In 2023, an estimated 571.16 billion U.S. dollars will be spent on digital advertising worldwide. This is a 16.2 percent rise from the $491.70 billion spent in 2021. Companies of all kinds are spending money on digital marketing agencies to do the job for them. If you’re here, we’re willing to bet it’s because you see an opportunity for yourself to start a digital marketing agency.
It’s that true?
Then buckle in, because this blog post will show you exactly what you need to do to start a profitable digital marketing agency, step-by-step.
What Is a Digital Marketing Agency?
The growth in popularity of the internet, smartphones, and other internet connected devices has pushed digital marketing into the forefront as the focus of most business marketing. Studies have shown that we spend between 5 to 8 hours/day online. This creates an opportunity for businesses to meet their customers where they spend almost ⅓ of their day.
Companies understand that they need to market themselves online. However, they often cannot fully grasp the opportunity on their own. Not all businesses have the resources to handle all of their marketing in-house. Companies that lack the in-house resources may hire a digital marketing agency with wholistic expertise in all things digital marketing or expertise in specific niches they wish to target.
This is where digital marketing agencies come in.
A digital marketing agency reaches customers online through websites, blogs, social media, email, and television. A digital marketing agency can help businesses build their customer base, and increase sales and brand loyalty.
Some niches that fit under the digital marketing umbrella include SEO, social media, pay-per-click ads, email marketing, video marketing, influencer marketing, content marketing, and website design.
What Are You the Types of Digital Marketing Agencies?
One of the great things about running a digital marketing agency is that you basically have 100% freedom to do what you want. You can work with whatever type of client you wish, offer any service you like, charge clients however you’d like, and work as often as you’d like.
With that said, there are some types of agencies that are more popular than others because of their profitability and demand.
Here are the most common types of digital marketing agencies:
- Full Service: Full service digital agencies can service all or most of a clients needs. They’ll have a team of designers, creatives, analysts, and developers covering everything from web development, SEO, social media management, and ad campaigns.
- Single-Channel: Single channel agencies are specialists that serve one specific area of digital marketing. Focusing on one marketing channel allows these agencies to deliver one-of-a-kind results to their clients and dominate a marketing channel.
- Multi-Channel: Multi-channel agencies fall between full-service and single-channel agencies. These agencies match a few complementary marketing channels. For example, SEO and web design or social media management and social media ads.
Is a Digital Marketing Agency a Good Business to Start?
The pandemic forced nearly every business to adapt its business strategies. One of those adaptations was how they market to potential customers. More people than ever are spending time at home and on internet-connected devices. It doesn’t seem like this will change coming out of the pandemic, either.
More potential customers using digital marketing strategies.
If you’re looking to capitalize on the digital marketing wave, starting a digital marketing agency is a good idea.
If you’ve had success as a marketing freelancer or are a seasoned marketer, starting a marketing agency may be a logical next step.
The appeal of running an online advertising business is of course, getting to work for yourself. It also becomes possible to win bigger clients who pay more, driving your revenue potential through the roof. However, the corresponding growth in revenue means more risk and moving pieces.
If you’re brand new to marketing or have a little less experience, we advise you to ask yourself a few questions before diving headfirst into the agency world. These questions will help take off the rose-colored glasses and understand the reality of what it takes to run a successful digital marketing agency.
So, the short answer is, “yes,” a digital marketing agency is still an excellent business to start.
But still, ask yourself these questions.
1. Is There Demand for Your Service?
Let’s assume your desire to start a digital marketing agency stems partly from your perceived marketing chops. If you genuinely do have the ability or believe you can learn along the way, then the next question is this…
“Are other agencies doing the work that I want to do?”
Furthermore, you can ask, “are other businesses looking for someone or an agency that does what I do?”
You should proceed if you answered yes to at least the 2nd question.
The best way to determine if there’s demand for your service is to begin outreach to potential clients.
2. Can You Produce Results?
If you have experience working as a marketer, then you should know the answer to this question to some degree. This is one reason why starting as a freelancer or getting a job in digital marketing is fantastic.
Working in marketing allows you to:
- Gain experience in digital marketing
- Figure out what niches or services you’re good at
- Build a reputation and portfolio for yourself
Being a results producer differentiates you from a large number of agencies that quite frankly do little for their clients and don’t use tools like Semrush to track results.
