How to Start an Ad Agency

If you’ve ever wanted to start an ad agency, there’s never been a better time. The digital marketing industry is projected to grow 11.6% through 2035 and revenue from U.S. digital advertising agencies reached $52.4 billion in 2024.

Like any small business, starting a digital marketing agency requires more than expertise in the advertising industry. It also requires capital to get the ball rolling so that you can grow into something sustainable.

This article outlines what you’ll need to start an ad agency. However, let’s first look at the types of ad agencies and some of the benefits and disadvantages of you may experience if you start an ad agency.

Types of Ad Agencies

The end goal of advertising is to increase sales of products and services. This can be done through newspapers, display advertisements, television, or online.

Before you start an ad agency, it’s smart to consider the scope of services you’ll offer.

Digital marketing specialties include:

• Search engine optimization (SEO)
• Website building and content marketing
• Copywriting
• Social media marketing and management
• Display advertising
• Starting a Google Ads agency
• Media and ad campaigns
• Email marketing
• Podcasts
• LinkedIn marketing
• Video advertising
• Influencer marketing
• Pay-per-click advertising and more

Some digital marketing agencies offer all of these services, while others might specialize in just a few.

Pros and Cons When You Start an Ad Agency

If you’re entrepreneurially minded and are thinking that you may start an ad agency versus starting another type of business, it may help to consider the pros and cons.

Pros of Starting a Marketing Agency

Low startup and overhead costs

It doesn’t take much to start a digital marketing agency. You essentially just need a computer and knowledge about advertising.

As you grow, if you hire freelancers or employees, the nature of the work means that you can often have remote teams. Many ad agency owners save money by not having a brick-and-mortar office space.

Your initial startup costs will most likely be for purchasing IT equipment, software tools, and any business registration fees that are required.

You can choose your own client base

While it might be tempting to promote your company to anyone and everyone, the most successful advertising agencies start out by making a name for themselves in a particular niche. For example, you might choose HVAC companies, therapists, or tree trimming companies as your target client base, and then focus on building a brand in that industry.

You can live and work anywhere

Unlike businesses that are tied to a physical location, it’s common for ad agencies to be fully remote. It’s not uncommon to find digital marketers living in interesting places or even embracing the “digital nomad” lifestyle and traveling frequently, taking work with them on the road.

Disadvantages of Starting an Ad Agency

If you listen to some YouTube gurus, you might start to believe that anyone can start a successful ad agency. But the truth is, it takes hard work and a willingness to persevere. The hardest part is often landing your first few clients.

This brings us to the challenges of starting an advertising agency.

The industry is constantly changing

If you’re in the digital marketing world, algorithms are constantly being upgraded, new tactics and strategies are being invented, and artificial intelligence tools are causing many to wonder what the future holds.

The constant change can be exciting for some entrepreneurs, but it may cause others to burn out. At the very least, you’ll need to have a deep understanding of your target audience to succeed and be skilled at both researching and understanding new trends and having good project management skills so that you don’t get distracted by all the changes.

There is a lot of competition

There are just over 54,000 digital advertising agencies operating in the U.S. And that doesn’t include all the influencers or individuals doing digital marketing as a side hustle while they pay their way through college.

If you’re thinking of starting a marketing agency, you’ll need to figure out what your competitive advantage is and be willing to face rejection from potential clients as you get your footing.

Step-by-Step Guide to Start an Ad Agency

Here are some tips for starting a marketing agency:

1. Outline your services and determine your pricing model and target clients

From the outset when you start an ad agency, you need to decide who you will serve, what you will do, and how much you will charge.

Start with your ideal customer. Who are they and what services do they need? Once you have that, look at the competition and see how much they are charging, and then come up with a competitive pricing model for your business.

For example, if you’re an SEO agency, you may decide to offer retainers for monitoring and improving SEO. Or if you build websites, you may have tiered pricing based on the size and complexity of the site you are building.

If you provide PPC, social media advertising, and email marketing, an hourly fee might make more sense.

