Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on May 25, 2022 Updated on March 13, 2024
Fast Facts
Investment range
$2,550 - $5,800
Revenue potential
$60,000 - $250,000 p.a.
Time to build
0 – 3 months
Profit potential
$54,000 - $100,000 p.a.
Industry trend
Growing
Commitment
Flexible
Advertising is a part of our daily lives — on TV, social media, and just driving down the road. The global ad industry is massive, projected to expand 30% by 2025 to reach $455 billion. If you have experience in marketing or advertising, now is a great time to start your own agency and grab a piece of that pie. You could even run your agency from home.
But before you start pounding out good copy, you’ll need to learn how to launch a business. Fortunately, this step-by-step guide has all the information you need to put you on the road to advertising success.
Step by Step Business values real-life experience above all. Through our Entrepreneur Spotlight Series, we interview business leaders from diverse industries, providing readers with firsthand insights.
Digital advertising is where most companies spend their money, with over 64% of advertising budgets allocated to online channels.
Video ads represent a large part of digital spending, with the trend moving to shorter and shorter videos.
Challenges in the advertising agency industry include:
Tightening privacy regulations limit advertisers’ access to information about target audiences, making it more challenging for ad agencies to create targeted campaigns.
As the digital world grows, it becomes more and more difficult for digital ad campaigns to make an impact.
Average level of education –The average advertising manager has a bachelor’s degree.
Average age -The average advertising manager in the US is 39.4 years old.
How much does it cost to start an advertising agency business?
Startup costs for an advertising agency range from $2,500 to $5,800. Costs include a computer, a website, and design software for presentations. If you do not have an advertising background, you can get an online advertising degree from any number of colleges and universities.
Start-up Costs
Ballpark Range
Average
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
$800 - $1,400
$1,100
Design software for presentations
$200 - $300
$250
Total
$2,550 - $5,800
$4,175
How much can you earn from an advertising agency business?
Advertising agencies charge between $150 to $250 per hour of work on a campaign. Usually, the agency will estimate the hours required for a project and give a flat price. When you’re working by yourself, your profit margin will be high, around 90%.
In your first year or two, you could work from home and do twelve $5,000 campaigns a year, bringing in $60,000 in annual revenue. This would mean $54,000 in profit, assuming that 90% margin. As your business grows, sales could climb to 50 campaigns a year. At this stage, you’d rent a commercial space and hire staff, reducing your profit margin to around 40%. With annual revenue of $250,000, you’d make a handsome profit of $100,000.
What barriers to entry are there?
There are a few barriers to entry for an advertising agency. Your biggest challenges will be:
The required advertising background or education
Breaking into a highly competitive advertising market.
Related Business Ideas
If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.
Now that you know what’s involved in starting an advertising agency, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
What? Determine your services
Your services will be to design, present, and implement advertising campaigns for companies. Here are the most common services:
Market Research: This involves gathering and analyzing data to understand the target audience, market trends, and consumer preferences, which is crucial for crafting effective campaigns.
Brand Strategy: Developing a comprehensive plan that defines brand identity, positioning, messaging, and voice, helping businesses establish a strong and consistent brand presence.
Creative Development: This service encompasses the creation of visual and textual content for advertising campaigns, including graphics, videos, and written content that aligns with the brand’s message.
Media Planning and Buying: Determining the most effective media channels to distribute the advertising content (such as television, radio, online platforms) and negotiating and purchasing advertisement space or time.
Digital Marketing: Involves online marketing efforts, including SEO (Search Engine Optimization), PPC (Pay-Per-Click advertising), email marketing, and content marketing to boost online presence and engagement.
Social Media Management: Managing a brand’s presence on social media platforms, including content creation, community engagement, and monitoring social media trends and analytics.
Public Relations: Enhancing and maintaining the public image of a client through media releases, public statements, and event organization, as well as managing crisis communication.
Event Marketing and Sponsorships:Organizing and promoting events to engage with the target audience or securing sponsorship opportunities to increase brand visibility.
Analytics and Reporting: Tracking and analyzing the performance of advertising campaigns using various metrics, providing clients with insights on ROI and helping them make data-driven decisions.
Interactive and Emerging Technologies: Utilizing new technologies like AR (Augmented Reality), VR (Virtual Reality), and AI (Artificial Intelligence) for more engaging and innovative advertising experiences.
Research advertising agencies in your area and online 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 creative agency that provides digital marketing services or that monitors Google analytics and focuses on search engine optimization (SEO).
How much should you charge for advertising services?
Ad agencies charge $150 to $250 per hour of work on a campaign. Usually, the agency will estimate the hours required for a project and give a flat price. When you’re working by yourself, 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 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 businesses and organizations. You can connect with business owners on LinkedIn or find them on Google and Yelp and call 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. 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 an Advertising 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 “ad agency” or “digital advertising”, boosts SEO
Name should allow for expansion, for ex: “Momentum Marketing Agency” over “Brand Builders Agency”
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 an Advertising 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: Highlight the vision and objectives of your advertising agency, focusing on delivering creative and strategic advertising solutions for various media platforms.
Business Overview: Describe your agency’s services in creating and managing advertising campaigns, including concept development, media buying, and digital marketing.
Product and Services: Detail the range of advertising services offered, such as print, digital, social media advertising, brand strategy, and market research.
Market Analysis: Evaluate the demand for advertising services, identifying potential clients like small businesses, corporations, or non-profits.
Competitive Analysis: Compare your agency to others, focusing on your unique offerings, such as niche market expertise, creative approach, or digital innovation.
Sales and Marketing: Outline your strategy for attracting clients, using methods like networking, showcasing a portfolio, or digital marketing.
