How Much Does It Cost to Start a Digital Marketing Agency?

You need about $70,000 or less to start a digital marketing agency (Small Scale). Here is a detailed cost analysis for starting a digital marketing agency and raising finance.

If you had wanted to create a marketing agency 30 years ago, the barrier to entry was enormous due to the primitive digital landscape, the overhead to create such an operation, and the nearly impossible chance without a substantial initial investment.

Aside from these constraints, you were limited to physical and traditional media and the headaches associated with all but fabricating something that resembled ROI for your clients. Starting a digital marketing agency business can be cost effective; this is so because on the average, you are not expected to acquire expensive machines and equipment.

Basically what you should be concerned about is the amount needed to secure a standard office facility in a good and busy business district, the amount needed to furniture and equip the office, the amount to purchase the required software applications and internet facilities, the amount needed to pay bills, promote the business and obtain the appropriate business license and certifications.

Estimated Cost Breakdown for Starting a Digital Marketing Agency

When it comes to starting a small scale digital marketing agency, the following expenditure should guide you;

• The Total Fee for incorporating the Business in the united states of America: $750.
• The budget for Liability insurance, permits and license: $2,500
• The Amount needed to acquire a suitable Office facility in a business district 6 months (Re – Construction of the facility inclusive): $40,000.
• The Cost for equipping the office (computers, software applications, printers, fax machines, furniture, telephones, filing cabins, safety gadgets and electronics et al): $5,000
• The Cost of Launching your official Website: $600
• Budget for paying  at least two employees for 3 months and utility bills : $10,000
• Additional Expenditure (Business cards, Signage, Adverts and Promotions et al): $2,500
• Miscellaneous: $1,000

Going by the report from the research and feasibility studies conducted, you will need about $70,000 or less to set up a small scale digital marketing agency business in the United States of America. You will need over $100,000 U.S. dollars to successfully set – up a medium scale digital marketing agency business in the United States of America.

If you are considering starting a large scale digital marketing agency business with several professionals under your payroll and offices in key cities in the United States of America and other parts of the world, then you should look towards budgeting from $1 million United States dollars and above.

Since marketing companies provide services rather than products, the start-up costs can be minimal, although the following factors will greatly determine the cost and start up routine.

Factors That Determine the Cost of Opening a Digital Marketing Company

1. Location

Ideally, marketing agencies should have an office for meeting clients, computers for working on projects, an internet connection and a printer for printing any physical marketing collateral. Agencies also need a website. However, there are ways of keeping the cost of rent and utilities low.

A digital marketing company can rent an office on an as-needed basis or work in coffee shops that offer free WiFi. If necessary, business owners can even meet clients in coffee shops – thus limiting the start-up costs to little more.

2. Equipment and Technology Costs

You will also have to invest in computers, office equipment, and software programs. However, note that these costs will vary depending upon the office setup. Computers adequate to handle sophisticated programs and software will be between $1000-$2000 each.

But have it in mind that the various technology or software services can be on the high side. Research databases, such as the Bloomberg terminal, can cost several thousand dollars per month.

3. License and Permit

According to reports, a rough estimate on the total cost of license and permit fees is $150 to $200. Note that business licenses and permits required for a digital marketing company will vary from state to state. Some of the fees you may have to pay for are annual business license tax, business improvement tax, new license application fee and state fee.

Your estimated gross receipt is part of the calculation of the state fees you will have to pay.  Thus, it is also important that your agency business plan has realistic financial assumptions.

4. Insurance

In the United States, acquiring general liability insurance is a must for all types of businesses to cover the risks caused by direct or indirect actions of the insured.

For a digital marketing company, professional liability insurance should also be considered. Note that this type of insurance, also known as errors and omissions insurance protects your business against errors and negligence in provision of services to your customers.

According to reports, the average Cost of Insurance Coverage for a Sole Proprietor Business, General Liability Insurance could be as low as $500 to as high as $15,000 a year, while professional liability insurance can vary from $500 to $2,500 a year.

5. Number of Employees

Note that the number of employees needed in a digital marketing company will also affect the startup cost and requirements.

Most big digital marketing firms have multiple employees. Larger operations may include a manager, creative marketing consultants, media influencers, a receptionist, and possibly additional service providers. While smaller agencies may have just a few attendants.

6. Cost of Advertisement

In this industry, there are many advertising options, including web pages, social media accounts, phone book ads, newspaper or magazine ads, mass mailings, vehicle decals, local media coverage, and more. The exact strategy a business uses will also influence the needed capital required to startup this business.

Financing Your Digital Marketing Agency

Starting a digital marketing agency business can be cost effective especially if you choose to run the business from your home, share office space with a friend or make use of virtual office. Securing a standard office is part of what will consume a large chunk of your start – up capital, but if you choose to start the business on a small scale, you may not have the need to go source for fund to finance the business.

No doubt when it comes to financing a business, one of the first thing and perhaps the major factors that you should consider is to write a good business plan. If you have a good and workable business plan in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.

Here are some of the options you can explore when sourcing for start – up capital for your digital marketing agency business;

• Raising money from personal savings and sale of personal stocks and properties
• Raising money from investors and business partners
• Sell shares to interested investors
• Applying for Loan from your Bank / banks
• Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
• Source for soft loans from your family members and your friends.

Conclusion

Managing your own business has many ups and downs to it and you’ll have to be able to weather the storm to enjoy the benefits. Note that it is a dramatic life event and you have to treat it as such. If you feel early on that you aren’t cut out for it, then don’t drag yourself along for any longer than you have to.

If you make a decision but don’t believe in it, you’re going to fail. You have to commit. Once you do that you may discover how extremely fulfilling running your own digital marketing agency is.