How to Start an Agency: The Ultimate Guide for Beginners + 5 Expert Tips

You've been freelancing or working as an in-house marketing specialist for some time. 

And it’s been a good experience. 

Then you thought that maybe you could do a much better job if YOU were the one calling the shots. 

You have great ideas, but your manager wants to fly straight and play it safe. 

At this point you have two options – either you start looking for a more creative agency, or you start your own agency. 

A digital marketing agency gives you the freedom and flexibility of freelance work but takes out many of its limitations. 

To help you out, we covered everything you need to know about starting an agency plus a few expert tips.

How to Start an Agency: Determine Your Niche

The first step is to choose which digital marketing services you want to offer. You don’t want to be a jack-of-all-trades so think about:

• What do you enjoy doing?

• What are you good at?

• What’s in demand right now?

What do you enjoy doing?

Running your own business is a long-term commitment with plenty of sunshine and rainy days. Because of this, it’s better to start with the services you love rather than something that just pays the bills. This will help you keep pushing even when the weather changes for the worse. 

Even though you may not always be providing services directly, in the beginning, you’ll be the face of the client service. 

What are you good at?

Kicking off with things you have a lot of experience with ensures that you’ll be able to offer quality service from the very start. This will generate social proof and positive customer reviews that you can use to get more leads. 

What’s in Demand?

Naturally, you want to offer services that are in high demand. You can learn this by doing market research, including interviewing your ideal clients or spying on the competition. 

The intersection of these three will tell you what services you should pursue. 

Of course, you should offer complementary services that clients expect along with what you’re already offering. 
For example, if you offer content marketing services, it makes a lot of sense to hire people who can do graphic design, funnel setup, and paid ads, among other things.

Remote or Brick & Mortar?

This is probably one of the most important decisions you need to make. Whether you are searching for the best state for an LLC for your agency or planning for remote work, it will determine your cost, hiring strategy, equipment, data privacy policies, etc.

Some agencies find it easier on the budget to have completely remote staff, while others need to have a brick-and-mortar office. 
In the State of Remote Work 2021 report, 72% of employees stated that their organization is planning for some kind of permanent remote work in the future.

Since 2020, we have had an explosion of remote agencies. Pandemic or not, going fully remote has serious advantages:

• Fewer expenditures – no rent and other office overheads.

• Increased productivity – employees have more flexibility.

• Endless recruitment potential – you can tap into a global talent pool.

While small remote teams are a great way to start an agency, as your business grows, you may want to have a physical office. 

How to Start an Agency: Choose the Business Model

Now you need to decide how you want to handle your billings. There are several options you can consider.

Flat-rate Service

Flat-rate means that you offer your services at a monthly or yearly rate. The clients don’t pay for your hours or the number of projects you work on. Instead, they agree to a flat sum for all your services. 

If you’re not sure about the flat-rate model, try to analyze client needs vs. the amount of work you need to do to get the job done. 

On the other hand, this business model might not work for you if your clients decide to scale up their projects. You’ll be doing more work and still getting paid the same. 

You can avoid this by revising every contract before you renew them. 

Commission Rate

In this case, you only get paid after your clients make money off of a sale. 

For example, if your agency creates a marketing campaign for several channels, you get the portion of the revenue that is generated through those campaigns.

This business model is attractive to clients because they pay you based on your success, however, there are a few issues:

• You can't apply it to all services. For example, there’s no way to get a commission for designing a logo or a banner for a client. Simply because they can’t measure the income based on new graphic work alone. 

• It’s impossible to bill your clients without keeping a close eye on their sales. This means you need to know exactly how much revenue your marketing strategies generate to get an accurate commission.

Hourly Rates

Perhaps the most lucrative model for new businesses is when you bill clients for the time you spend working on their projects. 
You can keep track of the hours manually, but it’s much easier to use time trackers. These handy apps automatically track the hours that your team spends on each project. 

Start With a Small Team

With the business model in check, it’s time to hire your team. You need other talents in your agency so you can provide services you don't have experience with. 

If you’re just starting, consider working with freelancers and hiring them on a project-based model or paying them as contractors. As your agency grows over time, you can hire them as salaried employees.

One way or another, it’s best you hire a small team in the beginning. You’ll be able to complete any project without having to hire someone to manage a large team. 

So what breed of professionals do you need to hire? This will determine your path when deciding how to start an agency.

It depends on the kind of agency you’re looking to run. But any digital creative needs:

• Web designers who are versed in the latest concepts like interactive web design. Most clients and customers will probably reach out through your website, so you need to make your presentation exemplary. 

• Marketing specialists who can analyze data and create campaigns to bullseye the potential clients and customers. 

• Other individuals who have specialized skills to complete the services you are offering. For example, if you’re starting a content marketing agency, you’ll need content writers, copywriters, and link-building specialists. Find out how collaborating with a trusted link building company can give your agency the competitive edge it needs.

When you take on enough clients, you can hire more specialists to grow your business. 

One way to start out with a small team is to invest in great sales software. Take writing proposals for, example. Better Proposals has over 200 professionally written and designed proposal templates in its database. 

Each of these proposals would take hours and hours to make from scratch, not to mention the collaboration of different specialists. You’d need a developer, graphic designer, and a copywriter to say the least. 

