Starting an Advertising Agency

How to start an advertising agency

Some of the aspects of starting an advertising agency are applicable across all industries, such as developing a business plan. However, some are specific to this business type. That’s why business.com spoke with established ad agency owners and collected their best practices and tips. This guidance will aid you as you go through the step-by-step process of starting your own firm.

1. Create a business plan for your advertising agency.

Before you can get up and running, you’ll need to create a detailed business plan that outlines your strategies for launching and growing an advertising agency. There are three main purposes of a business plan: to establish your business focus, to secure funding (if needed to launch or, later, expand your agency), and to attract executive leaders to help manage the company if you don’t want to operate it as a solo entrepreneur.

Include the following elements in your plan.

• Executive summary: What will your advertising agency do?
• Company description: What will define your agency?
• Product/service overview: What advertising services will you offer your clients?
• Market analysis: What kinds of clients will your agency target and how will you reach them?
• Financial plan: What are your expected expenses, and how will you make money to sustain operations?

Your business plan should also incorporate SMART goals — specific, measurable, attainable, relevant and time-based goals — to increase your chances of success. However, expect this plan to evolve as you gather input and refine your approach. 

“You’re not going to get everything right, right off the bat,” said Rob Lewis, founder and executive creative director at Good Conduct.

2. Choose your legal structure.

As you lay the groundwork for your advertising agency, you’ll have different options for forming the legal structure of your business — such as an S-corporation, LLC, etc. One consideration is whether you want to go into business with a partner. For John Kovacevich, founder and creative director at Agency SOS, starting solo allowed him to make decisions independently, move faster and build direct relationships with business associates. If you’d like to follow a similar path, you should also take a look at our guide to starting and running a one-person business.

Other ad agency founders, like Lewis, preferred to lighten the load with a partner who has complementary skills to support the business. 

“Have a partner with good business sense,” Lewis said. “Someone in the agency will need to make time for the business side of the agency. From payroll to legal council, production insurance, regular insurance, to processes and server space, there’s a lot of things a pure creative [person] doesn’t consider when starting an agency.”

If you still prefer not to have a co-owner, consider what staff you may want to hire to tackle tasks that aren’t in your wheelhouse.

3. Determine your services and pricing model.

Most advertising agencies make money by brainstorming and developing creative assets for their clients. This can involve creating traditional advertising campaigns and digital marketing pieces, like blogs and social media posts. You may want to focus on a specific niche audience, but whether you’re targeting a broad client base or a narrow one, you’ll need a unique value proposition that helps your business stand out from other agencies.

The best pricing model for your business will depend on the specific services you’ll provide and how you’ll work with your clients. You’ll need to decide if you’ll charge per hour, per project or according to a fixed retainer model, in which a client pays an agreed-upon amount in advance for a certain number of service hours. 

A flexible or hybrid approach with different payment structures can help you meet clients’ needs while allowing them to stay on budget. 

4. Develop a marketing plan to advertise your business.

Advertising agencies have a unique advantage over other types of service businesses: Their own marketing and advertising efforts serve as a work sample and let potential clients see upfront what the agency might be able to do for them.

That’s why you need to pull out all the stops for your digital presence and show off your strengths to prospects. For instance, if you plan to offer graphic design services for client ad campaigns, ensure that all of the graphic elements of your website and social media are impeccable. If you’ll provide copywriting services, maintain a well-written, SEO-friendly blog on your website so visitors can see your expertise and writing style.

In other words, let your marketing strategy speak for itself so your agency can keep growing and attracting new clients.

5. Find clients for your advertising agency.

Every advertising agency needs clients. Before you start spreading the word about your services, decide what types of clients you’d like to work with in terms of industries, business sizes, locations, services needed and other characteristics. Conducting market research and developing customer personas will help you home in on your ideal client.

Once you’ve defined your target customer, research businesses that fit that description and study their current advertising efforts. Reach out to these prospects with proposals for how you can help take their advertising to the next level and grow their revenue. Be sure to cater your pitch to each company.

“A couple [of] times, we found ourselves over-estimating budgets or a brand’s creative aspirations because of our past experience, and it scared those potential clients away,” Lewis said. “So, consider why a brand is speaking with you and not the 1,000 other more established agencies, and budget accordingly.”

Lewis further warned not to “underestimate the difficulty of getting clients” when starting out, which is why building blocks like your marketing plan are critical. Once you have a few regular clients, you can politely and professionally request a testimonial or referral to keep expanding your client base through word-of-mouth recommendations. 

6. Build your network.

If you’re planning to help your clients with ad placements on television, radio shows, podcasts, blogs and news publications, you’ll need to start building a stable of media contacts. From these outlets, collect media kits that list advertising rates, demographics and specs so you know what kinds of campaigns might be appropriate for your clients to place there. 

