Starting a marketing agency more than 25 years ago was a monumental task. The early digital landscape meant high overhead costs, making it almost impossible without significant upfront investment. Limited to traditional media and struggling to demonstrate ROI for clients, agencies often found themselves operating in the red for extended periods.

The landscape has transformed.

Today, a skilled individual or a small team can realistically establish a fully functional marketing agency within a few months, especially with the right support. Companies are dedicating larger portions of their marketing budgets to digital advertising, creating opportunities for those who can deliver. This guide outlines five crucial steps to building a successful online marketing agency from scratch, based on my personal experience.

1. Cultivate Essential Skills

While ambition is admirable, simply graduating and aspiring to become the next marketing guru won’t guarantee success. Creativity and intelligence are valuable, but without the experience to navigate client relationships and the intricacies of managing accounts, failure is likely. Building the necessary skills takes time and dedication, and I firmly believe that real-world experience is crucial.

Working within an organization provides insights into the complexities of a professional environment. Beyond the actual work, there are expectations, communication dynamics, and internal politics to navigate. Understanding the structure, culture, product, and leadership styles of your clients’ workplaces will make you a more empathetic and well-rounded professional.

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While soft skills are essential, mastering your digital marketing expertise is equally important. Clients need to see tangible results. I recommend starting your career by managing clients for larger agencies or taking on smaller clients while working on a marketing team.

Beginning my career on the marketing team at nexus-security allowed me to hone my paid acquisition skills. Working within a marketing team exposes you to the multifaceted nature of the field. You learn complex systems, develop a diverse skill set, and manage the pressure to deliver results.

This experience includes:

• Landing page development
• Ad design
• Crafting compelling messaging and positioning
• Mastering marketing platforms like Marketo, HubSpot, and Salesforce
• Implementing accurate tracking mechanisms
• Navigating campaign failures
• Thriving under pressure

While client management might delegate some of these aspects, firsthand experience provides invaluable context. You can confidently address client concerns and handle pressure with a deeper understanding.

In short: Gain practical experience before launching your agency. You can’t be a digital marketing expert without having walked the walk.

2. Start as a Contractor

The security of a stable job with benefits is something many take for granted. Transitioning to self-employment involves inherent risks. A practical approach is to establish a solid foundation by taking on contract work alongside your full-time job.

Reduced Risk and Early Learning

Side work offers a glimpse into entrepreneurship. From invoicing to managing taxes, you’ll encounter the operational realities of running a business. Time management becomes crucial, requiring work during evenings and weekends.

Building relationships as a contractor often leads to valuable referrals. Successfully managing your finances as a contractor simplifies the transition to a one-person agency. You’ll gain experience in drafting proposals, contracts, and handling essential documentation, streamlining the onboarding process for future clients.

Building Relationships and Setting Rates

Securing contract work through your network provides experience in building and nurturing client relationships. Negotiating your rates is another crucial skill. Your time and expertise hold value. Learning to determine your worth for specific projects or services is invaluable.

3. Choose the Right Business Model

Digital marketing agencies can be structured in various ways. Your service offerings and billing methods significantly impact your business’s efficiency.

Common billing models include:

Hourly Billing

Consultants often bill by the hour, especially when providing one-on-one consultations. However, this model becomes less clear with long-term, complex projects. Digital marketing efforts fluctuate, making it difficult to accurately estimate and justify hourly billing. Unless your core offering is one-on-one consulting, I advise against this model.

Flat Retainer

Flat retainers provide simplicity. You and the client agree on a fixed monthly fee based on the scope of work. This eliminates billing surprises and ensures consistent income. The downside is potential client growth that requires renegotiation. It’s advisable to guarantee the rate for a set period (e.g., quarterly) with the option to renegotiate afterward. Retainers enable financial forecasting and goal setting, which are crucial for growth and potential hiring.

Percentage of Spend

This model, popular among established agencies, aligns your income with the client’s growth potential. As your agency matures, you might decline low-spending clients. However, when starting out, a diverse client base is beneficial. The downside is that your income relies on the client’s budget, which can fluctuate due to internal decisions, seasonality, or unforeseen costs.

A good approach is to begin with a flat retainer and introduce a percentage-of-spend model as the agency and client grow.

Commission-Based

This model, often used to differentiate from competitors, ties your compensation directly to client sales. While appealing for clients with previous negative agency experiences, it requires transparency into their operations for accurate billing. It’s best suited for e-commerce or direct sales businesses with clear sales funnels and healthy profit margins.

The most valuable advice is to keep it simple. Avoid complex calculations and prioritize predictable income.

Addressing Taxes and Liability

When establishing your agency, consider liability and taxes. Forming an LLC or S-Corp provides legal protection and tax advantages. Consult with a tax professional to navigate the intricacies of business taxes and potentially save money through quarterly filings and write-offs.

4. Define Your Niche

Starting out, it’s tempting to accept any client. However, with numerous digital marketing agencies, specializing in a niche offers significant advantages:

Streamlined Onboarding

A defined ideal customer profile streamlines client onboarding. You know the right questions to ask, the information required, and have a better understanding of their business model and pricing expectations.

Enhanced Expertise

Specializing in a specific industry or client type deepens your knowledge and skills. You’ll become adept at navigating their challenges, anticipating their needs, and making informed decisions.

Competitive Edge

In a saturated market, specialization sets you apart. Positioning yourself as the “go-to” agency for a specific niche builds trust, credibility, and relatability with potential clients.

5. Determine Your Scaling Strategy

The traditional image of an agency often involves office spaces and numerous employees. However, starting lean and prioritizing your financial stability is crucial.

Initially, managing accounts yourself allows you to refine your skills and gain a deep understanding of the talent required for future hires. Consider factors like client churn rate, lifetime value, and client acquisition costs before taking on the responsibility of employees.

Hiring contractors offers a cost-effective alternative to full-time employees. They provide specialized skills without the overhead of benefits, allowing you to scale gradually and assess their suitability for potential full-time roles.

Starting an agency with partners requires careful consideration. Profit sharing necessitates higher rates or a larger client base to match the earning potential of a regular job.

It’s important to remember that rapid growth isn’t the only measure of success. A sustainable agency allows for a balanced lifestyle and the freedom to pursue other passions. Running your own business provides invaluable experience and builds a network you can leverage in the future.

Making the Leap

If you’re reading this, you’re likely considering entrepreneurship. My advice is to make a firm decision and commit fully. Running a business has its challenges, but the rewards can be significant. If it’s not the right fit, don’t force it. However, if you believe in your decision, dedicate yourself wholeheartedly. You might discover that running a digital marketing agency is incredibly fulfilling.