How to Start a Digital Marketing Agency

How to Start a Digital Marketing Agency

Starting a digital marketing agency can be an exciting and rewarding entrepreneurial journey. As more businesses realise the power of digital marketing, the demand for these services continues to skyrocket. The global digital marketing industry will grow to $1.2 trillion by 2027.

So, starting a digital marketing agency may be an excellent path if you have a background in marketing, advertising, communications or technology – or simply have a passion for helping businesses succeed online. But where do you begin? This comprehensive guide covers everything about how to start a digital marketing agency, from writing a business plan to winning your first clients.

How to Start a Digital Marketing Agency: Planning and Research

Before diving headfirst into starting your agency, thoroughly plan and research. Without understanding the full scope of what’s involved, rushing into this is a recipe for frustration and failure.

Set Goals and Create a Business Plan

When starting any new business, clear goals and a well-defined business plan are non-negotiable.

• Set concrete goals for what you want to achieve in the first year, three years and five years. Plans could include some clients, revenue targets, profit margins, number of employees, etc.
• Outline all critical assumptions and decisions in a business plan. This should cover your target market and ideal client profile, services and pricing, startup costs and financing needs, hiring strategy, projected financials, etc.
• Research the competition rigorously. Know what existing agencies charge and what services they offer. This will help you position yourself in the market.
• Build a services roadmap and offerings framework that matches your unique strengths and differentiates you from competitors. Determine what niche you want to specialise in.

Taking time upfront for thoughtful strategy and planning will pay dividends later.

Speaking with Prospective Clients

To further validate your business ideas, speak directly with people who would become your clients. This market research is invaluable.

• Identify a list of 20-30 businesses that fit your ideal client profile
• Reach out to set up short 30-minute interviews to pick their brains and assess their pain points related to digital marketing
• Inquire about their experiences working with agencies currently or in the past
• Collect key insights around what services they need most, what they liked/disliked about past agencies, what would compel them to switch to a new agency, and what factors they prioritise most when evaluating agency partners (e.g. services offered, experience level, reporting capabilities, personality fit)

Let these potential future clients shape your agency's positioning and offerings. By aligning closely to their needs from the outset, you’ll set yourself up for success in converting leads later.

Model the Financials

Starting any business carries financial risk and uncertainty. To mitigate this, model various scenarios for projected costs, revenues and growth rates. Estimate conservatively at first.

• Project startup costs. These may include expenses like:
  • Registering your business
  • Building a website
  • Renting office space (if not initially working remotely)
  • Purchasing hardware/software
  • Hiring initial team members
  • Paying for marketing activities
• Estimate ongoing operating expenses, like salaries, subscriptions, overhead, taxes, insurance, etc.
• Model various scenarios for how many clients you could realistically sign each month, associated revenue, and how long it will take to break even
• Establish metrics and milestones to evaluate your progress, like a month-over-month client and revenue growth.
• Build connections with small business financing partners like lenders and investors in case you need an infusion of capital before achieving profitability.

Continually updating financial models and targets will be crucial, but having an initial model provides a strategic framework.

Building a Digital Marketing Agency from the Ground Up

Once core planning and research are complete, building and launching your agency is time. This requires a laser-focused entrepreneurial drive and the flexibility to adapt when challenges arise.

Choose a Business Structure

You can legally create your agency in several ways, with differing tax treatments, regulations and filing requirements. The most common options include the following:

• Sole Proprietorship
• Partnership
• Limited Liability Company (LLC)
• S Corporation
• C Corporation

Weigh factors like your business model, number of owners, desired liability protection, stock issuance plans, intent to attract investors, tax implications and regulatory compliance needs.

For many digital marketing agencies, an LLC provides the best blend of liability protection while allowing pass-through taxation. It's also popular due to simplicity but confirm based on your scenario.

Handle Legal and Administrative Tasks

With your business structure selected, tackle essential legal and admin tasks like:

• Choose and register an official business name. Verify availability, ensuring your name won’t infringe upon trademarks. Also, secure relevant .com domain names.
• Apply for an EIN (Employer Identification Number) via the IRS, which is used to identify your business for tax purposes.
• Check registration & licensing requirements for your city and state. This can include general business licences, sales tax permits, and industry-specific licences, if applicable.
• Set up proper business accounts and tools, like a business bank account, accounting software, CRM, project management system, email marketing platform, etc.

Handling these items early establishes credibility and readiness to operate.

Set up a Website and Branding

A polished website, branding and overall image are vital for attracting clients initially.

• Develop a brand identity reflecting your agency’s culture, voice and positioning via logo, colour palette, fonts, etc.
• Either hire a web developer or use a site builder platform like Squarespace, Wix or WordPress to launch your site. Must-have elements include services overview, founder bios, case studies, blog, contact page, etc.
• Write SEO-optimised content highlighting your expertise around subjects your ideal clients care about
• Implement analytics to monitor traffic and engagement
• Ensure site security via SSL certificate, firewall, data encryption, backups, etc
• Set up professional email with a custom domain name
• Curate social media channels reflecting brand voice/tone with indie agency appeal.

