Many entrepreneurs have toyed with starting their own digital marketing agency, not knowing the precise costs of making this idea a reality.
But understanding these costs is a significant part of what it takes to launch your own business. Failing to grasp the exact costs of launching an agency can lead to poor cash flow – the top reason small businesses fail.
Fortunately, it’s not all doom and gloom if you know what you’re getting into. In this guide, we’ll break down all the costs associated with launching your agency so you can confidently start your digital marketing journey.
TL;DR – Quick Overview of Start-Up Costs
For those in a hurry, we’ve provided a quick summary of the start-up costs involved in starting a digital marketing company:
- Launching your own marketing agency is a lucrative business venture.
- Starting an agency with minimal funds is possible.
- Legal fees, branding, website development, office space, and marketing expenses are essential considerations.
- You can reduce costs by adopting a remote work arrangement, doing the registration process without professional help, and using free marketing tools.
- Launching your own digital marketing agency will cost you as low as $116 and as high as $45,530.
Are Digital Marketing Agencies Profitable?
Without a hint of doubt, starting your digital marketing agency is a profitable venture. Promethean Research’s Digital Agency Industry 2023 Report shows that the demand for digital solutions across companies has increased these past years. In 2022, digital marketing agencies experienced a revenue growth rate of 15%.
But remember that your profitability is linked to the effectiveness of your services, client satisfaction, and ability to adapt to digital marketing trends.
You’ll need to build a strong reputation and deliver results consistently to stay ahead of the curve and become a profitable agency.
With our proven strategies, tailored mentorship, and in-depth industry expertise, our team at Prospecting On Demand can help skyrocket your MRR to 7 figures and beyond. Sign up for our programs to boost your chances of digital marketing success!
Can You Start an Agency With No Money?
Contrary to what most people think, starting an agency is possible, even with little to no money. Of course, don’t expect the ride to be easy. You’ll need to squeeze all your creative juices and make the most out of your resources.
Because digital marketing agencies cover many services, find a niche you can serve with sufficient expertise. For example, if you’re skilled at social media marketing, you can start by offering your services to friends, family, or other peers in your network.
From here, you can request testimonials and create case studies to demonstrate your value to potential clients.
Estimating Various Costs of Starting a Marketing Agency
If you’re looking to launch your marketing agency smoothly, you’ll need to understand the breakdown of the costs involved. This will allow you to create a detailed budget plan and avoid financial surprises down the road.
Legal and Administrative Costs
Registering in your state or country is the first step toward launching your marketing agency. According to LegalZoom, state offices charge about $100 to $250 in incorporating fees depending on your business location. There are also other costs and fees that come with establishing an incorporation:
- Attorney Fees (if needed): $211 to $424 per hour (LawPay); some firms offer a flat rate between $500 to $700
- Registered Agent (if needed): $0 to $300 per year
- Annual Reports: $0 to $300 per year
- Doing Business As (DBA) Filing if needed): $25 to $50
- Business License: $15 to $300 per year
But if you’re looking for simpler agency processes with less paperwork, choosing to operate as a limited liability company (LLC) could be the way to go.
Startup costs will vary depending on the formation method. If you do it yourself, you only need to account for filing fees in your state, a one-time fee ranging from $50 to $150.
Here are other fees that you might need to account for when setting up your marketing agency:
- Attorney Fees (if needed): $425 on average
- Registered Agent (if needed): $0 to $300 per year
- Annual Reports: $0 to $800
- LLC Name Reservation (if needed): $10 to $140
- Operating Agreement: $0 to $200
- Employer Identification Number (EIN) Application: $0 to $99
- Business License: $15 to $1000
Remember that you can cut these costs if you do this yourself. Before you make a decision, weigh the benefits of seeking professional assistance against the potential cost savings.
Website Domain and Hosting
The cost of setting up a website domain depends on the top-level domain (e.g., .com, .org) you intend to use and the hosting service you choose.
If you envision your website’s domain ending with ‘.com, expect to spend about $9.99 annually. Less popular domains can go as low as $0.99 per year.
Website Design and Development
If you’ve entertained the idea of launching your marketing agency, you’ve probably thought of how you want your website to look. Your website design can significantly impact your costs.
Let’s compare the costs and features of 2 popular website builders, Squarespace and WordPress.
| Squarespace vs. WordPress | Squarespace | WordPress |
| Costs | Premium plans that start at $16 and go up to $49 per month | Free, but you can pay about $200 to $15,000 for plugins, hiring help, and other services |
| Design | Customizable design templates | Requires coding skills to bring your designs to life |
| Security | Squarespace’s team can help handle security issues for you. | You manage the security of your website. |
| Blogging | Excellent choices for blogging tools, but not quite as extensive as the resources that WordPress offers | Suitable for content-heavy websites |
In short, the costs depend on what you’re looking for in a website builder. WordPress will be the easy choice if you prefer more freedom in designing your website and adding more content. Meanwhile, if you’re looking for a builder that can provide templates for the design process, go for Squarespace.
