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How to Start a Digital Marketing Agency (15 Steps)

by | Jun 4, 2023

How to Start a Digital Marketing Agency (15 Steps)

by | Jun 4, 2023

Are you passionate about digital marketing and eager to start your own profitable venture? Starting a digital marketing agency can be an exciting and rewarding journey for professionals looking to leverage their skills and expertise in the ever-evolving online landscape. As businesses increasingly embrace digital strategies to reach their target audience, the demand for digital marketing services continues to grow. However, starting an agency requires careful planning, strategic decision-making, and a solid understanding of the industry. In this blog post, we will guide you through the essential steps to help you launch a successful digital marketing agency that stands out from the competition and delivers exceptional results for clients.

15 Steps to Start Your Digital Marketing Agency

Here are some steps to get you started:

1. Legally Register Your Business (Boring But Smart): Choose a legal structure and register your agency with the appropriate authorities. Obtain any necessary licenses or permits required to operate in your location. This sounds boring, but don’t skip this step. You need legal protection to separate your business from your personal finances, protect yourself.

2. Be a Contractor/Freelancer on the Side First (Don’t Quit Your Day Job): Don’t quit your job and jump into starting an digital marketing agency with zero experience. Get practice, hone your skills, and figure out which of those skills you want to get paid for and build an agency around. Maybe you’re a graphic designer, or maybe you’re a paid ads person. Whatever it is, get your business going on the side. Start by offering your services to friends, family, or local businesses at a reduced rate or even for free. This will help you build a portfolio of successful projects and gain testimonials to showcase your expertise.

3. Identify Your Niche (Generalist –> Specialist): When you first start out, you’ll be a generalist, you’ll do anything for anyone. That’s fine, get that experience, but make it your goal that by year two or three that you will start to specialize within vertical niche. Determine the specific vertical industry or market segment you want to focus on. Ideally you want a niche positioning that “We do X for Y”, example would be “We do brand launches for healthcare companies.” Specializing in a niche allows you to develop expertise and stand out from the competition. Specialists get paid more and are harder to replace. You’re going to be doing your craft either way, so why not get paid more for it?

4. Focus Your Services: Determine the range of digital marketing services you will offer, such as search engine optimization (SEO), social media marketing, content marketing, or pay-per-click advertising. Align your services with the needs of your target audience. In the beginning you’ll do anything. That’s fine, but again, you’re going to need to hone down and specialize to really stand out and to make better money.

5. Prioritize Personal Branding: Establishing a strong personal brand as the founder or key team member of your agency can significantly impact your agency’s credibility and attract clients. Invest time in building your personal brand through thought leadership, speaking engagements, guest blogging, or hosting webinars. Position yourself as an expert in your niche, and leverage your personal brand to enhance the reputation of your agency.

6. Research Potential Competitors: Identify your competitors, their pricing, and the gaps you can fill to provide a unique value proposition. To conduct effective competitor research, you can begin by identifying key competitors based on their target market, service offerings, and market presence.

7. Research Potential Clients: Analyze the demand for digital marketing services in your target niche. This gets easier once you know your vertical market to target.

8. Figure Out Your Pricing Structure: If you’re starting out, you’re probably thinking you’ll start out by undercutting your competitors. That’s a short term strategy. Research market rates and set your pricing structure based on factors like your experience, expertise, and the value you provide. Be flexible to adjust prices as you gain more experience and expand your client base. You need to be flexible and understand that long term you’ll adjust your pricing structure multiple times.

9. Setup Your Website and Social Media Profiles: Create a professional website that highlights your services, showcases your portfolio, and provides contact information. Utilize social media platforms to promote your agency and engage with potential clients. This isn’t just for lead generation, it’s also for validation, if a potential client is interested in you, they’re going to check out your web presence.

10. Borrow Other People’s Audiences to Promote Yourself: Collaborate with complementary businesses or professionals (who also address your target market) to expand your reach and promote your business to their audiences.

11. Figure Out Your Sales & Marketing Strategy – Where is your next client coming from? Networking events? Referrals? Google Search Ads? Instagram Ads? LinkedIn Posts? Influencer marketing? Buying a cold email list? SEO?

12. Figure Out Your Production Team – Build a talented team: As your agency grows, consider hiring skilled professionals to handle different aspects of the business. Recruit individuals who complement your strengths and share your vision for the agency’s success.

13. Cultivate Client Relationships: Nurture relationships with your clients by offering ongoing support, providing valuable insights, and proactively suggesting strategies for their digital success. Long-term client partnerships can lead to recurring revenue and referrals.

14. Develop Systems and Processes: Establish efficient systems and processes to streamline your workflow and enhance productivity. This includes client onboarding, project management, communication channels, reporting, and invoicing. Implementing effective systems early on will save time, improve client satisfaction, and set a solid foundation for growth.

15. Embrace Experimentation and Innovation: Encourage a culture of experimentation and innovation within your agency. Allocate time and resources for team members to explore new marketing trends, emerging technologies, and creative strategies. Foster an environment where team members feel comfortable taking calculated risks and thinking outside the box, as this can lead to breakthrough ideas and unique solutions for clients.