Treat your website as a lead generation workhorse from day one. Drive interest by showcasing thought leadership and results for similar clients.

Determine Service Offerings

The service offerings you choose form the backbone for everything else in your agency. So, take time to craft the right mix thoughtfully.

Standard digital marketing services among agencies include:

• SEO – Organic site optimisation
• PPC – Pay-per-click ads
• Content Marketing
• Email Marketing
• Social Media Marketing
• Web Design / Development
• Analytics and Reporting

To attract early clients, identify ~3 core competencies from this list to double down on and specialise in. Position yourself as an expert in these domains.

Over time, as you scale, gradually expand your capabilities via hiring and partnerships rather than trying to do everything in-house early on.

Define Pricing and Packages

Pricing appropriately ensures the success and longevity of your agency while also allowing you to serve clients with various needs and budgets.

You have a few options in structuring pricing:

1. Tiered Packages

Create set packages like “Starter”, “Professional”, and “Enterprise”, with defined deliverables and prices for each based on level of effort and scope.

2. Modular A La Carte

Price out each service individually, allowing clients to select piecemeal if they only need specific elements vs. an integrated program.

3. Project or Retainer Based

Quote pricing per project for one-off needs or charge an ongoing monthly fee for continuous services around strategy, execution and reporting.

4. Performance Based

Tie your fees directly to the results, value or ROI you drive for clients. This aligns incentives nicely but requires trust.

When first starting, a tiered model or modular a la carte approach provides flexibility for diverse client needs. Be sure to factor in both hard costs and your team’s time investment when calculating rates.

Define Ideal Customer Profile

Rather than being everything to everyone initially, narrowly define the ideal customer profile you want to target:

• Company size/revenue
• Industry vertical
• Key challenges/pain points
• Why they would value your specific services

Leveraging customer segmentation allows you to tailor messaging and offerings to resonate with your ideal buyers.

Make this target profile as explicit as possible early on. Then, reach them through tailored campaigns while referencing shared struggles and values.

Retain Clients From the Start

Client relationships are the lifeblood of agencies. Making every effort to set proper expectations during the sales process and then over-delivering with excellent execution prevents churn.

• Underpromise and over-deliver throughout the relationship lifecycle
• Explain precisely how you will measure success for the engagement so the definition of value is aligned
• Over-communicate during campaigns, providing consistent updates on critical metrics and insights
• Send monthly recaps detailing all activities completed and results achieved
• Ask for feedback often to identify areas for improvement
• Go above and beyond on reporting with clients by not only presenting analytics but strategic recommendations for what should be adjusted next quarter

Following this client-centric approach prevents mismatches down the line. Continue delighting them, and they’ll reward you with renewals and referrals.

Staffing Your Digital Marketing Agency

Hiring the right talent is instrumental to shaping company culture while allowing you to keep scaling. Move deliberately here, only bringing on key hires as demand justifies it.

Hire Slowly

As the adage goes, “Hire slow and fire fast”. Follow this mantra as you build your team to ensure alignment and prevent turnover.

• Start by handling sales and first clients yourself until bandwidth indeed necessitates help.
• Look for entrepreneurial self-starters who share your values and work ethic.
• Clearly define roles around specialised skills like content, analytics, social media, paid search, etc.
• Ask pointed questions during interviews to gauge work style, critical thinking, emotional intelligence, and hard skills.
• Check references thoroughly to verify candidates’ capabilities and temperament.
• Start new hires slowly through initial training periods before granting full autonomy.

Remaining patient prevents putting people in roles they’re not fully equipped for. Wait until you are sure.

Structure Your Agency

While the system should evolve, begin with a core foundation.

Typical roles and hierarchy:

• CEO – Strategy, biz dev, accounting
• VP of Sales / Marketing – New biz outreach
• VP of Client Success – Account management
• Content Strategist – Blog, Social
• Paid Specialist – PPC, ads
• Designer – Visual assets
• Web Developer – Technical builds & maintenance

Shape your org chart around strengths and gaps. Know when to hire vs. outsource specialities like PR, events, etc.

Compensate Competitively

To attract and retain top-notch talent long-term, your compensation packages must align with market rates for similar roles.

• Competitive base salary demonstrating value
• Performance incentives like quarterly bonuses for driving outcomes
• Profit sharing so the team shares in the upside as the company grows
• Training budget for continual skills development
• Remote work available for work/life balance
• Equity at senior levels for share in overall growth

Go above and beyond on culture, trust and rewards. This pays dividends through a happy, loyal team.

Getting Early Clients for Your Digital Marketing Agency

Without clients, even the best strategies or capabilities mean little. Client acquisition should begin on day one and never stop. Expect a long runway in securing first customers through continuous networking, lead generation and conversations.

Leverage Your Network

The easiest way to land initial clients is through tapping your existing network.

