Creating a marketing company 25+ years ago was virtually impossible. With primitive technology, creating a complex digital operation was far from easy. And would have required large investments. The company also served physical and traditional media, and you had to create an ROI for your clients. It was inevitable that the company would “end up in red” for a long time.
Things have changed.
It’s not impossible to think a dedicated individual or small team could set up an operational marketing company from scratch.
Businesses are spending more of their marketing budgets on digital advertising, and all are competing for a piece of the action. Here, I will walk you through the five steps you need to follow to build an online marketing company from scratch.
1. Become a contractor before becoming a founder
Many of us take it for granted that we can afford brain surgery without a lifetime of debt. Taking the leap to work for yourself comes with a long list of risks that could fill a separate blog post. Making the decision to do it full time before you develop the foundation for a business mitigates a lot of that risk. Consider doing some contract work on the side while holding down a full-time job for a variety of reasons, chief among them…
It allows you to strike out on your own without taking on much risk
Doing side work gives you a taste of the entrepreneurial life. Running your own business involves many small, but very important, tasks. Like invoicing to having extra cash for taxes.
It is also important to manage your time if you still have a full-time job. That means working nights and weekends when you would rather watch Netflix.
Besides building relationships with clients, establishing them early may bring you referrals in the future. Being able to pay your bills as a contractor makes transitioning to a one-person agency much easier than starting from scratch.
The other benefit of managing clients as a side gig is that you become accustomed to building contracts. It’s also important that you know how to create an email for business proposal. To get familiar with putting together a contract and signing the paperwork (NDA’s, etc.), you will need to take a little while. It’s a part of the process that you’ll want to streamline to reduce the time spent on onboarding new clients.
As a result, you are able to build valuable relationships
Through mutual connections, former colleagues, or by networking yourself, you will gain the experience. This is necessary for building and maintaining client relationships.
Negotiating the cost of your services is another skill that many people overlook early on.
Regardless of how well you know the person on the other end, your time and expertise are valuable. Developing the ability to figure out what you should charge for a specific project or service will become valuable in the long run.
2. Develop the skills you need For Your Marketing Company
If you are a narcissistic Gen Z’er with grand ambitions of becoming Neil Patel as soon as you accept your diploma, you will fail.
If you’re not prepared and experienced enough to manage accounts and client relationships, you’ll soon be looking for a new job. Some people may need years to develop the skills necessary, others may need less time. Regardless, I would recommend you hold down an actual job for a while before you start your own business.
Our work environments are far more complex than we realize when we’re honing our skills. Besides the work you produce, there are many expectations. Like verbal and nonverbal communication maneuvers, as well as politics. You experience your day-to-day (and your career) as a result of everything from an organization’s structure to its culture to its product.
Before you can master your digital marketing skills, you must experience working at the company where your clients might work. This will make you a well-rounded and more knowledgeable professional. You aren’t going to take it personally when stressed-out clients are projecting that on you.
Additionally, soft skills only account for 50% of your final product. Know exactly what you are going to offer as professional services. No matter how slick your sales pitch is, a client will realize that they were sold snake oil sooner or later. Ensure that you can deliver results. As you begin managing clients for larger agencies, I would recommend you work on a marketing team. You can also pick up a few small clients to gain a better understanding of the channels and skills you’ll need.
You can never realize how much work involves if you have never been on a marketing team. Besides the pressure to produce, you have to learn complicated systems. If you work in a small group, you have to get a variety of skills to execute even the simplest campaigns.
This includes, but is not limited to:
- Building landing pages
- Designing advertisements
- Developing messaging and positioning
- Learn how to use Marketo, HubSpot, and Salesforce
- Implementing tracking
- Investing hours into a promotion only to watch it fail
- Produced under large pressure
The benefit of managing clients is that many of these things are taken care of before they reach you. The experience of handling these things provides you with the added value of understanding what you are talking about. This is especially when they don’t work. Furthermore, it helps you deal with the pressure of delivering quality results because you have been there many times before.
