Starting an advertising agency can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful advertising agency.
Importantly, a critical step in starting an advertising agency is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start an Advertising Agency:
- Choose the Name for Your Advertising Agency
- Determine the Type of Advertising Agency You Will Launch
- Develop Your Advertising Agency Business Plan
- Choose the Legal Structure for Your Advertising Agency
- Secure Startup Funding for Your Advertising Agency (If Needed)
- Secure a Location for Your Business
- Register Your Advertising Agency with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Advertising Agency
- Buy or Lease the Right Advertising Agency Equipment
- Develop Your Advertising Agency Marketing Materials
- Purchase and Setup the Software Needed to Run Your Advertising Agency
- Open for Business
1. Choose the Name for Your Advertising Agency
The first step to starting an advertising agency is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your advertising agency:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your advertising agency.
2. Determine the Type of Advertising Agency You Will Launch
The next step is to determine the type of advertising agency you will launch. The four main types of advertising agencies are:
- Creative agencies: These agencies design advertising campaigns and create promotional materials. They are typically responsible for all creative aspects of a campaign, including research, writing copy, designing images, video production and more.
- Content Marketing Agencies: These agencies create content such as blog posts, articles, videos, podcasts and other forms of media to help advertise a product or service.
- Digital advertising agencies: These agencies specialize in digital marketing and create campaigns for websites, social media channels, email and other forms of online advertising.
- Media planning/buying agencies: These agencies plan how and where to advertise a product or service across various media outlets, including television, radio, print and more.
3. Develop Your Advertising Agency Business Plan
One of the most important steps in starting an advertising agency is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your advertising agency.
- Company Overview – this section tells the reader about the history of your advertising agency and what type of advertising agency you operate. For example, are you a creative agency, content marketing agency, digital advertising agency or media planning/buying agency?
- Industry Analysis – here you will document key information about the advertising agency industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products or services like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your advertising agency? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your advertising agency make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
4. Choose the Legal Structure for Your Advertising Agency
Next you need to choose a legal structure for your advertising agency and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the advertising agency and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start an advertising agency together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for an advertising agency include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for an advertising agency is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your advertising agency, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
5. Secure Startup Funding for Your Advertising Agency (If Needed)
In developing your advertising agency plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for an advertising agency to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in an advertising agency that they believe has high potential for growth.
6. Secure a Location for Your Business
Having the right space can be important for your advertising agency, particularly if you’d like to meet clients there.
To find the right space, consider:
- Driving around to find the right areas while looking for “for lease” signs
- Contacting a commercial real estate agent
- Doing commercial real estate searches online
- Telling others about your needs and seeing if someone in your network has a connection that can help you find the right space
7. Register Your Advertising Agency with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
8. Open a Business Bank Account
It is important to establish a bank account in your advertising agency’s name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
9. Get a Business Credit Card
You should get a business credit card for your advertising agency to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
10. Get the Required Business Licenses and Permits
There are a few business licenses and permits you will need to operate your advertising agency, such as:
Business license – Generally, you need to obtain a business license from the city or county in which your advertising agency will be located.
Sales tax permit – Depending on the products/services that you offer, you may need to apply for a sales tax permit. This allows your business to collect and remit sales taxes when applicable.
Nearly all states, counties and/or cities have license requirements including:
- General Business License: getting your Articles of Incorporation as discussed above
- Sales Tax License or Seller’s Permit: for selling products
- Zoning Approval: typically at the city or county level, this provides authorization for construction or use of a building or land for a particular purpose
- Fire Department Approval: a process by which the local fire department reviews and approves the installation of a fire alarm system.
Depending on the type of advertising agency you launch, you will have to obtain the necessary state, county and/or city licenses.
11. Get Business Insurance for Your Advertising Agency
When you’re starting a business, it’s important to protect yourself and your business with the appropriate insurance. Here are some of the most common types of insurance businesses should have:
General liability insurance – This insurance protects your advertising agency from any lawsuits that may arise from accidents or injuries that occur on your property.
Business interruption insurance – This type of insurance helps protect your business if something happens that causes you to lose income. For example, if a fire destroys your office building, this insurance would help reimburse you for lost income while you rebuild.
Other business insurance policies that you should consider for your advertising agency include:
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
12. Buy or Lease the Right Advertising Agency Equipment
Most advertising agencies don’t need much equipment. To start an advertising agency, you probably only need a computer, phone and internet access. You might also need office furniture.
If you’re just starting out, you may want to look into leasing options as this can help reduce costs and keep your overhead low. Leasing also allows you to upgrade your equipment more easily when needed.
13. Develop Your Advertising Agency Marketing Materials
Marketing materials will be required to attract and retain customers to your advertising agency.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your advertising agency. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional advertising agency website provides potential customers with information about the products and/or services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your advertising agency.
