Start An Advertising Agency
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By: Scam Risk - Expert Reviewer
Starting An Advertising Agency
How To Start An Advertising Agency
To attract customers in today’s saturated digital marketing industry, businesses require innovative and profitable advertising strategies. Such are planned and executed by advertising agencies.
The yearly income of the advertising business in the United States is $44 billion and rising.
If you are someone who wants to pursue a career in the advertising world but don’t know how, you’ve come to the right place!
Towards the end of this article I’ll answer some of the most frequently asked questions on how to start an advertising agency…
But most importantly, I’ll show you the exact system I used to build my own Advertising Agency to over $40,000 a month in mostly passive income.
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Table of Contents
Benefits Of Starting An Advertising Agency
Low Overhead And Startup Costs
A lot of ad agencies work remotely, eliminating the requirement for a physical office. In most situations, you would need to spend for the following as part of your startup costs:
- Technology (hardware and software)
- Internet service
- Any necessary business registration
To get started, you don’t even need a huge staff. Initially, you could operate the business and accomplish most of the deliverables by yourself as a way to cut costs.
Large Potential Client Base
Advertising agencies can provide service to customers from anywhere in the globe, thanks to todays’ digital technology.
Even if the marketing sector is saturated, there are several chances to build a niche from targeting to certain types of businesses, i.e., salons, restaurants, law firms, or medical offices.
Low Barrier To Entry
Because the business is constantly changing and evolving, it’s not really required to have years of marketing expertise to establish a digital advertising agency.
You can create your reputation as a professional advertiser if you have a foundational understanding of content marketing and social media, as well as a desire to grasp new and developing platforms.
Scalability
Scaling of your business would be easy if you have a solid team of affordable contractors and freelancers in place. You can provide your customers with full-service marketing campaigns with the following:
- Copywriting
- Social media
- Email marketing
- Graphic design
- Search engine optimization (SEO)
- Etc.
Start An Advertising Agency By Following These 9 Steps
Now that you’ve uncovered the ultimate business concept, it’s time to take the next step. Starting a business entails more than simply registering it with the state.
We’ve put up an easy-to-follow guide on starting your own ad agency. These measures will ensure that you have a new business that is well-planned, registered, and compliant legally.
STEP 1: Plan Your Business.
A well-thought-out plan is crucial to become a successful entrepreneur – enabling you in mapping out the details and uncovering some unknown factors.
A few key questions to ask are:
- What are the initial and recurring costs?
- Do you have a pricing model in mind?
- Who is your intended audience?
- How much money can you charge your customers?
- What will you call your company?
Fortunately, we’ve already done a lot of the legwork for you.
What Are The Costs Involved In Opening An Advertising Agency?
Because advertising agencies provide services instead of products, starting an agency would only need low start-up costs.
Typically, you would need an office space for meeting with clients, PCs to complete approved projects, printer, and an internet connection, plus a website.
However, there are ways to cut these costs to a minimum. Small business entrepreneurs on a limited budget can:
- Rent an office space only when needed
- Work in public spaces like coffee shops that offer free wi-fi
- Use their personal PCs
- Outsource printing needs
What Are The Ongoing Expenses For An Advertising Agency?
They include the following:
- Office rent, if any
- Computer costs
- Internet connection
- Employees’ salaries
Salaries of employees usually make up the huge chunk of the agency’s ongoing expenses.
Who Is The Target Market?
Target market of advertising agencies are usually other corporations, businesses, or non-profit organizations. An agency’s ideal client would be one who falls under their marketing specialization and requires continuous work.
Such a customer will often request that an agency be placed on retainer. A retainer is an agreement in which a client hires an agency a specific sum weekly or monthly in exchange for a certain number of hours for the agency to work on the campaigns of their clients.
How Does An Advertising Agency Make Money?
Ad agencies generate profit by providing their clients with advertising campaigns. In most cases, an agency would be willing to make a sales pitch to a potential client without getting paid.
If the customer approves of the pitch, the agency is hired to carry out their campaign proposal.
How Much Can You Charge Customers?
Clients are frequently charged an hourly fee or a commission by advertising agencies. Hourly rates are generally established by dividing the yearly income of the person (or persons) who will take on a project by 1,500 (approximate number of billable hours in a year), according to Two Hats Consulting & Web Design Services .
Commissions are typically 15% of total media and production costs.
How Much Profit Can An Advertising Agency Make?
As previously mentioned, the potential earnings most ad agencies generate are in billions of dollars per year, but with lower annual revenues.
A lot of agencies produce hundreds of thousands yearly which depend largely on their distinctives and niches.
It isn’t uncommon for ad agencies to generate annual revenues in millions of dollars.
How Can You Make Your Business More Profitable?
Offering services apart from traditional marketing can help an advertising agency boost its profitability.
If public relations or social media consulting services are required, for example, an agency may offer them to customers.
STEP 2: Form A Legal Entity.
Sole proprietorships, partnerships, limited liability companies (LLCs), and corporations are the most common types of business structures.
If your ad agency is sued, forming a legal business entity like a corporation or LLC, prevents you from being held personally accountable.
You may form an LLC on your own and spend only for the minimal state LLC fees, or you can employ an LLC service to do it for you for a modest charge.
STEP 3: Register For Taxes.
Running a business would require registration for various taxes at the state and federal levels, you must register for a number of state and federal taxes.
To register for taxes, you must first get an EIN, which is a free and simple process to do.
Small Business Taxes
Your taxes depend largely on the type of business structure that you will register for.
