Agency 101: How to start a digital marketing agency

Written by: Karl Sakas

People often ask me for advice about how to start their own digital marketing agencyIt’s an important question—but as new business owners, they can’t always afford to hire me as an advisor.

As a public service, here’s my free advice on how to start a marketing agency. This includes self-awareness, positioning, sales & marketing, track record, services, clients, staff, and operations. Want to plan ahead even further? Check out my book Work Less, Earn More: How to Escape the Daily Grind of Agency Ownership.

Let’s take a closer look at each area—I kept my answers in bullet form so you can scan them. [Updated: January 2024]

Self-Awareness: What are you getting into?

  • When it comes to starting a new marketing agency, the exact answer depends on your personal and business goals. In particular, do you want a Lifestyle agency (where you make a nice salary while working reasonable hours) or an Equity agency (where you work long hours now to maximize valuation to sell the agency in the future). More on that here.
  • Also, think hard about whether you truly want to start an agency. If you’re doing it because you really like marketing (or design or development), know that agency owners have little time to actually do client-facing marketing (or design or development). You’re going to spend a ton of time on everything else—sales, client service, accounting, recruiting, project management, and more.
  • Finally, don’t do it unless you have 6-12 months of personal financial reserves. Otherwise, you’re going to run out of money and need to find a new job. Things will take longer than you expect.

Positioning: Why pick your agency?

  • Positioning fits under marketing (below), but it’s important enough to be its own section.
  • What makes you unique? Why hire your agency rather than all the other agencies that are already out there? Why should anyone care about what you do?
  • Where are you going to focus? What’s your client industry vertical, geography, and/or type of service? Is that market big enough to support your agency and its competitors? This will evolve, but you need to start somewhere.
  • How much are you going to charge? This will evolve quickly during your first year, but where do you want to start? Are you doing $50K projects, $500K projects, or $5 million projects? This also affects your ability to make a profit.

Marketing & Sales: Getting the word out… and getting revenues

  • You might think you’re in marketing, but when you run a startup marketing agency… you’re actually in sales. You or your business partner need to be bringing in sales.
  • The exact approach depends on your target industry and/or geography. Assume it’s going to take longer than you expect.
  • How are you getting the word out? What digital and print collateral do you need to do get started?
  • At a minimum, you want an agency name, logo, basic website, email address, and business cards. Do NOT waste months trying to find the perfect name or trying to design the perfect logo. There isn’t one. But do take the time to ensure your branding matches the sophistication of your target market. (And do a trademark search; I recommend Matchstick Legal and Sharon Toerek.)
  • You can use content marketing to help stand in for a small portfolio (more on portfolios below, under “Track Record”). Clients would rather see what you’ve done before, but they also want to see how you think (e.g., your blog and/or social media accounts). Share what you think, with a focus on informing clients rather than promoting yourself—it’ll attract clients you want and repel clients you don’t want.
  • Keep in mind that thought leadership marketing is a key way to stand out. Get my book on speaking for agency bizdev: The In-Demand Marketing Agency.
  • Consider my 37 agency sales tips, to help you closer better deals with less work.
  • Weigh when to add a sales pre-qualification survey to your sales process. Initially, you might not want to add the “friction” of a pre-survey… but soon you’ll need to become picky about which prospects get a call with you.

Track Record: Portfolio & proof of results

  • You’re new, so what can you do to build a proxy track record? The biggest factor is going to be your past projects.
  • Have you gotten results for others? You probably need to start with a portfolio of work you’ve done for others. But be honest if you don’t have direct experience; let prospects opt-out early instead of wasting your (and their) time.
  • Don’t have anything you can point to from past work? You really shouldn’t be starting an agency—why would anyone hire you?
  • Consider doing 1-2 strategically free projects in return for testimonials and featuring the client in case studies. You need anything you can get to start forward motion. But the “strategic” part means doing this only for clients/brands who’ll help you move forward.