In a nutshell: Put in the work at a company before setting off on your own. You can’t sell yourself as a digital marketing expert without having expertise in digital marketing.
3. Establish Your Niche For Your Marketing Company
You’re tempted to be seduced by the prospect of working with any business when you’re starting out.
It can cause cognitive dissonance for anyone when their livelihood is on the line to have to turn down someone. There are thousands of digital marketing agencies and consultants out there.
If referrals don’t flow you’ll need to stand out and create a unique selling proposition when approaching new prospects.
There are countless benefits to focusing your services on a defined niche. Also, to the added value of specialization within an industry or client type. Below is a list of the most notable benefits:
Making onboarding easier
Before deciding whether to do business with a client, there are many variables to consider. As your ideal customer is clearly defined, this process becomes streamlined. Since you know what types of questions to ask and what information to gather. The business model of these companies is also clear to you, as well as how much you would charge them on average.
You strengthen your skillset exponentially
If you are skilled in digital marketing (paid specifically), you can run ads for most businesses. Besides, you need to learn your target market and how to plan effective messages. You may have to spend a lot of time doing this when the business is unfamiliar. Or if it’s abstract to what you are used to, which may cause issues early on if things aren’t going well.
When your ideal client is already defined, you are going to gain plenty of experience working with that type of client. By doing so, you develop both muscle memory and intuition that will aid you in making the right decisions at the right time. Since you have dealt with the problems before, you can work more efficiently. It also helps you recognize clients you don’t want to do business with.
You gain a competitive advantage by using it
There are many people out there who spout advertisements and call names. We have discussed this before.
Due to the internet’s success, even the most nefarious hack is successful. Because there are so many low-quality agencies out there, your business provides the client with much more peace of mind. You will gain social proof and expertise from being the “insert niche here” agency, so you can speak confidently to these individuals and organizations. This creates an added layer of trust and relatability that is so often lacking in the industry.
4. Develop a Marketing Company model that will work
There are many ways to start a digital marketing company. You will determine how to manage your business by the services you provide. And also the way you bill for your work over time.
Here are some of the most common ways to bill your clients:
Many consultants charge their clients on an hourly basis. They spend most of their time one-on-one with clients, whether that is over the phone or in person. As services become more complex and lengthy, this model becomes muddied.
Hours spent on digital marketing for a particular client fluctuate over time. It can be unpredictable. There are a few things that come into play like setting up and launching new campaigns or promotions. And also restructuring accounts and maintaining what is working well for them.
Because it becomes difficult to say I spent “X” amount of hours on this per week, I will bill you accordingly. Furthermore, if the client starts to question how long certain actions take per week, it might make them wary. I recommend staying away from hourly billing models unless you provide one-on-one consulting.
Flat retainers are the simplest of all the pricing models. Based on how much the work and time for a specific client are worth, you both agree on a flat monthly fee.
Aside from being simple, it also allows you to reduce any friction when sending out the invoice. Your client knows exactly how much it will cost them, and if you meet their expectations, they will not hesitate to pay it.
There is a downside, but, if your client scales exponentially in time.
It may be advisable to have an agreement in your contract that guarantees that price for a period of time. Then you can renegotiate once that period has expired. An advantage of a retainer-based model is that it allows you to forecast your earnings. And then see how much you will earn if your clients stay with you for 12 months. It is vital to growing the business since it allows you to set goals and prepare for setbacks.
Amount spent as a percentage
Because it takes into account growth potential and scalability, agency pricing models are very popular. Once an agency reaches a certain level of maturity, clients with little or no existing spending will be turned away.
While this may not seem like the best option when you’re first getting started as you’ll want to expand your network. As time goes on, you’ll realize that having a larger client base is beneficial for a variety of reasons. There is a downside to conducting business exclusively. With a percentage of spend model since many internal factors will determine budgets. You may be able to control some of these factors (results), but many others are beyond your capability. Like internal decisions, seasonality, and other costs. It doesn’t make sense for you to get into a situation where your client spends very little money in a month. That you will be on calls and put time into the project.