With even just basic sales skills, you can grow an agency if you know how to get results in the current marketing climate.
3. Can You Build a Team?
By definition, the difference between freelancing and running an agency is a team. Scaling up requires systems and people to manage those systems. Adding part-time and full-time employees means navigating different legal, recruiting, training, and management landscapes.
You will spend a lot less time marketing and more time running different business skillsets. Can you handle the pressure of managing a team and growing a team?
4. Are You Committed Enough?
Running a business is a long-term commitment. Once you get a book of clients and employees who rely on you for their salaries, the pressure is on every day.
Every day will NOT be rainbows and unicorns, meaning you’ll have to show up even when things are tough.
This means showing up when it takes longer than expected to get your first client, when you lose a client, or when you waste money on a tool, course, or employee that doesn’t work out. For these reasons, it’s good to have a real passion for marketing and the types of businesses you want to work with.
5. What Do You Want Out of Your Agency?
This question is less about whether you should start a marketing agency and more about what you wish to gain from your agency.
This means answering what you want your business to look like and determining your vision. Starting a digital marketing agency without a vision is like making dinner with a blindfold.
Here are a couple of ideas your welcome to mix and match into a vision:
- Some agencies want to maximize time freedom, so they focus on low-maintenance clients, working remotely, and building simple systems.
- Some agencies want to maximize profits, so they focus on scaling quickly and acquiring high-paying clients.
- Some agencies want to maximize status and reputation so they focus on working with high-profile clients.
- Some agencies want to maximize opportunity so they focus on building strategic partnerships with like-minded businesses/people.
- Some agencies want to maximize creativity so they take on projects based on their ability to make a creative difference.
There is no correct one-size-fits-all approach to determining your vision and by no means do you have to choose one.
When to Start an Agency
When to Work in Marketing
You want to work for yourself.
You never want to work on weekends.
You enjoy being a leader.
You’re more interested in working on projects rather than finding more clients through sales.
You want to make more than most jobs can pay.
You don’t enjoy leading team/s.
You have the skills and resources to deliver results to clients yourself or by hiring others.
You don’t feel confident enough in your marketing abilities and need more training.
You feel like you can have a bigger impact on businesses than you currently do with a job.
Having a job allows you to excel at your full potential as a marketer.
You’re unhappy at your job, and don’t think it’s because of where you work, but rather that you’re not working for yourself.
You’re happy at your job, get what you want out of it, and don’t see that changing anytime soon.
You’re comfortable wearing multiple hats and learning new skills fast.
You’d rather just work in a few key areas you excel at and let others handle the rest.
The Digital Agency Business Model
One of the hardest parts of running a business is finding a lucrative pricing model. There is a delicate balance between an irresistible offer that your target market will say, “yes” to, while still generating enough revenue to pay your employees and profit.
One of the big questions asked by newbies is, “how do digital agencies make money?”
Agencies have the option to charge clients in a variety of different ways. Here are the most common pricing models:
The majority of agencies use the retainer model because retainers allow agency owners to plan ahead, especially when retainers turn into long-term clients. With the predictability of guaranteed upfront payments, agencies, in turn, can deliver better results to their clients. Let it be known that predictability is not something agencies are known for, but retainers can add a bit of it.
Why is predictability important?
Because with it, you can better predict revenue, manage cash flow, and make better hiring decisions. The ability to do all of this is a good indicator of growth
Another popular pricing model is the hourly-based model, which is also the simplest of the bunch. Simply set the hourly rate for each service, and charge the client for every hour spent on a project. A mistake agencies make when charging hourly is not charging enough to compensate for non-billable hours that you spend working.
When managed properly, you have a straightforward pricing model that makes tracking profitability, team-hour management, and project schedules easier. With the hourly model, you can eliminate any worries of scope creep.
The performance-based/commission model is often used by agencies that can definitively tie their work to a measurable outcome for a client. For example, leads generated exclusively turn into clients/customers. This pricing model can be extremely lucrative and rewarding for seasoned agencies confident in their ability to deliver results.
The drawback of performance-based pricing is the volatility created by the fact that your clients can drop you at any moment or disappear when it’s time to pay. Regardless, to charge according to performance, agencies need to establish key metrics like the conversion value. To ease the risk, some agencies will charge a flat-fee upfront.
