As the internet continues to dominate the business world, more and more marketing agency teams are arising to meet the demand of digital advertising and marketing.

According to statistics, in 2015 the worldwide internet advertising revenue was more than $150 billion, set to increase to $260 billion by 2020. Currently, companies spend around $60 per internet user.

The industry is certainly booming. In fact, according to the US Bureau of Labor Statistics, the advertising, promotions and marketing industry is set to grow at 9% through 2024.

The digital marketing industry is a big part of that growth. Companies are clamoring around Google and social media to try to reach their customers in way they never could have before.

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If you’ve ever considered starting a digital marketing agency or marketing consulting firm, now… is the best time to do so. These skills are in high demand because the benefits of successful marketing campaigns could be the difference between companies having a fine year and a fantastic year.

With the general uptick in the economy since around 2010, more companies are loosening their marketing purse strings. Even better, small business owners are starting to understand how important proper marketing is and how much it will benefit them.

In today’s guide, we’ll show you everything you need to know to get your marketing agency started in the digital era.

We’ll go over the types of services modern marketing agencies provide and the advantages and disadvantages of the digital marketing industry.

Then we’ll look at what you need to get your bases covered in terms of your business plan and software, as well as your qualifications, licenses and insurance.

Finally, we’ll go over the pricing strategies that will get you your clients, and the ways you can market your marketing agency.

I. The Marketing Agency Types

In general, there are 9 different types of niches you can get into in your marketing agency.

They include:

• full-service marketing agency – offers their clients all types of promotional activities. These are generally more expensive than these other specialized marketing agencies
• branding marketing agency – specializes in the company’s brand image, including the logo, signage, name, etc.
• advertising agency – offers their clients all types of media, including TV, radio, online and more to make and share commercials
• PR marketing – specializes in performing communications during crises, working with the media and investors, and strategizing the company’s outward communications
• direct marketing agency – specializes in direct outbound (traditional) marketing that includes SMS marketing, email marketing, etc.
• media planning & buying agency – specializes in buying, researching, planning and organizing the types of media that the company will use
• design agency – specializes in creating the content that are promoted out to customers
• digital marketing agency – focuses on using the internet to help the client build up their brand, increase visibility and get qualified leads.

In our guide today, we’ll focus on the digital marketing agency sector, as it is the newest and most promising of all different types of agencies.

5 Different Digital Marketing Areas

Inside digital marketing, there are five main areas that they are able to help. Essentially, all of them are important to companies, but many clients may choose to focus on one at a time.

1. SEO

SEO (Search Engine Optimization) looks at how you can help your client get to the top pages of search engine results pages (SERPs). The main focus is almost always Google, the king of search, although SEO normally will work on all search engines.

Getting clients on the top of the search results can bring in a large amount of qualified leads, which (with good conversion rates) can lead to huge increases in sales.

2. SEM (PPC)

SEM (Search Engine Marketing) or PPC (pay-per-click) is focused on using search engine advertisement to get qualified leads to the client’s website. This has the same end-goal as SEO.

The difference is that SEO costs virtually nothing but can take a long time to be effective, whereas SEM requires a healthy advertising budget but brings results faster.

3. Social Media

The new most important platform, social media is becoming more important for all types of businesses, hoping to connect with potential customers on their social channels.

Technically, this type of marketing is free (unless you use the platform’s advertising services), but it can be a hit and miss if the client is inexperienced with the various platforms, such as Facebook, LinkedIn, Pinterest, Instagram, Twitter and more.

4. Email Marketing

Although normally included in direct marketing agencies, email marketing is crucial for the standard digital marketing agency as it is one sure way to convert website visitors into product buyers.

Email marketing works by keeping the customer connected to the website and converting them over time to buyers through discounts, sales, etc.

5. Content Marketing

Also known as inbound marketing, this type of digital marketing is closely connected to SEO.  Here, the client is producing high-quality information that the ideal customer desires.

The customer will voluntarily come to the client’s blog or website for the information and therefore begin to build a relationship with the brand. An engaged lead is more likely to buy the client’s products or services than a random lead.

It is highly connected to SEO since if the agency wants the customer to see the content in the first place, it has to place highly on the search results pages.