Management Team: Highlight the experience and skills of your team, particularly in advertising, creative design, and business development.
Operations Plan: Describe the process of campaign development, from client consultation to execution and performance analysis.
Financial Plan: Provide an overview of financial aspects, including startup costs, pricing strategy, and projected revenue.
Appendix: Include supplementary documents like case studies, client testimonials, or detailed market research to support your business plan.
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
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’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to advertising 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 advertising agencies 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 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.
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’re 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.
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 an advertising agency business. You might also try crowdfunding if you have an innovative concept.
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.
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 advertising 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.
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 MavenLink, HighLevel, or Function Point, to manage your sales pipeline, campaigns, scheduling, and invoicing.
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.
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.
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.
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.
Marketing
Here are some powerful marketing strategies for your future business:
Specialize and Showcase Expertise: Focus on a niche or specific industry, positioning your agency as experts in that area. Develop case studies and portfolio pieces to showcase your successful campaigns within that niche, demonstrating your deep understanding and capability.
Content Marketing and Thought Leadership: Create valuable content that educates and engages your target audience. Start a blog, produce insightful whitepapers, or host webinars to establish your agency as a thought leader in the advertising field, building trust and credibility.
Collaborate with Influencers: Partner with influencers in the marketing and business space to increase your agency’s visibility. This collaboration can extend your reach to a broader audience and lend credibility to your services.
Run Targeted Social Media Campaigns: Leverage social media platforms to run targeted advertising campaigns. Utilize platforms like LinkedIn for B2B marketing and Instagram or Facebook for a B2C focus. Tailor your content to resonate with your audience on each platform.
Client Testimonials and Referral Programs: Encourage satisfied clients to provide testimonials and reviews. Word-of-mouth is powerful in the advertising industry, and positive feedback can significantly influence potential clients. Implement a referral program to incentivize existing clients to refer new business.
Attend Industry Events and Conferences: Participate in relevant industry events and conferences to network with potential clients and partners. Sponsorship or speaking engagements can further establish your agency’s presence and credibility within the advertising community.
Implement Guerrilla Marketing Tactics: Get creative with unconventional, attention-grabbing marketing tactics that generate buzz. Guerrilla marketing can help your agency stand out and create memorable impressions, fostering brand recall.
Offer Free Workshops or Training Sessions: Host workshops or training sessions on relevant advertising topics. This not only positions your agency as an authority but also provides a platform to interact with potential clients and showcase your expertise.
Strategic Alliances with Complementary Businesses: Form partnerships with businesses that offer complementary services, such as graphic design, public relations, or digital marketing. These alliances can lead to collaborative projects and mutual referrals.
Optimize Your Google My Business Profile: Ensure your Google My Business profile is complete and optimized. Positive reviews, accurate information, and engaging photos can enhance your local search visibility and attract clients in your area.
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 advertising 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 advertising agency business could be:
Creative ad campaigns to grow your business
Build brand awareness with better advertising
Take your business to the next level with stronger ads & marketing
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 an advertising agency business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in advertising 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 advertising 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 an advertising agency business include:
Advertising Specialists – assist with advertising campaigns
Receptionist – greet customers, make appointments
General Manager – scheduling, accounting
Marketing Lead – SEO strategies, social media
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 an Advertising Agency – Start Making Money!
Advertising helps make the business world go round, boosting brand awareness and educating consumers. The ad agency industry is huge and growing, so if you have relevant experience, a desire to help businesses grow, and creative skills, you could grab a share of the market and build a thriving advertising operation.
This article has taught you how to launch a business, so now it’s time to start thinking up great ad campaigns and make your entrepreneurial dreams come true!
Advertising Agency Business FAQs
How profitable is an advertising agency?
Advertising agencies can be very profitable, with rates between $150 and $250. You’ll just need to come up with creative advertising campaigns to stand out in a competitive market.
How should I price my advertising services?
Advertising agencies charge between $150 and $250 per hour of work on a campaign. Usually, the agency will estimate the hours required for a project and give a flat price.
Is hard to start an advertising agency?
Starting an advertising agency can be challenging, as it requires a wide range of skills, knowledge, and experience. Some of the key challenges include identifying a target market, developing a unique value proposition, building a team of talented professionals, establishing a strong brand identity, and attracting clients in a highly competitive industry.
What skills do I need to start a marketing agency?
To start a marketing agency, you will need a combination of creative, technical, and business skills. These may include expertise in areas such as branding, graphic design, copywriting, digital marketing, social media, analytics, project management, and business development.
How can I start an advertising agency with no experience?
To start an advertising agency with no experience, you may need to start small and focus on building your skills and expertise over time. You can gain experience by working for an established agency, freelancing, or taking on small projects for friends and family. You can also invest in training, education, and networking opportunities to build your knowledge and connections in the industry.
What services should I offer as an advertising agency?
As an advertising agency, you can offer a wide range of services to clients, including branding, creative design, copywriting, media planning and buying, digital marketing, social media management, analytics, and market research. You can also offer strategic consulting and project management services to help clients develop and execute effective marketing campaigns.
What are the best practices for developing and presenting advertising proposals to clients?
When developing and presenting advertising proposals to clients, it is important to follow best practices to ensure that your proposals are effective and persuasive. Some key tips include:
Conduct thorough research and analysis to understand the client’s needs, target audience, and competition
Develop a clear and compelling value proposition that highlights the benefits of your proposed strategy or campaign
Use data and metrics to support your recommendations and demonstrate the potential ROI
Present your proposal in a clear, concise, and visually appealing format that is easy to understand
Be prepared to answer questions and address objections from the client
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