• Reach out to past colleagues, managers, vendors, stakeholders, or clients you’ve worked with previously.
• Host small gatherings or coffees to share your vision for the agency
• Ask if they know of any companies needing the services you offer or warm introductions
• Offer discounts or pilot engagements to close early customers and prove the value

Launching with accounts from those who already know/trust you provides social proof for future growth.

Be Visible In Your Community

Establishing your agency as a recognised leader and local industry expert drives referrals over time.

• Provide free workshops or lectures relevant to your services
• Guest post or offer quotes as a source for local media outlets
• Sponsor or speak at local events aligned with your target customers
• Support charities and community organisations
• Join and actively participate in local industry associations and Chambers

Giving back establishes you as a compassionate, ethical agency dedicated to the region’s growth. These roots grow loyalty.

Outbound Sales

Outbound sales remain imperative, though, reaching beyond existing spheres through both personalised and broader efforts:

• Leverage LinkedIn to identify and then directly contact prospects
• Invest in lead generation via list building, events, pay-per-click, etc
• Craft highly targeted, personalised emails pitching your services
• Follow up diligently on promising leads
• Offer free website audits or strategic calls to showcase expertise

Target 50-100 weekly cold outreaches across channels, refining messaging based on response rates. Schedule demos, then nurture leads towards a close.

Set individualised goals, track conversion rates diligently and continuously refine techniques until securing first sales. Then, scale what works.

Accelerating the Growth of Your Digital Marketing Agency

With early sales established and happy clients on board, activities shift from speculative to scaling through deliberate growth initiatives.

Expand Service Offerings

As a team and internal bandwidth grow, thoughtfully evaluate adding capabilities:

• Conduct surveys asking clients what additional needs they have
• Watch for trends in client requests or RFP requirements
• Identify gaps between your services and competitors
• Seek strategic partners lacking in-house but able to refer out
• Cross-train team on new capabilities before promoting externally
• Update website and collateral with expanded offerings now available

Moving upmarket often requires broader end-to-end lifecycle marketing services. Monitor demand signals to guide.

Specialise Your Expertise

Equally as powerful as expanding horizontally into additional capabilities, though, is deepening vertical expertise in specific domains:

• Industry verticals – Become known as a retail marketing expert, healthcare marketing guru, etc
• Emerging platforms – Establish dominance on TikTok, augmented reality, CTV, etc
• Legacy platforms – Maintain mastery of SEO or email while others chase shinier objects
• Business model archetypes – Perfect your blueprint for onboarding ecommerce brands, local service businesses, etc

Choose your frontier, then defend it relentlessly through thought leadership, client results and partnerships. Become renowned as a category kingmaker.

Increase Pricing Over Time

As your expertise, results, and clientele grow increasingly prestigious, charging higher pricing becomes possible.

Approaches include:

• Create new premium packages only for top-tier clientele
• Migrate existing clients into higher-priced packages upon renewal
• Introduce value-based pricing tied directly to campaign performance
• Shorten contracts to reassess rates six months vs committing for an entire year
• Spot renegotiate mid-contract if delivering outsized returns

Communicate expanded capabilities, demand and stellar outcomes as justification for increases. Highlight massive value still delivered vs. incremental fees.

Maintain High Retention

Client retention proves exponentially easier than new acquisition. So protect hard-won relationships through ongoing value delivery aimed at:

• 85%+ retention rate amongst active clients
• Multi-year contracts establishing continuity
• Gradually increased budget over time as campaigns scale
• Minimising account manager turnover/changes

Loyalty earns legacy clients’ spend following your agency anywhere. Never take them for granted.

Recruit Talent Aggressively

People power your agency – so acquiring and nurturing the best talent at scale determines destiny.

• Build an employer brand and careers site highlighting the culture
• Incentivise referrals with employee finder’s fees
• Develop internship pipelines with local colleges
• Offer above-market compensation, perks and remote flexibility
• Create upward mobility paths preventing attrition
• Maintain a razor-sharp focus on diversity, equity and inclusion

With a supportive workplace and ample growth opportunities, your agency will become a magnet for hungry rising stars across specialities. Provide the stage for their brilliance while driving outcomes for clients.

Final Thoughts on Starting a Successful Digital Marketing Agency

Launching a digital marketing agency requires immense passion, resilience, strategy and hustle. The obstacles will feel endless some days. But by relentlessly focusing on delivering tangible value to clients through strategic insight and strong execution, your agency can become a thriving, fast-growing business for years.

Remember that this is a marathon, not a sprint. Stay patient in building a sustainable foundation, even as ambitions race ahead. With the above guide setting the cornerstones around planning, hiring, sales, and service craftsmanship – then deliberately iterating based on client feedback – your agency positioning will only strengthen over time.

Soon, you’ll look back in awe at early milestones like securing the first client, recruiting the 10th employee or cracking seven-figure revenue. However, the most satisfaction will come from positively impacting local businesses’ key performance metrics through innovative campaigns daily. By solving their changing digital marketing challenges over the long run, your agency becomes their secret weapon vital for continued adaptation and leadership.