How To Start an Agency Business
As a freelancer, you might be wondering how to start an agency. Understandable, after having worked with agencies (who often rely on freelancers), you want to run your own team, have stable recurring revenue, and make a real impact with your clients.
The good news is that it’s easier than ever to become an agency owner, as we see daily here at SPP. The bad news is that building a successful one is still really difficult. It takes a lot of hard work, dedication, and most importantly, a well-thought-out plan.
In this article, I’ll give you a blueprint to kickstart business development for agencies looking to scale. I’ll be covering everything from finding your target audience to acquiring clients, building a team, and running an agency.
So, if you’re not sure what you need to start an agency, read on.
What is an agency?
Before we dive into the process of building an agency, what exactly is an agency? Most definitions describe a collective of people (a group) that are experts in delivering specific services. The agency can serve other agencies, businesses, or private persons.
As opposed to a freelancer, an agency is a group of people, so one freelancer does not make them an agency (unless they partner up with multiple freelancers).
What types of agencies are there?
When starting a new business, it’s a good idea to niche down, and focus on things you’re good at, that make it easy to identify ideal clients, and market your service. This is why most agencies are focusing on a specific niche. While there are certainly more general companies, such as marketing agencies that do everything related to marketing, others are more focused.
Assigning a type to each agency isn’t an easy task, as there are no set rules. However, we can try to organize them into five categories:
Each category has many different agencies, that are more or less niche down. For instance, a digital marketing agency is part of the marketing category, but its services are not as focused as those of a SaaS-focused content agency that only creates case studies.
This means that some agencies are more full-service orientated, while others focus on specific niches and service types. The latter have it much easier when it comes to creating service bundles, finding potential clients, and converting them into paying customers.
6 tips on how to start an agency
If you’re unfamiliar with how to run a business and what you need to do to find your ideal clients, simply follow our process below.
1) Find your target market
The first step in starting an agency is figuring out who you want to work with. This might seem like a no-brainer, but it’s very important.
You see, many agencies make the mistake of trying to be everything to everyone. They try to work with businesses in every industry and of every size. And while there’s nothing wrong with that in theory, it rarely works out in practice.
The reason is that it’s just too difficult to be an expert in everything—it’s much better to focus on a specific niche and become the go-to agency for that type of business. To do that, you’ll want to start by creating an b2b customer profile.
Think about your ideal clients’:
company size (e.g., SME, enterprise-level, etc.)
industry (e.g., healthcare, e-commerce, etc.)
location (e.g., local, national, international)
business model (e.g., B2B, SaaS, etc.)
Once you have a good understanding of who your ideal customer is, you can start to work out important details like your price points and service offerings.
2) Determine your business structure
Starting an SEO agency can be a great way to make a living while helping online businesses achieve their marketing goals. But before you can provide services as an SEO agency, you need to set up your business structure.
There are several types of business structures to choose from in the U.S., each with its advantages and disadvantages.
Which one is right for you? That depends on a few factors, including the size of your business, the number of employees you have, and your state’s tax laws. Here is a summary of the most common business structures.
A sole proprietorship is the simplest and most common business structure. You are the only owner of the business, and you are responsible for all debts and liabilities. This is a good option if you’re starting a small business and don’t have many employees.
A partnership is similar to a sole proprietorship but with two or more owners. Like a sole proprietorship, all partners are responsible for debts and liabilities. This is also a good option for small businesses.
Limited Liability Company (LLC)
An LLC provides personal liability protection for its owners. This means that if the business owes money, the owners’ assets cannot be used to pay off the debt. An LLC is a good option for companies that want more liability protection than a partnership or sole proprietorship offers.
A C Corporation is a large, formal business structure with many rules and regulations. It offers limited liability protection for its owners and can have unlimited shareholders. However, C Corporations are subject to double taxation; profits are taxed at the corporate level and then again when distributed to shareholders. This is not a good option for small businesses.
An S Corporation is similar to a C Corporation but has fewer rules and regulations. It also offers limited liability protection for its owners and can have unlimited shareholders. S Corporations are subject to single taxation; profits are taxed only once when distributed to shareholders. This is a good option for small businesses that want the benefits of a C Corporation without double taxation.