4. Flat Fee/Fixed Fee
As the name suggests, this model involves charging clients a flat fee for the project. Agencies will estimate the total number of hours required for a project and multiply it by an hourly rate. Flat fee rates are good for agencies that offer one-off services like website development and SEO audits. They also work well for agencies that offer clear deliverables with well-defined endpoints.
For fixed-fee pricing to work in your agency’s favor, you need a clear understanding of your expected costs for projects. This model is good for agencies starting out that may have trouble securing retainer-based clients.
The Steps to Starting a Digital Marketing Agency
Ok, let’s get into the meat and potatoes of this blog post. There is no mandatory order you need to follow when starting a marketing agency. Instead, follow this rough framework to give your agency the best chance of starting out strong.
1. Pick a Service/s to Offer
Step one is to determine what service/s you want to offer to your clients. You can be a full-service agency, offering one service or matching a few complimentary services.
Here are a few ideas:
- Social media
- Pay-per-click ads
- Email marketing
- Video marketing
- Influencer marketing
- Content marketing
- Website design
An example of matching complimentary services together would be a website design company offering SEO services to clients they build websites for.
2. Choose a Niche/s
Competition is intense in digital marketing and quite frankly, there are already a metric TON of agencies. If you’re starting an agency, being a generalist who serves everyone will quickly put you in the “everybody else” pile. Choose to stand out instead of setting yourself up for an uphill battle. You do this by choosing a niche and drilling down explicitly on the businesses within that niche.
The smaller your target audience, the more you’ll speak directly to your target audience. Your clients will understand what you do better and feel comfortable making quick decisions. Once you’ve attained these clients, you can create processes built around the repetitive work you do. Eventually, you can become a market leader.
With all of that said, if you enjoy stretching your creative capacity and like working on a variety of different projects, then disregard the above advice.
3. Find Clients/Market Yourself
The funny irony about running a digital marketing agency is that marketing will most likely be your biggest challenge. With around 500,000 marketing agencies in the world scratching a clawing for every last client, standing out becomes a full-time occupation.
Since you’re a marketer yourself, you must be on the top of your game when presenting your business to potential clients.
Here are five ways to market your digital marketing agency and get your first clients:
Create a Website
Eventually, people will start searching for your agency online. Before that day comes, people will want to do their research on your business after hearing about you through your outbound marketing. The obvious central place you can direct potential clients to is a website.
With a website, you can do a lot for your business, including:
- Showcase your portfolio to potential clients
- Showcase your marketing chops with a beautiful website
- Speak directly to your target market and build desire and trust
- Send inbound leads to specific landing pages through ads and content marketing
- Build credibility while doing outbound marketing
When starting a marketing business, speed is your best friend. Don’t spend too much time building a website unless you plan to utilize it as your #1 marketing asset.
We recommend building a website with WordPress.
Cold Call/Cold Email
Cold emailing gets a lot of negative shticks, and cold calling gets it even worse, but the truth is that they both work.
If the only thing stopping you from starting is the question, “how do digital marketing agencies get their first clients?” then cold calling and emailing is your answer.
These methods can work when you play the game of numbers and have a plan. Again, remember that for every marketing technique that exists, other marketing agencies are beating it to death.
To stand out with cold emailing, properly research each company and owner before reaching out. Customization gets attention and shows you’re willing to go the extra mile.
Create a Portfolio
Whether you have a website or not, you at least need somewhere you can showcase your portfolio. Show your target market that you can deliver results and plan to continue doing so. A good portfolio will show accurate timelines, important metrics, and a report on why the result was good.
Content marketing is a marketing strategy used to attract and engage an audience by creating relevant content like articles, videos, and other media. Content marketing is a great way to build a metaphorical moat around your business if you have long-term plans for your agency.
Content marketing can position you as an authority in your space and generate significant inbound leads. Find a medium and consistently create high-quality content that’s a step above what’s already there.
Build Social Media Accounts
You don’t need to be everywhere, but creating an omnipresence early will position you as an authority. Build profiles in places your target market hangs out.
4. Nail Down Service Delivery
If getting clients is the 1st half of running an agency, then service delivery is the 2nd part. As a marketing agency owner, you have to get comfortable not spending your time worrying about service delivery. This is the crucial difference between running a digital marketing agency and being a freelancer. A freelancer spends most of their work hours doing client work while an agency owner spends time building systems, training others to do client work, and finding new clients.