Services: Get them “right-ish”

  • Choose the type(s) of agency services you’ll provide. Every agency service fits into one of three buckets—Think (strategy), Teach (training), and Do (implementation). Be careful about starting with implementation—it’s easy money, but it’s hard to convince those clients later that they should trust their implementer for strategy advice.
  • Pick the right agency pricing model. Your options are hourly, milestone, and value-based. Each has pros and cons; hourly is easiest to start, but you’ll likely want to transition to milestone and (perhaps eventually) value-based.
  • When it comes to services, choose to be mostly proactive, rather than mostly reactive. Clients will ask you to do all kinds of things; don’t provide a service unless it’s a strategic fit for your agency or provides another benefit to you beyond the revenue alone. Otherwise, you’ll find yourself doing projects that you hate… and you’ll be doing them poorly… and people keep asking you for more of them. (You can refer poor-fit work to a partner agency, potentially collecting a referral fee.)
  • Charge enough from Day 1. How much is enough? At least $150/hour or equivalent, and preferably $200/hour or more (USD). It’s hard to raise prices with existing clients, so now’s your biggest chance to set prices that that reflect your market value (and that cover your overhead). Value-anchoring can help. If you were previously a freelancer, raise your rates immediately for new clients; you can’t cover your new agency overhead (including outsourcing to others in a few months or a few years) on your old rates.
  • Your services will evolve over time. Consider the points above, but allow space to evolve as you learn how to do each service better. Here’s my advice on adding new services at agencies.

Clients: You need them ASAP

  • Clients = Revenues. No Clients = No Revenues. You need to get paying clients as quickly as possible or else you’re going to go out of business.
  • If you can start the agency with some initial clients, you’re off to a good start. Don’t have any initial clients? You’ll need bigger personal financial reserves, as I note in the Self-Awareness section and the Operations section.
  • Start by reaching out to people you’ve helped in the past (assuming there aren’t relevant non-competes and non-solicitation agreements).
  • Manage clients’ expectations at every step of the way, to reduce your stress and improve profits. I have a free eBook (available immediately as a 20-page PDF when you sign up for my email newsletter) with advice and templates for doing this.
  • Clients are more likely to fire you for bad client service than for bad marketing. Commit to Warmth & Competence, and be ready to defuse client freakouts before they get worse.

Staff: Avoid making full-time hires at first

  • You’ll need people doing sales, client service, client implementation, project management, agency marketing, and business operations. In the beginning, just 1-3 people will be doing all of that (you and your business partners, plus the occasional contractor).
  • As you grow, plan to separate those responsibilities based on who’s good at what. Salespeople are rarely good at ops, and vice versa. Eventually you’ll want to hire help.
  • Think very hard about whether to hire full-time employees. Few super-early-stage startups (especially service-based businesses like agencies that don’t have outside investors injecting cash) should hire employees beyond the founding partners.
  • Focus on using freelancers (designers, copywriters, event planners) and outside services (accounting, legal) whenever possible, at least at the beginning. Here’s how to find great freelancers.
  • Your first full-time employees should be client-facing people. You can swap-in behind-the-scenes freelance designers, developers, and copywriters as needed, but nothing frustrates a client like having to re-explain their account to a new client service person or a new strategist every few months. Here’s more about agency roles.

Operations: Keep things organized

  • You don’t have to figure everything out in advance, but you at least need to set up a business entity and open a bank account to deposit client payments.
  • Find an accountant and a lawyer to keep you on track. A small investment up front (and along the way, for the accountant) will prevent major problems later.
  • Again, you need personal financial reserves. This is going to take longer than you expect. Consider whether to do freelance work for past employers or other clients in the meantime.
  • Do NOT start any client work without receiving a signed contract and deposit. You will absolutely regret it if you don’t. I recommend having a “we don’t schedule the kickoff meeting until we’ve received the deposit” policy. You can use my Reason-Options-Choose (R-O-C) framework to handle those issues.
  • Keep an eye on collections. If you don’t watch Accounts Receivable (A/R), you’ll get in trouble—because there’s work going out, but no money coming in.

Next Steps to Start a Marketing Agency

Good luck! You have a long road ahead of you, but with good planning, good execution, and at least a little luck, you’ll be off to a good start.

Need further support as you start your agency? I have a few options to help you:

Question: What questions do you have as you start—and grow—your agency?

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