II. The Advantages and Disadvantages of Digital Marketing Agencies

Before we delve deeply in what is needed to have a successful marketing agency, we first need to check what the pluses and minuses are.

1. The Advantages of Starting Your Own Marketing Agency

If you want to start your marketing agency, you need to be aware of all the great benefits that it brings.

Low upfront costs

Luckily, it doesn’t require a lot of upfront costs to start your digital marketing agency.

In fact, it is quite a cost-effective option for beginning entrepreneurs since the costs are minimum and it doesn’t require much or any infrastructure.

Global clients

Because the service is internet-based, you don’t really need to be in any place specifically. That means that not only can you work from anywhere, but you can work with anyone.

Only a few clients will want to meet you in person. As long as you bring the right results, you can have clients from anywhere.

Recurring income

If you do your job right, the marketing industry is luckily not a one-time event.

Clients will need your services on a regular basis and many will pay you a retainer. This means that if you land a few big clients, you can have a steady income for a long time.

Flexibility

Besides the fact that you’re your own boss and can work from anywhere, you can also do your work wherever and whenever you want. This is great for its flexibility.

However, it does require that you have enough discipline and motivation to get the job done.

2. The Disadvantages of Starting Your Own Marketing Agency

Of course, the advantages are great. But there are two sides to every coin, so let’s familiarize ourselves with the disadvantages of starting a digital marketing agency.

Unfamiliar to clients

While many bigger businesses are coming around to digital marketing, your bread and butter—smaller businesses—are still unaware of what you do and how you can benefit them.

Therefore, you need to not only convince them to hire you, but you also have to convince them that they need digital marketing in the first place. This can be quite difficult.

Fast-moving

The digital marketing field is quite fast-moving. It is important that you stay up-to-date with every new development in the industry.

This is especially true with Google’s algorithm updates (which can greatly impact your client’s SEO) or other updates on social media platforms. In order to stay up-to-date, you’ll have to spend your time and sometimes your money.

Get familiar with client’s business

In order to market your client’s business effectively, you need to get to know it intimately. While possible, it is difficult and time-consuming, especially when you have more than one client at a time.

Long-term

Digital marketing can be a long-term investment, as the results may not be seen until many months later.

Your clients may be impatient and demand results on a shorter timeline, and it can be challenging meeting their demands.

III. The Basics of Your Marketing Agency

Now that we’ve got the advantages and disadvantages out of the way, we can focus next on the fundamentals of the marketing business.

These are the important things you need to take care of behind the scenes in order to make sure you’ve got your bases covered before you put your service in front of the right customers.

1. Your Marketing Business Plan

One of the hardest thing abut business plans in the modern world is deciding whether you’ll even need one.

There’s a lot of misinformation out there stating that business plans are outdated. That they’re relics of an overly-formal, unnecessarily official old business world.

In the modern world, the idea goes, business plans are not necessary, only good ideas are.

While that is understandable, it is incorrect, based on the way that people are viewing business plans. If you look at it as a document to show your professionalism and aimed only at investors, then  there’s some truth to that.

However, if you look at it as a document that forces you to think about your business strategically, then it isn’t an unnecessary relic. In fact, it’s a crucial document for your business growth.

So let’s look at the most important parts of your marketing agency business plan:

• The Executive Summary – in this section, you will display your business’s strengths and because of that, should be the section that you write last, not first
• The Business Description – here you go over the most crucial aspects of your business
• The Industry & Competition Overview – in this section, you discuss the research you’ve done on the marketing industry, including its growth, trends and main competitors
• The Operations & Management Plan – here you should explain what your business operations and management structure will be like and how they will work together to achieve desired results
• The Service Description – explain what competitive benefits your marketing service will provide over that of your competitors
• The Marketing Strategy – this should be easy for a marketing agency, as you’ll need to show how you will get your service to the market in front of the right people that need it the most. This should include the service price, promotion, distribution and the sales channel
• The Financial Projection – and finally, you need to forecast what kind of revenues and expenses you’ll have, and if you will require any additional financing

Making a business plan can be tough, and it definitely takes lots of work and dedication. However, as a document that you can reference when your actual business gets tough, it’s indispensable.

To make it easier, we’ve written an 8,000-word business plan guide to help you create the best plan that will help your new marketing business.