Five Common Mistakes People Make When Starting an Agency

Starting any new business is rife with potholes. Here are some to avoid when your’e starting an agency:

1. Lack of Niche Focus: One common mistake is failing to define a specific niche or target market. Without a clear focus, the agency may struggle to differentiate itself from competitors and communicate its unique value proposition. This lack of specialization can lead to diluted marketing efforts, inconsistent messaging, and difficulty in attracting clients who are looking for expertise in a particular industry. By not focusing on a niche, the agency misses out on the opportunity to position itself as an expert and may face challenges in building a strong reputation.

2. Underestimating Pricing and Profitability: Another mistake is setting pricing too low or failing to accurately assess the costs involved in running the agency. Undercharging can devalue the agency’s services and undermine its profitability. Insufficient pricing may lead to overworked and undercompensated team members, limited resources for marketing initiatives, and difficulty in scaling the business. It is essential to conduct thorough financial planning, consider all costs involved, and set prices that reflect the value provided by the agency’s services.

3. Neglecting Ongoing Professional Development: Digital marketing is a rapidly evolving field, and failing to invest in ongoing learning and professional development can be detrimental. Staying updated with the latest industry trends, tools, and techniques is crucial to maintaining a competitive edge and providing the best possible results for clients. Neglecting professional development can result in outdated strategies, inefficient processes, and a stagnant agency that fails to adapt to changing client needs.

4. Overpromising and Underdelivering: Making unrealistic promises or setting unattainable expectations for clients is a common pitfall. Overpromising may initially attract clients, but it can lead to disappointment, damaged client relationships, and negative word-of-mouth. It is vital to set clear and realistic expectations, communicate transparently with clients, and ensure that the agency’s capabilities align with the commitments made. Building trust and delivering on promises are critical for long-term success and client satisfaction.

5. Neglecting the Importance of Networking and Relationships: Building a strong network and cultivating relationships within the industry is often underestimated. Failing to engage in networking activities, attending industry events, or building strategic partnerships can limit the agency’s visibility and growth opportunities. Networking allows for valuable collaborations, referrals, and access to industry insights. Neglecting relationship-building efforts can result in missed opportunities for business development, client referrals, and staying up-to-date with industry trends and best practices.

Avoiding these common mistakes is crucial for the success of a digital marketing agency. By focusing on a niche, setting appropriate pricing, investing in ongoing learning, managing client expectations, and prioritizing networking, professionals can position their agency for long-term growth and profitability.

How to Create a Pricing Structure for Your Agency

When creating a pricing structure, digital marketing agencies should take into account several key considerations to ensure their pricing is competitive, profitable, and aligned with the value they provide. Here are five important factors to consider:

1. Scope of Services: Assess the scope and complexity of the services you offer. Consider the time, resources, and expertise required to deliver each service effectively. Some services may require more extensive research, planning, and execution, which should be reflected in the pricing.

2. Value and ROI: Determine the value your services bring to clients and the potential return on investment (ROI) they can expect. Consider the impact of your services on their business growth, revenue generation, and brand visibility. Align your pricing with the value and results you deliver to ensure clients perceive it as a worthwhile investment.

4. Market Rates and Competition: Research the prevailing market rates and pricing structures within the digital marketing industry. Assess the pricing models used by your competitors to understand industry standards and remain competitive. While you don’t have to match prices exactly, being aware of market rates can help you position your pricing strategically.

5. Client Budgets: Understand the budget constraints of your target market. Different clients may have varying budgets, so offering flexible pricing options can attract a wider range of clients. Consider creating different packages or tiers to accommodate different budget levels while ensuring profitability for your agency.

6. Long-Term Sustainability: Develop a pricing structure that allows for sustainable growth and profitability. Consider your agency’s overhead costs, employee salaries, ongoing professional development, marketing expenses, and desired profit margin. Ensure that your pricing covers these costs and leaves room for reinvestment in the agency’s growth.

By carefully considering these factors, digital marketing agencies can create a pricing structure that is competitive, fair, and aligned with the value they provide to clients. Regularly review and adjust your pricing structure as the market evolves and your agency grows to ensure continued success.

The Five Common Pricing Structures Digital Marketing Agencies Use

Marketing agencies often employ various pricing structures to accommodate different client needs and project requirements. Here are some common pricing structures used by marketing agencies:

1. Hourly Rate: Agencies charge clients based on the number of hours spent on a project or specific tasks. Each service or activity is assigned an hourly rate, and the final cost is calculated by multiplying the hours worked by the respective rates. This structure is transparent and straightforward, especially for projects with varying scopes or ongoing retainer-based work.

2. Project-Based: Agencies determine a fixed price for a specific project or campaign. This pricing structure is suitable for well-defined projects with clear deliverables and timelines. The agency and client agree on the scope of work, and a set price is established for the project as a whole. It provides clarity on costs and is beneficial for clients seeking predictable budgeting.