3) Choose your services
The next step is to choose the services you’re going to offer. It might seem daunting, but it doesn’t have to be.
The key is to start small and only offer services that you’re confident you can deliver. It’s much better to start with a few core services, so you can better target potential customers that need them. While there are many ways to grow an agency, one of them is to delivery high-quality work consistently. In return, you’ll be able to hire the talent needed to expand your offering.
For example, your agency might start out only offering content marketing services and eventually build up to PPC, technical SEO, and ad management. The key is building a stable foundation that can support these additions.
4) Get your tools in order
Once you have your target market and services figured out, it’s time to find the right tools to get essential tasks done, such as billing a client. The goal here is to make it as easy as possible for you and your team to deliver high-quality work to your customers.
There are a ton of great agency tools out there, but here’s a great starter software stack for agencies:
SPP: A white label client portal tool built with agencies in mind. Through the platform, you can manage client projects, deliverables, invoices, communications and more. Plus, it allows self-service, so your clients can log in and help themselves—freeing up your time to focus on billable work.
QuickBooks: A must for any agency that wants to stay on top of their finances. It’s easy to use and can help you manage everything from invoicing to expenses. It’s also easy to integrate SPP and QuickBooks via Zapier, so you can fully automate your financial workflow.
Google Data Studio: GDS is a great way to consolidate and visualize data from a variety of sources to create easy-to-understand reports for your clients. You can embed these reports directly into your website or SPP client portal with our Google Data Studio integration, so clients can track project KPIs in real-time. Oh, and it’s totally free!
Tip: In addition to tools, you’ll also want to start documenting recurring processes, so that your team can easily replicate them to the standard you expect.
Grow your industry knowledge
5) Choose a fee structure
This is a critical step because your pricing will have a direct impact on your profitability and, ultimately, the success of your agency.
A fee structure is simply the way you charge for your services. If you’re not sure what fee structure is best for your agency, here are three guiding questions to get you thinking:
What can your ideal customers afford to pay upfront? For example, small and medium businesses may be hesitant to commit to a large, up-front fee.
What are your competitors doing? Established agencies in your niche have already gone through this entire process. That makes them incredibly valuable resources.
Now, let’s compare a few of the most common agency fee structures:
Recurring or subscription-based billing
Agencies increasingly opt to productize their offering, either fully or partially, due to the fact that it brings many benefits, especially if services are billed on a recurring basis.
Recurring or subscription-based billing means charging a flat fee that’s paid regularly (e.g., monthly, quarterly, etc.) for a set number of deliverables. In other words, the agency is selling service packages like the ones shown by the SPP subscription billing demo below.
This is one of the most common fee structures used by agencies because it makes ordering and billing incredibly intuitive for clients. With a client portal tool like SPP, the process can even be self-service—clients select the package that works for them and hit “add to cart”.
Plus, it allows agencies to predict cash flow much more accurately, which is important for things like payroll and expense management.
Project-based (or variable) billing means charging for each individual project. Usually, clients will come to your agency with a set of goals or desired outcomes, and you price the project based on the scope of work required to achieve those goals.
Alternatively, you can use a billing system like SPP to create custom order forms that simplify variable billing and make it self-service.
The main advantage of project-based billing is that you can charge based on the value of the project. Since each project is a separate entity, you can simply charge more for future projects without having to worry about upsetting existing clients.
That said, project-based billing usually sticks clients with a hefty upfront bill. This can be a turnoff for small businesses or those that are new to working with an agency. Plus, accurately predicting the cost of a project can be difficult, which can lead to cash flow issues down the road.
Hourly billing is the most straightforward fee structure—you charge clients an hourly rate for the services they request. This method is similar to project-based billing in that the agency is selling services rather than service packages. This method is used by Johnathan’s web development agency, for instance.
The main advantage of hourly billing is that it’s easy to explain to clients. After all, they’re used to being billed by the hour (think lawyers, plumbers, etc.).
The downside of hourly billing is that there can be a misalignment of interests between the client and the agency. If it takes you a lot longer to submit the deliverables, the client might think that you’re intentionally logging in more hours to get paid more.