2. The Software Your Marketing Agency Needs

If you have a digital marketing agency, you will need the absolute best software to keep you on top of your game. Let’s look at some of the best.

Trello

If you are working with a team, you’ll need a powerful project management tool. That’s where Trello comes in—making it easier to manage projects with many team members.

The visual interface is great, helping to make daily operations intuitive and even fun.

Optimizely

This is a very useful and intuitive A/B testing and personalization platform that will help you check your client’s websites and mobile applications.

It helps optimize the page so that you can increase your client’s revenue and engage your client’s website visitors.

InvoiceBerry

Of course, because a marketing agency is still a business, you shouldn’t forget about your financials either. Online invoicing software InvoiceBerry will help you to quickly send out invoices to your clients—in under 60 seconds.

It’s also great for recurring invoices—meaning you can set it once and the software will automatically send your client invoices.

Ahrefs

In order to do SEO, SEM/PPC, content marketing and other research, you’ll need a powerful platform.

Ahrefs is one of the best tools to use to get the information you need to help you build backlinks, do keyword research and plan your PPC campaigns.

IV. The Qualifications, Licenses and Insurance You Need

We’ve now covered the fundamentals of your business, which will serve as the backbone for your company. But before we look at the pricing and how to market your marketing agency, we first need to make sure we’ve dotted our ‘i’s and crossed our ‘t’s.

That means we need to make sure the documentation is in order so that you don’t leave yourself vulnerable to legal or other issues.

We’ll look at the qualifications, insurance and licenses you need to get your  marketing agency started.

1. Your Marketing Qualifications

Marketing is one of those fields that don’t have specific requirements in order to succeed as a marketer. In fact, many successful marketers studied nothing related to marketing (or didn’t study anything at all).

However, there are a few common educational qualifications that successful marketers have in common.

The first most important thing is to have a bachelor’s degree in Business, Marketing or Digital Marketing. Essentially, it is possible to have a successful career in marketing without having a degree at all.

However, according to some industry experts, it can be very difficult to have a good career in marketing without a degree. This is mostly because employers value degrees, and in order to have experience in marketing, you’ll first need to work under an experienced marketer.

While formal education is important for the beginning stages of your marketing career, you’ll need continuing education—in whatever form you can find it—to really succeed.

There are certain certifications that will also help you in your marketing career, although they are not mandatory.

The American Marketing Association offers certifications in marketing. These types of certifications can help your marketing agency improve its reputation, as employees and clients will be more trusting of your abilities.

There are free certification courses, however, that are recommended time and again for their real-world value and price (free!):

• Google Analytics IQ certification
• Google Adwords
• Hubspot Inbound
• Hootsuite Social Media
• Facebook Blueprint

2. The Important Licenses

If you are starting a business officially, you’ll need to have a business license. The specific type and difficult to obtain it will vary depending on the state or country you are working in, however.

For many states, it is not necessary that you have a specific license in order to start your marketing business. For the most part, the general business license will do.

However, if you decide to do marketing work for specific industries, such as defense, telecommunications, food, etc., then you’ll most likely need to get a special permit.

3. Your Marketing Insurance Needs

Marketers will need to be sure they cover themselves when problems arise in their service. While your clients will depend on your expertise to boost their business, a misstep could bring damages to your business and your brand.

Therefore, it’s important that you protect yourself as much as you can, including with the appropriate marketing agency insurance.

General Liability

The first type of insurance you definitely need to have is general liability. Although marketing agencies generally are low-risk when it comes to bodily injury and property damage, you should always have protection for that just in case.

Because, if you don’t have this, your client could claim that you or one of your employees caused them or their property harm. Then they can put you through an expensive and drawn-out lawsuit and settlement—both of which are bad. General liability will cover these types of claims.

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Professional Liability (Errors & Omissions)

This type of insurance is crucial for your marketing agency. If your client claims that you caused their business financial loss, due to faulty advice or something related, you could  find yourself at the receiving end of a time-consuming and expensive lawsuit.

This is especially applicable for in the marketing industry, where often a risky or controversial campaign could lead to really good or really bad things.

Professional Liability insurance (also known as “errors and omissions”) will help cover you in these situations. It will pay for your lawyer’s time, income lost due to having to spend time in court, the settlement and other expenses related to the lawsuit.