Office Space and Equipment
With the advent of remote work, many offices now do not require physical office space. For many agency owners, this is a huge cost-saver. But for others, the experience of working in a physical office is unmatched.
The average rent per square foot of a private office in the U.S. is $8 to $23 per square foot. This number varies widely, considering your location and number of employees.
Private offices range from 150 to 350 square feet. In total, your office rent could cost you about $1,200 to $8,050 per month, depending on your requirements.
Marketing and Advertising
The success of your business will rely on our marketing efforts. One of the most effective ways to advertise your agency is through pay-per-click (PPC), where you can place ads strategically in search engines and pay only when a user clicks on your ad.
About 43% of startups and 33% of small businesses pay between $100 and $5000 per month on PPC advertising. These businesses can also expect to pay $0.11 to $0.50 per click.
Social media marketing is another avenue filled with great opportunities, considering more than 4.95 billion social media users worldwide. Fortunately, creating a social media account on huge platforms won’t cost you any money, and some social media marketing tools, such as Agorapulse and AdReports, offer free versions.
Branding and Design
Maintaining your agency’s image requires a focus on branding and design. If you want to create a memorable logo for your business, you can create your logo for free with tools like Canva and Designhill.
An excellent logo can cost you $300 when working with a freelance designer and about $2,500 with a design agency.
Hiring Costs and Talent Acquisition
Your team will be a significant part of your agency’s success. According to the Society for Human Resource Management, the average cost per hire is about $4,700. Plus, the total cost to hire an employee can be up to 3 or 4 times their salary.
Salaries often top the list in an agency’s ongoing expenses. Remember that you invest in people, and they directly influence the quality of your digital marketing services. Keep in mind that hiring exceptional talent can help you bring in higher-paying and long-term clients.
According to Glassdoor, these are the average annual salaries for core digital marketing roles:
- Content Writer: $62,438
- Social Media Manager: $60,695
- SEO Specialist: $69,941
- Web Developer: $84,520
- Account Manager: $65,925
Training and Development
Your expenses don’t stop in the hiring process. It’s just as important to nurture your talent, allowing them to bloom. According to Training Magazine’s 2023 Training Industry Report, companies spent an average of $954 per employee trained.
Continuous improvement must be a priority in digital marketing, considering the fast-changing dynamics of online platforms and consumer behaviors.
The good news is that a lot of these certificates can be earned for free. Google Ads, for example, offers free certifications in areas such as search, shopping ads, videos, and more.
Miscellaneous Expenses
Any expense that does not belong to the previous categories will be classified as a miscellaneous expense. Here, you can include transportation expenses, office supplies, and even communication expenses.
These will vary depending on your business requirements, so it’s wise to add a buffer in your budget to account for these unexpected costs.
All in all, starting your digital agency is possible even with a small budget. It can cost as low as $116 if you do many legal processes by yourself (varying by state), use free resources, opt for a remote setting, and set up agency operations as a one-person team.
But if you’re considering the opposite end of the spectrum, expect to shell out a maximum of $45,530. This considers premium tools, professional service in the legal process, outsourced website design and marketing, a team of 5 employees, and their training.
On average, starting your agency costs about $22,823. Of course, this number varies significantly depending on your agency’s scale, industry, location, and specific requirements.
Frequently Asked Questions (FAQs)
These are some of the most frequently asked questions when starting a digital marketing agency:
How Much Does a Digital Agency Owner Make?
A small and budding marketing agency owner can expect to earn about $60,000 to $250,000 a year.
As the agency scales, owners can earn over $1,000,000 annually. However, this will depend on the agency’s niche, geographical location, range of services offered, and the effectiveness of its business strategy.
How Much Do Small Digital Marketing Companies Make?
The amount of money a digital marketing company makes primarily depends on its size and number of employees. Small marketing agencies earn about $10,000 on average per month, while larger digital marketing companies can make north of 6 figures every month.
How Much Does it Cost to Start an SMMA?
Starting an SMMA doesn’t have to be a high-cost endeavor. Based on our estimates, starting a digital marketing agency, such as an SMMA, can cost you as low as $116. It averages about $22,823, with a maximum cost of $45,530.
Apart from the financial aspect, starting an agency of your own will cost time, effort, and expertise to pave the way for your success.
Conclusion
That wraps up our brief guide on all the costs of starting your digital marketing agency. Keep in mind that these costs will vary depending on your business requirements. You don’t have to go all in and consume your whole budget.
Instead, tailor your spending to align with your overall financial plan. For example, you can use free or cost-effective resources to cut agency costs and switch to more advanced tools once you get the ball rolling.
To help you scale your agency toward a 7-figure MRR, Prospecting On Demand provides a personalized mentorship program to help you charge 3.4x more and retain clients 5.5x longer than the industry average. Schedule your agency assessment today!