Prepare to introduce yourself to sales representatives at the media outlets you plan to use regularly. If you have been in the industry for some time, create a portfolio of your past work to highlight ad campaigns you’ve worked on and grab attention during ad sales meetings.

Also, start reconnecting with contacts in your existing network. Even if you don’t think the relationships will help you now, developing them can provide valuable opportunities, referrals or advice when you least expect it, Kovacevich noted. Don’t be afraid to leverage this support when necessary; many people in your network are likely willing to help, but you must make your needs known and invest effort in maintaining those connections. 

“Relationships are everything,” Lewis said. “As a new agency, you’re asking people to take a risk by working with an unproven entity. If you’re talking to people you’ve already built trust with in a previous role, they’ll be much more likely to give you a shot.”

With a business plan, legal structure, service and price list, and marketing plan in place, you can begin finding clients and growing your network in anticipation of an official launch. But before you open for business, there are some tools and software you’ll want to acquire.

Tools and software to run your advertising agency

To operate an advertising agency, you’ll need a business bank account, a business phone number and a bevy of resources beyond essential advertising tools, like Adobe design software and ad managers such as Google Ads.

As you start your business, we recommend using the following.

• Project management software: Staying on top of deliverables for each client can be challenging. Project management programs like those from monday.com can help with organization.
• CRM system: With a top CRM solution, you can identify prospects and manage your client relationships.
• Accounting software: Look for accounting software features like invoicing so you can easily charge clients for your services and track money going in and out of your business. You may also want a separate payment solution.
• Email and text message marketing services: These tools are valuable for targeted marketing campaigns, as well as one-on-one communication. For example, you may want to use text messages for customer service.
• Website builder: If you won’t have a brick-and-mortar location, a website may be one of the only places where your target audience interacts with your ad agency. High-quality website builders can help you create a responsive website that’s easily accessible on mobile devices.

Benefits of starting an advertising agency

One of the best reasons to start an advertising agency is that such services remain in high demand — every business needs to advertise to new customers to keep growing. Need proof the sector isn’t losing steam? In 2024, the ad industry surpassed $1 trillion in revenue for the first time, according to media investment group GroupM. Now a slice of that revenue could be yours for the taking if you find the right clients.

While some small businesses and startups may need to keep their marketing and advertising needs in-house to start, utilizing an outside agency like yours can bring many advantages, especially for companies looking to expand their reach. Many organizations, including small businesses, rely on the expertise of advertising agencies to help them create and execute effective marketing plans, so your firm would be fulfilling a legitimate business need. 

Although some ad agencies prefer to run their operations out of physical locations, many conduct their business primarily online, allowing for more accessible and specialized firms to gain a footing in the market. Plus, with more people working remotely and decentralized business models on the rise, the playing field has leveled, giving small agencies a better chance to compete with larger ones.

“Since the pandemic, everything in the industry has changed,” Lewis said. “We’re seeing the CMO [chief marketing officer] … in one place, the brand manager in another and their support staff scattered around the country — or even countries. … It just comes down to the people. If you have good ones, you’re well on your way.”

Besides the continued demand for advertising services, here are some more benefits of starting an ad agency.

Low overhead and startup costs

Many ad agencies operate remotely, so they don’t need to invest in a brick-and-mortar office space. In most cases, your only startup costs will be technology equipment (like the hardware and software mentioned above), high-quality internet service and any applicable business registration. You don’t need a big team to get started, either. You can run the business and execute a lot of the deliverables yourself to save money on salaries and wages, especially in the beginning.

Large potential client base

Thanks to digital tools, ad agencies can serve clients anywhere in the world. There are a lot of opportunities to carve out a niche by catering to specific types of businesses, such as restaurants, salons, medical practices or law firms. Without physical boundaries, your client base won’t be limited by geography. 

Opportunity to scale

With a robust team of affordable freelancers and contractors, your agency can scale up quickly and offer full-service campaigns for ad design, ad placements, copywriting, social media, email marketing, graphic design, search engine optimization and more. [Our free email design guide will help you design appealing emails that market your clients’ businesses and your own.]

Low barrier to entry

You don’t need years of experience to start an advertising agency because the industry is constantly changing. With baseline knowledge of copywriting and design, plus a willingness to learn new and emerging platforms, you can launch your business and start making a name for yourself. In fact, your smaller size could be what sets your firm apart. 

“Bigger brands have started to consider smaller agencies a real viability,” Lewis said. “We’re seeing a real renaissance in the industry, with more brands working with small agencies and smaller agencies creating some of the best work.”

Miranda Fraraccio and Jenni Simcoe contributed to this article. Source interviews were conducted for a previous version of this article