This is the only way you’ll have the time to get clients while delivering quality results consistently. For an agency to grow effectively, you need systems to manage client delivery. Think about the tasks you do repetitively, how can you build a strategy around so they can be completed by a computer and/or delegated to the most affordable labor?
Is It Possible to Start a Digital Marketing Agency Without Any Experience?
Are you wondering how to start a digital marketing agency with no experience? If you’ve followed this far, you’ve already succeeded at the first step.
That is to get educated.
The great thing about digital marketing is that there have never been more opportunities to learn marketing. If you’re a sponge for new information, then there’s no reason why you can’t launch a marketing agency.
Tools You Need to Run a Digital Marketing Agency
So, what do you need to start a marketing agency? Here are five tools to help you get a leg-up against the competition.
Semrush is an all-in-one tool suite for improving online visibility and discovering marketing insights. Our tools and reports can help marketers with the following services: SEO, PPC, SMM, Keyword Research, Competitive Research, PR, Content Marketing, Marketing Insights, and Campaign Management.
Besides 50+ digital marketing tools, Semrush also has solutions for running a digital marketing business included in the Agency Growth Kit. They are:
- Agency Partners (agency directory, leads who look for an agency will find and contact your agency)
- Bid Finder, a base of high-value marketing contract bids for agencies
- CRM for agencies
- White-label client portal for digital agencies and freelancers
- And automated white-label PDF reports with custom messages for agencies
2. Google Apps
You shouldn’t be new to Google and Google Search, but did you know you can use Google for a myriad of different business tasks? Google can help you track marketing growth, work on client campaigns, and keep track of team members. Using tools like Zapier, you can further optimize your experience with Google.
These are the necessary Google Apps for every business:
- Google Docs
- Google Suite
- Google Adwords
- Google Business
- Google Sheets
- Google Analytics
As a digital marketing agency, you will use various apps to manage your team, market your business, and work on behalf of clients. Zapier is an excellent tool that allows you to create automated workflows across your suite of tools in your tech stack.
We’re not mincing words when we say that Zapier can be one of your agency's most significant time-saving tools. Learn to integrate it with client campaigns and your marketing to ensure you look like a superhero.
In the beginning stages of running an agency, the invisible clock is ticking until you get your first few clients and get your business above water. Websites, content marketing, and ads are great, but they either take time and/or cost money. Cold emailing allows you to quickly reach potential clients, but that’s only if you can find their contact info.
Enter Hunter.io, an essential tool that helps you find contacts across the web and manage email outreach with a free Chrome extension.
You’re probably familiar with Zoom, but there’s a lesser-known tool called Loom that can be a great asset to your agency. Loom is another chrome extension that allows you to record your screen and audio with one click. Use Loom to replace lengthy emails and unnecessary calls with straight-to-the-point and informative videos. If Zapier makes you look like a superhero, then Loom will make you out to be a demigod.
Read more: Best Marketing Agency Software: Top 15 Types
Is a Digital Agency Profitable? And Which Business Model Is Best?
As we detailed earlier, there are numerous ways you can bill your clients. Regardless of what option you choose, the good news is that digital marketing agencies have the potential to be extremely profitable. NYU Stern's database for more than 7,000 companies found that the average profit margin is 7.9%.
Digital agencies have been known to have profit margins of up to 40% due to the ability to work fully remote.
This should be the last motivation you need to consider starting a digital marketing agency.
Is Starting a Digital Marketing Agency Worth It?
As we come to the end of this guide, you may have one question lingering in the back of your mind.
“Is starting a digital marketing agency worth it?”
If you have the drive, commitment, and skills to deliver results for your clients, manage a team of marketing professionals, and market your agency to win new businesses, then there’s no reason why you can’t build a profitable business.
There you have it.
Hopefully this blog post was effective in teaching you how to start a marketing business.
If you’re ready to start a marketing agency, then there’s one tool that stands out above the rest in helping agency owners.
That tool is Semrush, an all-in-one tool suite for improving online visibility and discovering marketing insights. Our tools and reports are able to help marketers that work in the following services: SEO, PPC, SMM, Keyword Research, Competitive Research, PR, Content Marketing, Marketing Insights, and Campaign Management.
Our Agency Growth Kit was specifically designed to help agency owners land more clients, strengthen their brand, and manage their clients.
Figure out why 30% of Fortune 500 and thousands of growing companies use Semrush.