14. Purchase and Setup the Software Needed to Run Your Advertising Agency
There are a few software programs you will need to run your advertising agency. The first is a good graphic design program for creating marketing materials and logos. Adobe Photoshop, Illustrator and InDesign are all good choices.
The second software program you will need is an accounting program. This will help you keep track of your expenses and income. QuickBooks or Microsoft Excel are both good options.
Last, you will need a customer Relationship Management (CRM) program. This will help you track and manage your customer data. Salesforce and SugarCRM are both popular CRM programs.
Research the software that best suits your needs, purchase it, and set it up.
15. Open for Business
You are now ready to open your advertising agency. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Start an Advertising Agency FAQs
Is it hard to start an advertising agency?
No, it's not hard to start an advertising agency. In fact, with the right information and planning, it can be easy.
Moreover, if you follow the steps above, you should be able to start your advertising agency without too much difficulty.
How can I start an advertising agency with no experience?
The best way to start an advertising agency with no experience is to start small. You can offer your services to friends and family members, or to local businesses. Once you have a few clients, you can then start marketing your business more aggressively.
What type of advertising agency is most profitable?
Some of the most common advertising agencies that are profitable include digital marketing agencies, creative agencies, and PR firms. For example, digital marketing agencies specialize in helping businesses create and run digital campaigns, while creative agencies focus on coming up with unique ideas for advertising campaigns.
How much does it cost to start an advertising agency?
The cost to start an advertising agency will vary depending on the services you choose to offer. The startup costs for advertising agencies range between $2,000 and $10,000. These costs include things like website design and development, software applications, and marketing materials.
It's important to remember that while the start-up cost may seem high initially, it can be offset by gaining clients quickly and efficiently. With proper planning and strategy, you should be able to recoup your investment in no time.
Overall, the cost of starting an advertising agency can range from a few thousand dollars to tens of thousands of dollars. It's important to do your research and plan accordingly to ensure that you have everything you need to get your business off the ground.
What are the ongoing expenses for an advertising agency?
The ongoing expenses for an advertising agency can vary depending on the size and scope of your business. The typical ongoing expenses range between $500 and $10,000 per month. This includes things such as software, marketing materials, advertising campaigns, website hosting fees, and labor costs.
How does an advertising agency make money?
An advertising agency makes money by providing creative and effective advertising campaigns for their clients. They typically charge a commission for each campaign that is run, which can vary depending on the size and scope of the campaign. Additionally, many advertising agencies also offer consulting services, which can be quite lucrative.
Is owning an advertising agency profitable?
Yes, owning an advertising agency can be very profitable.
If you're creative and effective in your campaigns, you can bring in a lot of business and make a good profit. Advertising agency owners can earn excellent money, depending on their client base and how well they manage their business. Additionally, there is potential to earn more money through additional services such as consulting or training.
Some of the key things you can do to make your advertising agency more profitable include:
- Developing a strong network of clients
- Researching effective advertising strategies
- Offering competitive rates and fees
- Investing in marketing materials and campaigns
- Keeping up to date with industry trends
- Investing in training and certification courses
- Narrowing your focus to a specific niche market
- Offering add-on services that complement your main offering
- Optimizing your website for SEO to increase online visibility
- Creating a unique selling proposition
- Providing outstanding client service
Why do advertising agencies fail?
There are a number of reasons why advertising agencies can fail, but some of the most common include:
- Not developing a strong network of clients
- Focusing on the wrong niche market
- Not keeping up to date with industry trends
- Offering low-quality services
- Not investing in marketing and advertising materials
- Poor customer service
- Charging too little or too much for services
One of the main reasons that advertising agencies fail is a lack of planning. This can include not having a detailed business plan, not doing research on the industry, and not targeting the right customers.
Another reason is a lack of marketing and sales skills. This can include not creating a sales process and not have a clear and strong value proposition.
The last main reason is a lack of financial management skills. This can include not having a realistic budget, not tracking expenses, and not investing in the business.
Who are key players in the advertising agency market?
The advertising agency market is made up of a variety of different players, including small businesses, large enterprises, and even individuals.
Some of the key players in the market include:
- Publicis Groupe
- Interpublic Group
- Dentsu Aegis Network
- Havas Group
However, there are many other players in your specific target market, and it is important to research the market to identify the key players that may have the most direct influence on the success of your business.
How much should I charge for my advertising agency services?
Advertising agency fees can vary depending on the type of advertising agency services being offered, as well as the size and scope of the project.
However, some common advertising agency fees include:
- Hourly rates - $50 to $250 per hour
- Project fees - $500 to $5,000+
- Retainer fees - $1,500 to $10,000+ per month
- Commission: 10% - 20% of project value
The best way to determine the right fee for your advertising agency services is to research the rates of similar businesses in your industry, and to also consider the value that you will be providing to the client.