6) Choose a pricing model
Pricing your services can be tricky, but it doesn’t have to be. The key is to find a pricing model that’s sustainable while still being competitive.
To do that, you need to understand:
costs (e.g., salaries, tools, rent, etc.)
duration (e.g., how long it takes to deliver a service)
desired profit margins (e.g., 20% → 0.2)
Once you have a good understanding of these three things, you can start pricing your services. Here’s how you can do that for the three fee structures I mentioned above:
recurring billing—service package cost × (1 + profit margin) = service package price
project-based billing—duration estimate x hourly cost x (1 + profit margin) = project quote
hourly billing—(annual service costs / (billable hours – non-billable hours)) × (1 + profit margin) = hourly service rate
Keep in mind that these are just rough estimates. You’ll need to adjust your prices based on the specific services you offer, the niche you’re in, and the market rates in your area.
Next steps after launching an agency
It’s finally time to start marketing your new agency business. If you’re wondering how to get agency clients, there are a number of strategies. The ones below have turned out to be the most successful.
Build a website
Your website is the most valuable piece of real estate you have. It’s the first thing most people will see when they Google your agency, so it needs to make a good impression.
Make sure your website is mobile-friendly, easy to navigate, full of relevant, keyword-rich content, and includes a clear call-to-action (CTA).
If you’re not sure how to build a website or don’t have the time to do it yourself, there are plenty of web design agencies that can help. Just be sure to vet them carefully before handing over the reins.
Tip: If you’re looking for a way to dramatically boost the functionality of your website, consider hosting your white label SPP client portal on one of your agency’s subdomains.
Use social proof
Social proof is the idea that people are more likely to trust a business if it’s endorsed by someone they know and respect. Once you’ve figured out how to consistently get traffic to your website (e.g., through search engine optimization), showing social proof can significantly increase the chances of turning a visitor into a paying customer.
There are a number of ways you can use social proof to market your agency, but one of the most effective is testimonials as seen in the example from Contentellect.
Ask your satisfied clients if they would be willing to write a short review or testimonial. And make sure you display them on your main site as well as relevant subpages.
Prioritize content marketing
Content marketing is the most cost-effective way to reach new clients. Studies have found that on a timeline of 5+ months, content marketing generates 3× more leads than paid search. Plus, it almost always works out to be cheaper.
Also read: what is lead generation?
To get started with content marketing, create a blog and start writing articles that are relevant to your target clients. Focus on using your expertise to produce content that’s comprehensive—you want your blog to be an authoritative source of knowledge.
Once you have a few articles published, you can start promoting your content through social media and paid channels.
Supplement with PPC
PPC is a form of online advertising that allows you to bid on the keywords that are relevant to your services. With PPC, you pay only when someone clicks on your ad, and it’s a great way to get in front of people who are actively looking for what you have to offer.
Due to stiff competition, most agency services terms have a very high cost-per-click. So, if you decide to use PPC to get clients, you’ll need to make sure your ad copy, landing pages, and conversion rate optimizations are on point.
Give networking a try
Never underestimate the power of networking. Going to the places where your ideal customers frequent (both physically and virtually) is a great way to get your name out there.
Some places you can network include:
Social media, such as Twitter and LinkedIn
Online communities where your target customers hang out
Events, such as conferences and seminars
When you’re networking, be sure to have a pitch prepared that succinctly explains what your agency does and how that benefits the person you’re talking to.
Don’t forget about cold outreach
Another great way to reach new clients is by cold-emailing them. That means finding companies that match your ideal customer profile and sending the founder (or a department head) a personalized email.
You need to show your value. Show your case studies and testimonials. Directly address their pain points. Give away your secrets!
That might seem counterintuitive, but remember, your goal is to get the person on the other end to say, “Wow, these guys sound like they really know what they’re doing. I think I’ll just hire them instead of doing this myself”.
Ready to start an agency business?
Becoming an agency founder may seem scary at first. From hiring great employees to figuring out how to grow your revenue, you’ll have to do and learn new things every day. However, taking things one step at a time will help alleviate a lot of anxiety around the process, especially if you document every step, set up processes, and hire people you can trust.
With time and effort, your agency will grow, and at some point, you’ll want to scale your agency and watch it grow.