3. Monthly Retainer: Agencies charge clients a fixed monthly fee for an agreed-upon set of services. This pricing structure is commonly used for ongoing marketing support, where the agency provides a range of services on an ongoing basis. The retainer fee allows clients to access a dedicated team and a predetermined amount of services each month.

4. Percentage of Ad Spend: In this model, agencies charge clients a percentage of the advertising budget they manage. This pricing structure is prevalent in digital advertising, especially for pay-per-click (PPC) campaigns. The agency’s fee is calculated based on a percentage of the ad spend, and it incentivizes the agency to optimize campaigns to maximize results.

5. Performance-Based: Some agencies offer performance-based pricing, where their compensation is directly tied to achieving specific performance metrics or goals. This structure may involve revenue sharing, bonuses for meeting targets, or payment based on predetermined key performance indicators (KPIs). It aligns the agency’s incentives with the client’s objectives and encourages a results-driven approach.

It’s important for marketing agencies to choose a pricing structure that suits their business model, aligns with client expectations, and ensures profitability. Often, agencies may offer a combination of these pricing structures depending on the services provided and client preferences. Flexibility and transparency in pricing can help agencies attract clients and build long-term relationships based on trust and value.

Average Hourly Rates for Marketing Agencies

The average hourly rates for digital marketing agencies can vary significantly depending on factors such as location, agency size, level of expertise, and the specific services provided. It’s important to note that rates can also fluctuate over time due to market trends and demand. However, here are some rough estimates of average hourly rates for digital marketing agency services:

  • Junior-Level Professional: Hourly rates for junior-level professionals typically range from $50 to $100 per hour. These professionals have entry-level experience and handle tasks such as basic social media management, content creation, and basic website updates.
  • Mid-Level Professional: Mid-level professionals with a few years of experience can charge hourly rates ranging from $100 to $150 per hour. They possess a deeper understanding of various digital marketing strategies, can handle more complex tasks, and may specialize in specific areas like SEO, paid advertising, or email marketing.
  • Senior-Level Professional: Senior-level professionals, with extensive experience and expertise in their field, can command higher hourly rates. Their rates can range from $150 to $300 or more per hour. They are typically responsible for developing comprehensive digital marketing strategies, managing complex campaigns, providing high-level consulting, and overseeing the agency’s operations.
  • Agency Founder/Executive: The hourly rates for agency founders or executives can vary widely based on their reputation, industry experience, and track record of success. Rates for these individuals can range from $200 to $500 or more per hour. They bring strategic direction, industry insights, and extensive knowledge to guide clients in achieving their business objectives.

It’s important to note that these figures are estimates and can vary depending on the specific circumstances. It’s recommended for both agencies and clients to engage in discussions to determine fair pricing based on the services provided, the agency’s expertise, and the client’s budget and requirements.

Common FAQs About Starting an Agency

When starting a digital marketing agency, here are seven frequently asked questions (FAQs) that people often have:

1. How do I determine my target audience and niche? Identifying a target audience and niche is a crucial step. It involves researching market segments, analyzing competition, and understanding client needs. By evaluating factors such as demographics, industry-specific requirements, and market demand, you can determine the audience you want to serve and the niche you want to specialize in.

2. What services should I offer? Deciding on the range of digital marketing services to offer can be overwhelming. Common services include search engine optimization (SEO), social media management, content marketing, paid advertising, email marketing, and web design. Consider your expertise, the needs of your target audience, and the services that align with your agency’s goals and resources.

3. How should I price my services? Pricing is a critical aspect of running a profitable agency. Factors to consider include the complexity of the services, the value you provide, industry standards, and your target market’s budget. Research market rates, assess your costs, and consider offering different pricing packages to cater to varying client needs.

4. How do I find clients for my agency? Acquiring clients is a common concern. Start by leveraging your network and reaching out to your existing connections. Utilize digital marketing techniques like content marketing, social media advertising, and search engine optimization to attract leads. Attend industry events, join professional groups, and engage in online communities to expand your reach and build relationships.

5. Should I specialize in a specific industry or offer services to various industries? This decision depends on your business model and preferences. Specializing in a specific industry can allow you to develop expertise and tailor your services to meet the unique needs of that industry. On the other hand, offering services to various industries provides diversification and a broader client base. Consider your strengths, market demand, and long-term goals when making this decision.

6. How can I differentiate my agency from competitors? Standing out from the competition is essential. Identify your unique selling points, such as specialized skills, innovative approaches, exceptional customer service, or specific industry experience. Highlight these differentiators in your marketing efforts and showcase them as your agency’s strengths.

7. What tools and software do I need to run my agency efficiently? Several tools and software can help streamline your agency’s operations. These may include project management tools, collaboration platforms, social media management software, analytics tools, and SEO software. Research and select tools that align with your agency’s specific needs, budget, and workflow.

These FAQs address common concerns when starting a digital marketing agency. Remember to adapt your strategies based on your agency’s goals, target audience, and the ever-changing landscape of digital marketing.

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