2. Write a comprehensive business plan.

Before you start an ad agency, you should have a business plan outlining your growth marketing strategy. You’ll likely need to do some market research to develop a solid business plan. Your business plan should outline the focus of your business, name people who will help run your business, and provide the necessary financial documentation to secure funding.

Your business plan should include the following:

• An executive summary explaining what services you plan to provide
• A market analysis that shows you understand your target market and how you can distinguish yourself from your competition
• Financial projections, including costs you anticipate, how you plan to generate revenue, and how you plan to use funding

When you’re tempted to pivot your services to try something new, your business plan can help you keep your eyes on the prize and remain focused.

3. Showcase your skills

If you’re going to start an ad agency, the way you advertise yourself will be under scrutiny. Potential clients will evaluate your skills by looking at how you market your own company. To make a good impression, your ads should:

• Grab attention within the first 2-3 seconds
• Emphasize how you meet customers’ pain points
• Include a clear call to action

If you can’t advertise your own ad agency well, it’s unlikely that you will land any clients!

4. Position yourself as a thought leader

When you start an ad agency, you should convey that you are a thought leader who stays up to date with industry trends. Create content, whether on social media, your website, YouTube, or at conferences, that emphasizes your expertise.

5. Engage your network

Your first few clients will be the hardest to get. Instead of relying on cold outreach, start building your client list by reaching out to everyone in your network. Send emails, make phone calls, and start putting the word out about your new company and remember to ask for referrals. There’s a good chance that your first client won’t be a direct connection but will be a “friend of a friend.” As you do this, be clear that you have a specific niche you are looking to serve so that you build your brand.

Using Small Business Financing to Start an Ad Agency

While you can start an ad agency with very little capital, scaling from a side hustle to a thriving small business may require additional capital. Financing options like a working capital loan, an equipment loan, or a line of credit can help with things like:

• Hiring new talent and expanding service offerings. You can bring on designers, sales staff, data analysts, and other experts to enhance your offerings.
• Investing in technology. With more capital, you can invest in advanced technologies and software, including automation systems and analytic tools.
• Enhancing cash flow management. Ad campaigns usually require upfront expenses and costs. A short-term loan can provide the cash needed to launch new projects and keep multiple campaigns going until clients pay you.
• Purchasing equipment. You may need to purchase things like computers and office equipment that require significant investment up front. Small business financing can provide the capital you need to get started.

Final Thoughts

If you’re thinking that you want to start an ad agency, a little planning can go a long way. And that includes knowing your options when it comes to financing. In fact, some digital marketing entrepreneurs begin engaging with a loan specialist before they need funding, so that when the need arises, they already know what to do. The ability to get fast financing to leverage growth opportunities is essential in today’s digital marketing industry.

FAQs

Is it hard to start an ad agency?

Starting an ad agency is easy, but finding clients, growing, and becoming profitable can be challenging. If you’re thinking of starting a digital marketing business, you may want to launch it as a side hustle until you have enough clients to make it a full-time business.

How much capital is required to start an ad agency?

The initial investment needed for starting an online marketing agency can be as little as a few hundred dollars if you’re launching by yourself. If you want to hire staff or rent a brick-and-mortar location from the outset, the capital outlay can increase significantly. Your location, business model, and mode of operations will impact how much is needed to launch your advertising agency.

What kind of loans can I get to start an ad agency?

Many types of business financing require a minimum time in business and a minimum annual revenue. However, if you’re starting a digital marketing agency you may still be able to get equipment financing to purchase computers and supplies, or if you have clients and cash flow, you may qualify for revenue-based financing.

What is the typical annual revenue for digital marketing agencies?

Annual revenue for ad agencies will vary widely. But if you’re starting out, charging your clients $1-$3,000/month for advertising services may be a reasonable rate, depending on the services you provide.

Can I get small business financing for a new agency if I don’t have a business credit record?

A loan provider may approve you for financing if you have good personal credit and can offer collateral. Depending on your situation, you may qualify for revenue-based financing or a business credit card.