Depending on the business form you select, you may have several options for how your company is taxed. Some LLCs, for example, may benefit more if registered as an S corporation (S corp). Note that there may be state taxes that are specific to your business.
STEP 4: Open A Business Bank Account & Credit Card.
Personal asset protection requires the use of separate business banking and credit accounts.
When you combine your personal and business accounts, you also put to risk your personal assets (your house, vehicle, and other possessions) if your company is sued. This is regarded as a “piercing your corporate veil” in business law.
Furthermore, understanding how to develop corporate credit can help you obtain credit cards and other forms of financing under your company’s name (rather than your own), higher lines of credit, lower interest rates, and other benefits.
Open A Business Bank Account.
This isolates your personal assets from the assets of your business, which is crucial to protect your personal assets.
It also simplifies your bookkeeping and tax filing.
Get A Business Credit Card.
This enables your personal and company expenses not to be mixed by consolidating all of your company’s expenses in one location.
It also establishes the credit history of your company, which may be used to raise funds and attract investment in the future.
STEP 5: Set Up Business Accounting.
Keeping a record of your company’ sources of income as well as expenditures is crucial to obtain a good assessment of your business’ performance in terms of finances.
Maintaining detailed and accurate records also makes yearly tax filing much easier.
STEP 6: Obtain Necessary Permits And Licenses.
Failure to get required licenses and permits can lead to huge penalties or possibly the closure of your business.
Federal Business Licensing Requirements
These rules, known as “truth-in-advertising laws,” safeguard consumers by requiring a truthful product marketing by advertisers and a substantiation of their product claims.
Failure to comply to advertising and marketing laws such as this may result in expensive civil penalties, even lawsuits.
The Federal Trade Commission (FTC) is the primary federal agency responsible for enforcing these advertising rules and regulations.
State & Local Business Licensing Requirements
To run an ad agency, there are certain state licenses and permits that may be required. You may visit the SBA’s reference to state licenses and permits to learn more about your state’s licensing requirements.
Most companies must perform sales tax collection on their products and services. For more information on local licenses and permits, you may:
- Check with the clerk’s office in your town, city, or county.
- Contact one of the local associations mentioned in the US Small Business Associations directory of local business resources for assistance.
Services Contract
A services contract describing the terms and conditions of service is usually drafted for businesses where services are given on an ongoing basis. Before jumping to a new project, a services agreement with your client is required.
By defining payment terms and conditions, as well as service level standards, this agreement gives a clear outline of your client’s expectations and minimizes the possibility of legal conflicts.
Certificate Of Occupancy
A typical advertising agency operates from a physical location. A Certificate of Occupancy (CO) is generally required for businesses that operate from a physical site. A CO attests to the fact that all building codes, zoning laws, and government restrictions have been followed.
- If you intend to lease office space:
- The landlord is usually responsible for obtaining a CO.
- Before signing a lease, make sure your landlord has or can acquire a valid CO for an advertising agency.
- A new CO is sometimes required following a major renovation. If your location will go through such before opening, indicate in your leasing agreement that lease payments would not begin until a valid CO is obtained.
- If you intend to buy or develop office space:
- You must get a valid CO from a local government body.
- Examine all building codes and zoning standards for the location of your business to guarantee that your agency will be compliant and able to acquire a CO.
STEP 7: Get Business Insurance.
Insurance, like licenses and permits, is required for your business to operate legally and safely.
During a covered loss, business insurance provides your company’s finances with protection.
There are many types of insurance policies designed for various types of businesses that pose different risks. If you are unaware or unsure about these risks that your company may encounter, start with General Liability Insurance (GLI).
GLI is the most common type of coverage needed by small businesses, so it’s a rather good and safe place to start yours.
STEP 8: Define Your Brand.
Your company’s brand is what it represents, and how the public perceives it. A brand image will allow your company to stand out in the competition.
How To Promote & Market An Advertising Agency.
The location of advertisements placed by an advertising agency is determined by what type of clients it wishes to reach.
For example, a local business-targeting agency may choose to put advertising in local publications and become a member of the town’s chamber of commerce.
In comparison, an agency that concentrates on internet marketing may benefit more from pay-per-click advertising.
How To Keep Customers Coming Back
Industry recognition for campaigns completed by an advertising agency may help it stand out from the crowd. There are several award-giving organizations for various advertising campaigns.
These awards are given by a variety of organizations, including Hermes Creative Awards, Ad Age’s Small Agency Awards, Marcom Awards, and Clio Awards.
STEP 9: Create Your Business Website.
After you’ve defined your brand and designed your business logo, the next step is to build your company website.
While building one is an important step, some may be concerned that it’s not their cup of tea due to their lack of website-building knowledge and experience.
While this was a legitimate concern in 2015, online technology has made significant advances in recent years, making the lives of small company owners considerably easier.
The following are the major reasons why you should not put off establishing your website any longer:
- Every reputable business has a website, period. When it comes to bringing your business online, it doesn’t matter what size or sector it is.
- Facebook pages or LinkedIn company profiles, and other social media platforms should not replace your business website.
- Website builder programs, such as the GoDaddy Website Builder, have made it incredibly simple to create a basic website. You do not have to employ a web developer or designer to create a decent website.
Advertising Agencies: Is this Business Right For You?
Those who are both artistic and have a sense for business could be most suitable to start an advertising agency.
Sales pitches for customers necessitates a high level of creativity, but this must be combined with a good business sense that takes into account the agency’s financial sustainability.
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