: Decide if the Business Is Right for You

Pros and cons

Social media marketing industry trends

Industry size and growth

Social media marketing makes up more than 30% of the digital advertising market. 

• Industry size and past growth – The U.S. digital advertising agency industry is worth $60 billion in 2023 after growing more than 25% annually the last five years.((https://www.ibisworld.com/industry-statistics/market-size/digital-advertising-agencies-united-states/))
• Growth forecast – The U.S. digital ad industry is set to grow 7.7% in 2023.
• Number of businesses – In 2023, 11,996 digital advertising agencies are operating in the U.S.((https://www.ibisworld.com/united-states/market-research-reports/digital-advertising-agencies-industry/))
• Number of people employed – In 2023, the U.S. digital advertising agency industry employs 161,397 people. 

Trends and challenges

Trends

• Facebook is the most popular social media platform for advertising, but Instagram and TikTok are gaining ground
• ChatGPT is emerging as a powerful tool for social media marketers, providing insights that shape strategies

Challenges

• Social media marketing is an intensely competitive market 
• Greater interest in personalised marketing experiences requires social media marketers to gather considerable data to create that personalization

Consumer spending

• Average consumer spend – The average company spends $200 to $350 per day on social media advertising.((https://socialistics.com/social-media-marketing-cost/))
• Potential customer base – More than 90% of firms use social media marketing.((https://www.statista.com/statistics/736971/social-media-ad-spend-usa/))
• Average prices – Social media marketers charge $50 to $100 per hour for their services.((https://www.thumbtack.com/p/social-media-marketing-prices))

What kind of people work in social media marketing?

• Gender –60% of social media marketers are female, while 40% are male.((https://www.zippia.com/marketing-social-media-manager-jobs/demographics/))
• Average level of education – The average social media marketer has a bachelor’s degree.
• Average age – The average social media marketer in the US is 39.3 years old.

How much does it cost to start a social media marketing business?

Startup costs for a social media marketing agency range from $1,500 to $3,300. The largest expense is a computer. 

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

• Computer
• Wi-Fi connection

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$100 - $500	$300
Business licenses and permits	$100 - $300	$200
Insurance	$100-$500	$300
Initial Marketing Budget	$200 - $500	$350
Computer	$500 - $1,500	$1,000
Total	$1,000 - $3,300	$2,150

How much can you earn from a social media marketing business?

Generally, you’ll charge your customers monthly for ongoing campaigns, fees for which could range from $500 to $5,000. These calculations assume an average rate of $2,500 per month. 

Your profit margin after marketing and Wi-Fi costs should be about 90%. In your first year or two, you could work from home for two clients, bringing in $60,000 in revenue. This would mean $45,000 in profit, assuming that 90% margin. 

As you gain traction, you could attract 10 clients.  At this stage, you might have an office and hire staff, reducing your margin to around 40%. With annual revenue of $300,000, you’d make a tidy profit of $120,000.

What barriers to entry are there?

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

• Gaining knowledge and experience in social media marketing 
• Competing with established digital agencies

Step 2: Hone Your Idea

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

Begin by evaluating your own strengths, expertise, and resources. Consider what aspects of social media management you excel at – content creation, strategy development, analytics, etc.

Why? Identify an opportunity

Research social media marketing agencies in your area to examine their services, price points, and customer reviews.

• Make a list of social media marketing 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 improve your business, gain a competitive edge and make better business decisions.

You’re looking for a market gap to fill. For instance, maybe the local market is missing an agency that builds a social media presence for real estate agencies, or that offers social media management and content marketing. 

Look into what potential clients need and what’s trending in the market. Are businesses looking for more video content, influencer collaborations, or analytics-driven strategies?

What? Determine your social media services

Some services tend to be more profitable due to high demand and the ability to scale. These include:

• Content Creation: Crafting high-quality, engaging content for different platforms.
• Social Media Strategy: Developing comprehensive strategies tailored to specific business goals.
• Advertising and Campaign Management: Managing paid social media campaigns, including targeting and optimization.
• Analytics and Reporting: Providing detailed analytics and insights into social media performance.
• Influencer Partnership Management: Facilitating collaborations with influencers for brand promotion.
• Community Management: Engaging with and managing a brand’s online community.

Instead of offering individual services, consider bundling them into packages. For example, a basic package could include content creation and posting, while a premium package could add in strategy development and analytics.

If you choose to specialize in a single platform, it allows you to develop deep expertise and offer highly specialized services. For instance, mastering Facebook’s advertising and community engagement tools, leveraging Instagram’s visual storytelling and influencer networks, or tapping into TikTok’s unique content trends and viral marketing strategies can set your agency apart as a niche expert.