Workers’ Compensation

You may or may not need to have workers’ compensation insurance depending on your state or country.

In some states, there is a requirement for businesses of all sizes to have workers’ comp, while others will have a minimum number of employees before you need that coverage.

Workers’ comp helps cover you in case your employees get injured or contract an illness while on the job. Because marketing is at low risk for these issues, workers’ comp is not necessary unless required by your local laws.

V. How to Set Your Marketing Agency Prices

Okay, enough with the bureaucratic stuff! Let’s get to the nitty gritty—setting prices.

This is one of the more difficult things to do, as effective pricing strategies could mean the difference between your business booming or getting ready to shut down.

Let’s look at the 3 most effective pricing strategies for your marketing agency, as well as their pluses and minuses.

1. Hourly

The hourly pricing model is quite effective and commonly used in marketing. Here, you are charging an hourly rate for all the work that you do.

One way is to use what’s known as a “blended” agency rate (which takes into account a lot of costs and margins). You can also use different rates for different marketers in your agency, depending on their qualifications, experience and seniority.

In this method, you will provide an estimate to your clients upfront and then bill for any additional hours. Agencies often invoice their clients on a monthly basis, although you may have a shorter (or even longer) invoicing period.

Advantages

The advantages to this system are:

• you’re getting paid for all the work you’re doing
• you make it easier to scope the work, as the hourly pricing method is flexible enough for adjustments
• you can track your budget much more easily
• it is a good method for beginning agencies, as you’ll get experience on how long certain campaigns or jobs take and can protect you from undercharging

Disadvantages

There are certain large disadvantages, however:

• your clients will be questioning a lot of the items on your invoices. This is natural, as your clients are never sure how much something will cost and will challenge whether certain things should take as long as it should have—meaning they’re more focused on the process than the results
• you are limited by how much you can make, and making more money means you’ll have to hire more people or increase your rates
• your clients will be unwilling to talk to you for a long time (or at all), as the discussion will be billable hours, and they are concerned with minimizing the invoice amount
• it provides an incentive to be less efficient, rather than more—if you work and get results faster, you are essentially earning less than if you dragged  your feet

2. Fixed Pricing

Fixed pricing, also known as milestone pricing, determines a specific scope for a specific price for the job. You agree to do a job for a specific price, and you will invoice your client when the results or milestones are reached.

Advantages

This type of pricing method has a few great benefits:

• you are being rewarded for efficiency—the more you do a certain type of job, the faster you become, and you get the reward of getting the money and saving your time and energy
• your clients are comforted that they know how much they’ll pay and when they’ll pay, so it means they’ll be more willing to communicate with you and there won’t be any invoice challenges
• you can estimate your cash flow because you can predict when you’ll finish a job, send out the invoice and get it paid

Disadvantages

This pricing method is best if you are more experienced. Some of the bigger problems are:

• if you aren’t good at scoping a particular project, you can undercharge your customer and cut into your profits
• your clients may end up changing some, a lot, or everything about the job and you have to adjust with them
• your clients may not agree that you’ve reached the results and will hold off on payment until you finish it according to their standards

3. Value-Based

Value-based pricing is particularly great, especially for older, more established marketing agency types. Essentially, there are two types of value-based pricing strategies:

• royalty or commission on client revenues, where you are being paid for your performance
• charging more, as your client will get higher value from your work, meaning you get higher pay

Advantages

This pricing method has some great benefits:

• you and your client’s incentives are being aligned, seeing as you get paid more as they make more money. This helps you get more incentive, but it also helps put your customer at ease, as he’ll be more willing to pay higher for the higher value you brought.
• With the hourly pricing, you are essentially getting paid a flat rate, no matter how great your results are. Here, you get paid according to your results, and great results means great pay.

Disadvantages

These may not exactly be disadvantages, but they are some pitfalls that could negatively impact your marketing agency:

• with value-based pricing, you need to be confident in your ability to get results, rather than just making promises and ultimately falling short
• you have to focus only on results, as you’ll be earning based on results but paying your marketing team based on their deliverables

VI. How to Market Your New Digital Marketing Agency

This should be the easiest part of starting up your digital marketing agency—marketing yourself.