Instead, pick any template you like and modify it to your needs – it takes less than 15 minutes.

Who is Your Ideal Client?

You know what kind of services you’ll be offering and you have a team eager to start. Now you should decide on who your ideal clients are. To choose your target audience, think about:

People you like doing business with

This is where you can rely on your experience as a freelancer. What types of clients, businesses, or industries do you enjoy working with? 

When asked about their number one business priorities in the next 5 years, 45.9% of professionals listed customer experience.

This only shows how important it is to find clients that speak the same language. 

Also, think about the types of clients who were the happiest with your work. Prioritize those who regularly gave you positive reviews and referred you to their partners. 

People who have the kind of cash you need

At the end of the day, you need clients who need your services and are willing to pay the rates you charge. 

At this point, you shouldn’t waste resources on pursuing clients who still need to learn about the value of the services you provide. There will be plenty of time for education later – when you’re flush and looking to expand your customer base.
In the same way, it makes no sense to offer your services to clients who can't afford them. In the first days, your main concern is the cash flow. Get your agency profitable, and then you can think of giving clients discounts.

Build Online Presence

An engaging online presence is essential for any new business. Think of a name for your agency, register the domain name and create the:

Website

Your company’s website is an online presentation of your business. It should provide basic information about your agency, the services you offer, and how you can help potential clients realize their goals. 

On top of it, your website can also generate leads for your agency. Include a chatbot and you’ll have an AI business development rep working for you seven days a week, 365 days a year. Find the best website builder to help you create a website easily, including professional UI design services to make your website look its best.

Business Blog

A blog is an excellent way to attract organic traffic to your website. It also allows you to establish your agency as a leader in ideas in the digital marketing domain you’re interested in. 

For example, if you’re a graphic design agency, your blog should have knowledgeable posts about visual marketing, brand communication, etc. 

A HubSpot study found out that businesses that blog have 126% higher lead growth than those that don’t. 

Social Media Accounts

Last but not least, your online presence also depends on your social media activity. You need accounts on all major social media platforms, so potential clients can reach you there as well. 

Then after a while, you’ll be able to focus your efforts on one or two social media platforms – the ones your clients use the most. 

For example, if you’re dealing mostly with local businesses, Facebook is the best option. On the other hand, if your clients are SaaS companies, you’ll have the best chances to generate B2B leads with LinkedIn.

Startup Tips From Experts

1. Forget about the work-life balance… for now

These kinds of messages pop all around the web like those bumper stickers. Highly successful people love to brag about themselves working 20 and sleeping 4 hours a day. 

And unfortunately, they are right. You won’t get very far by taking it easy, especially in the beginning.  

It’s not that you should work 20 hours a day, but don’t expect to go vacationing all year round. 

Hard work always pays, especially in the first days, I mean years. 

2. Start counting coppers

And I mean watching every single penny, even when the cash is flowing in. 

However, as a business owner, you need to do it forever. When you’re running things, you don’t have the luxury to relax your spending when things are going well. 

Becoming successful is about how much you spend just as it is about how much you make.

For starters, you don’t need expensive finance software for controlling your expenses. A few simple spreadsheets will do the trick. Create one master spreadsheet that covers every penny that goes in and out every month, add another spreadsheet for the burn rate and expenses.

And remember:

"They are only numbers. Numbers on paper; once you understand that... it's easy to make them behave."

―Master of Coin Petyr Baelish

3. Invest in great talent

Talented professionals are the cornerstone when deciding how to start an agency. You might be the brain behind your business, but if you’re the most skilled person on the team, you’re not hiring the right people. 

No matter how experienced you are, you can’t do everything, it’s just not physically possible. 

Top talent is also a powerful productivity booster. A study by McKinsey found that the gap between average performers and high performers increases with job complexity. In highly complex occupations like software developers, talented people are 800% more productive. 

Talented professionals not only save you from mental overload but come a long way in customer experience. Clients love working with knowledgeable people. 

4. Nurture relationships with loyal clients

Don’t pursue every client for the sake of cash. When you’re doing a good job, you can choose who you do business with.

You want to take good care of good clients. These are the people who won’t take advantage of you even if you overdeliver on a specific project. 

If they take advantage, they are no longer a good client and sooner or later will be asking for more free work. 

These are the clients you should look to replace as soon as you can. 

Remember: Every business sits on mutually beneficial relationships and financial transactions – not desperation and taking advantage.  

5. Keep up the good spirit

When the atmosphere sinks, you’re the one who can lift the spirits. Whatever happens, don’t talk bad about your clients to your team, as this will reflect in their productivity. 

You are the boss, which means you need to remain firm but good-natured and approachable.

Have fun but keep it professional at all levels.

Wrapping Up

Starting your own agency is a major step in your career. Freelancing and working in-house have their benefits – your job is to work and get paid, and someone else does all the rest. 

Running an agency, on the other hand, allows you to control every aspect of your job, while you apply all your energy to brilliant creative work and the acquisition of new accounts. 

I hope this 15-minute guide helps you make your first steps and make the right choices from the first day of your business. 

Make sure that every proposal you send hits its target. Sign up for a free trial and see for yourself how easy the proposing process becomes. 

Now go and make a name for yourself.