You start with a flat retainer fee as described above. As you grow, you can implement a percentage of spend model on top of the retainer. In that case, you will work more on your end to make it happen if the client wants to scale and spend more.
It is one that many agencies use in an attempt to gain an advantage over their competitors.
As a result, they only get paid when the client makes money.
At first, it is appealing because you want to establish trust with a client that you are doing everything in your power. There are many agencies that complain about poor returns or results after paying a lot of money. Guns-for-hire approaches like this may seem tempting to a client who’s been burned before.
The downside to this model is that unless you know a lot about the client’s operations, it will be extremely difficult to bill them. This pricing model would be a nightmare for SaaS companies and companies with complex sales funnels. I would recommend this model only for e-commerce or clients selling direct to consumers. You can do the math that way and figure out how many sales you have driven. One of the downsides to this model is its dependence on the product being sold. When there is a good profit margin, then it makes sense. Otherwise, you may be causing yourself unnecessary stress.
My best piece of advice is to keep it simple. We don’t want to have to solve math equations at the end of every month, not knowing how much we will earn.
Taxes, liability, and the power of having an expert on hand,
In addition to understanding the business model, liabilities and taxes are important.
If you decide you want to create an agency, you should form an LLC or S-Corp. This will ensure your personal legal protection in case something goes terribly wrong (lawsuits). There are also numerous tax benefits. Establishing an LLC or corporation as soon as possible will also legitimize your company in the eyes of both your clients and Uncle Sam.
Get a tax person, too.
You should do taxes if you are extremely knowledgeable about them. In general, however, it makes better sense to delegate this task to someone who knows the subject well (such as your clients do). A professional can help you save a lot of money by filing your taxes on a quarterly basis and helping you maximize your write-offs.
5. Decide how you want your Marketing Company to scale
When you say you’re running your own agency, people automatically assume you rent an office space. That is often the worst decision you can make. Like 99% of everyone else, you probably have bills that need to be paid. You must first make sure you can survive if you want to start and grow.
The first step in building a successful agency is to be highly skilled in the agency’s core business. You will develop your skills and knowledge when you manage the accounts yourself, as well as make finding qualified help easier.
Also, you need to know how much those services will cost you financially. What is your client retention rate? What is your average customer lifetime value? How do you acquire new clients? Adding an employee will add an additional layer of complexity to all of that.
Getting someone to accept your job offer is another matter altogether. Most employees are looking for security in employment. You can’t expect them to take the job unless you offer them benefits and pay them well. Finding contractors is the most cost-effective remedy for this issue.
You can find quite a few talented people who will work for you on a contractual basis. There is no need to provide these people with benefits, and they are easy to deduct from your taxes. When your business is growing, you can delegate monotonous or time-consuming tasks to a trustworthy contractor. With this method, you can grow to the point where full-time hires make more sense. When things go well, and they have already proven their competence to you, the contractors may decide to join you full-time.
All of this advice comes from starting your own agency. It changes a lot if you have a partner or two who want to do it with you. Therefore, you must charge more for your services or take on more clients to make them mutually beneficial. Keep that in mind.
In the world of startups today, a successful marketing company is seen as something that is characterized by extreme growth. You may find that you are financially satisfied with a certain number of good clients and are under pressure. Ultimately, you may find that rapid expansion isn’t the best choice for you. You may prefer living on your own terms, if not financially stable.
Your own marketing company gives you valuable business experience, and you can depend on it forever.
Probably if you’re reading this post, you’ve already ventured out on your own or are considering doing so. The most important thing is to make a decision and stick to it.
You’ll need to be able to weather the storm to enjoy the benefits of running your own marketing company. There’s no denying that this is a dramatic life event, so take it seriously. If you feel early on that you aren’t cut out for it, don’t drag yourself along any longer than necessary. When you make a decision but don’t believe in it, you’re bound to fail. You should commit yourself. When you do that, you will probably find it extremely fulfilling to run your own digital marketing company.