If you have the chops to make it in the marketing world, meaning you can help your clients with their marketing, you should be able to market yourself successfully.

1. Traditional Marketing

While most of this effort will unsurprisingly be inbound or digital marketing methods, you can still use traditional marketing effectively.

The best way to go old school is to attend conferences or having speaking gigs where you can increase your visibility and improve your reputation in your industry.

Beyond that, you should try to get quoted by the traditional media as well as blogs. Of course, getting backlinks is one of the most important SEO strategies, but here we’re just looking at its reputational benefits.

Moreover, if you can get published in leading industry publications, you are showing that you have the experience and knowledge needed to ensure your clients’ success.

Of course, there’s also a lot to be said for being where your ideal clients are and networking with them. If you are targeting small businesses, you need to be seen at small business conferences and meetups. Be ready with your business card and a great elevator pitch.

A lot of small business clients may not really be sure what you do, so you’ll have a nice task educating and then convincing them in a short amount of time.

But it is highly effective.

2. Inbound Marketing

No digital marketing agency is going to be worth much if it doesn’t have a good handle on inbound marketing. Essentially, you need to bring your clients into your space, as well as increase your position on search results pages.

Therefore, you need to create the right content. This is of course answering the questions that you find your ideal customer asking.

But you can also gain reputation, backlinks and visitors by providing valuable research and case studies.

Case studies present a great opportunity for you to show your seriousness, professionalism and experience. This is especially effective if you can show a case study of a former client’s amazing progress, where you explain how you took your client from x to y in z amount of time.

While not technically part of inbound marketing, one of the most effective strategies (related to case studies) is glowing customer testimonials.

When your potential clients see how much you helped past clients, that will be a huge push for them to employ your services.

If you don’t have any clients at all, you may consider doing your first one at a reduced price in exchange for an agreement that you will use that as a case study and get a testimonial for positive results.

3. Social Media and Advertising

Lastly, you should be using social media effectively for your marketing agency.

Your agency should have a presence on all the big social media platforms. This obviously includes Facebook and Twitter, but you shouldn’t ignore Pinterest, Instagram and even Snapchat.

For the most part, your usage of social media will be connected to one of two things:

• sharing your content
• utilizing their advertising services

Both are important for success, especially since social media advertising is quite affordable compared to SEM.

If your budget allows, however, you should invest in PPC for search engines. After all, people don’t go to social media first to find answers. They simply type their question into Google’s search bar.

This can be effective, but, as I said, it can also be quite expensive, especially if you are going after highly competitive keywords.

Social media is of course a complicated but potentially lucrative area that you should invest your time and energy into. Luckily, we’ve already created an in-dept (and free) ebook on what you need to know about using social media for business.

Get our free ebook The Ultimate Guide to Social Media for Small Businesses and Freelancers to find out.

VII. Summary

Starting a digital marketing agency is a great business idea. However, in order to succeed, you need to be aware of the most important things.

In digital marketing, there are 5 areas that are normally covered:

• SEO
• SEM/PPC
• Social media marketing
• Email marketing
• Content marketing

Before diving into what is needed, it’s important to know the advantages:

• low upfront costs to starting
• you’ll be able to work with clients all over the world
• you’ll have recurring income
• your work is flexible

Of course, to balance that out, you need to know the disadvantages as well:

• your field and benefits are unknown to many small business owners
• it’s a fast-moving field and you need to keep up-to-date
• you need to familiarize yourself with your client’s business first
• the results come in the long-term, and your clients may want faster results

Your marketing agency business must cover its basics:

• create an effective business plan to set yourself up for success
• use software such as Trello, Optimizely, InvoicBerry and Ahrefs

You’ll need certain documentation:

• a bachelor’s degree is usually helpful
• some locations require you to have permits in addition to the business license
• you’ll need general liability, professional liability, and workers’ compensation insurance

In order to set your marketing agency prices, you should use one of three strategies:

• hourly
• fixed price
• value-based

To get your marketing clients, use these three methods:

• traditional marketing, such as networking and press
• inbound marketing to create content your ideal customer wants to learn
• social media and advertising to put your business in front of the right eyes

With these steps covered, you’ll be soon succeeding in your newly established digital marketing agency.