Who? Identify your target market

Your target audience will be business owners, who are best found on LinkedIn. If your marketing focuses on a certain industry, connect with people in that industry through related events, forums, and websites.  

How much should you charge for social media marketing?

Pricing your social media services will depend on the extent of the services offered and the time it takes, and could range from $500 to $5,000 per month. Once you have an office and staff, your costs will also be a factor. 

Once you know your costs, use our 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.

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 space. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

Step 3: Brainstorm a Social Media 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 “social media” or “digital marketing”, boosts SEO
• Name should allow for expansion, for ex: “Digital Dialogue Dynamics” and “WebSphere Engagements” over “InstaGrowth Agency” and “Local Buzz Creators”
• 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 Social Media 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: A snapshot of your agency, emphasizing its mission, services, and strategic goals in the social media landscape.
• Business Overview: Overview of your agency’s focus on offering specialized social media services, such as content creation, strategy development, and platform management.
• Product and Services: Description of your services like content creation, social media management, advertising, analytics, and consulting.
• Market Analysis: Insight into social media usage trends, target market demographics, and client needs in various industries.
• Competitive Analysis: Examination of competing agencies, their service offerings, pricing strategies, and market positioning.
• Sales and Marketing: Your approach to attracting and retaining clients through digital marketing, networking, and client relationship management.
• Management Team: Information about the key members of your team, their expertise in social media, and their roles in the agency.
• Operations Plan: Outline of the daily operations, including content production, client meetings, and project management.
• Financial Plan: Projection of your revenue, expenses, and profitability, with details on pricing strategies and growth potential.
• Appendix: Supplementary information like case studies, client testimonials, and detailed descriptions of your services.

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 social media 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 social media 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. 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. 

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.

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 social media marketing business. You might also try crowdfunding if you have an innovative concept. At some point, you might even be able to attract angel investors or venture capital.

Step 8: Apply for Business Licenses/Permits

Starting a social media 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.

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 social media 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. 

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 Cloud Campaign or Kontentino, to manage your posts, reporting, metrics, and design. 

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.

The website should showcase your services, case studies, and client testimonials.

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 “Contact Now” or “Request a Quote”. This can sharply increase purchases.

Marketing

Here are some effective marketing strategies specifically tailored for a social media agency:

1. Optimize for Local SEO: To attract local businesses, ensure your website is optimized for local SEO. This includes using local keywords, registering your business on Google My Business, and getting listed in local directories. Encourage satisfied clients to leave positive reviews on these platforms.
2. Content Marketing: Share valuable content that demonstrates your expertise in social media management. This could be in the form of blog posts, videos, infographics, or podcasts. Topics can include social media tips, platform updates, case studies, and industry insights.
3. Leverage Social Media: Use different social media platforms to showcase your work. Regularly post client success stories, behind-the-scenes looks at your agency, and thought leadership content. Tailor your content strategy to each platform’s audience and strengths.
4. Paid Advertising: Invest in targeted paid advertising on platforms like Facebook, LinkedIn, or Google Ads. Use these to highlight your unique selling points and reach potential clients actively searching for social media services.
5. Email Marketing: Build an email list and send regular newsletters with insights, agency updates, and special offers. Segment your email list to send personalized content to different types of clients.
6. Offer Free Workshops or Webinars: Host free workshops or webinars on social media strategies. This positions you as an expert and provides a platform to engage with potential clients.
7. Case Studies and Client Success Stories: Publish detailed case studies on your website and share them on social media. These stories should highlight the challenges, your strategies, and the results achieved.
8. Influencer Collaborations: Partner with influencers in the digital marketing space. This can help in reaching a broader audience and building credibility.
9. Continuous Learning and Adaptation: Stay updated with the latest trends and tools in social media. This ensures your strategies are current and effective, a key selling point for prospective 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 social media 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 social media marketing business could be:

• Build your brand with proven social media strategies
• Planning to be a social media star? We’ll get you there
• Affordable social media marketing to help small businesses grow

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 social media marketing business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in social media 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 social media marketing. 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 social media marketing business include:

• Social Media Marketers – assist clients with social media marketing
• Receptionist – take client calls, greet clients
• 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 Social Media Agency – Start Making Money!

Social media has taken the world by storm and now dominates marketing. Companies spend billions on social media ads, creating a ripe opportunity for new agencies. Starting a social media marketing agency doesn’t cost much and it could be hugely lucrative. 

Now that you understand the business side, you’re ready to hit the ground running and ride the social media train to serious success!