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What is the Cost of Starting a Digital Marketing Agency?

What is the Cost of Starting a Digital Marketing Agency?

In this edition of Classy University, we talk about how much it costs to start a local digital marketing agency. Digital marketing agency in this episode is defined as a company selling search engine optimization, Google Adwords, and/or Facebook Ads.

This video is made for marketing managers looking to start their own agencies; graphic designers or web developers looking to add digital marketing into their current services; students out of college looking to become freelancers; and anyone else who finds value in this.

 

Some notes:

  • All costs are subjective. These were based off of Classy Brain’s initial startup costs.
  • SBA stands for “Small Business Administration”, they will fund a local Small Business Development Center.
  • We did not meniton payment processors, this is a very important mistake. You will need a payment processor like Square or Stripe to process credit card transactions. Typical rates are 2.75% per transaction.

Video Transcription

Hey guys, my name’s Craig and I run a digital marketing agency out of Colorado called Classy Brain. Today, I wanted to answer a question that I think a lot of people who are looking at starting their own digital marketing agency has, and that is how much money does it cost? How much does it cost to start a digital marketing agency?

I’ve talked to some very smart people, put together this whiteboard behind me and I think I got a pretty good answer for you. So I’ve divided this video into three different categories. The first category is going to be offline utilities, second category is going to be online utilities, and third category is going to be software. So, jumping right in, if you’re looking at starting a digital marketing agency, the first thing that you’re gonna need is office space and you can go one of three routes with that.

Offline Utilities

The first route is free by working out of a Home Office, second route is a coworking space. Coworking spaces are popping up all over the nation and they’re a really cool concepts. You pay a hundred to $200 per month and you get electricity, you get internet and you get a work environment where you can, you know, come to work, feel like you’re at work and work with other professionals in your area who are just getting started as well. It’s a great option.

When Classy Brain first started, we actually just went ahead and purchased office space at $400 for 229 square feet in Colorado Springs, wouldn’t recommend that to you guys. That does get up there and we kind of shouldered a lot of weight. Then in hindsight, I think if I had known about this coworking route, I probably would have went that way.

Moving on to internet. Segues very nicely into that. If you’re working out of your Home Office, internet’s included there, right? Pretty great perk. If you’re working out of a coworking space, internet is included with the coworking space. If you’re at Classy Brain when we first started, we had the $400 and we actually paid for internet, shared it with another business in our space, and that was about $85 per month.

If you’re looking at just getting your own business internet connection, typically, that’s gonna run about $170 per month and that’s gonna get you about 120 megabytes. Now, this does depend on whatever internet service providers you have in your area. This is just a general cost that I’ve kind of calculated here based off of our metrics.

Next, legal, if you’re going to be a digital marketing agency, you’re going to need help with contracts. You know how to deal with employees, things of that nature and your local Small Business Administration (SBA) is actually a great resource. I’m going to be talking about the SBA a couple of times in this video and I would definitely recommend it, especially for legal. Sometimes they do offer legal services for free and I would definitely encourage you to look at an active SBA in your area to see if that’s a cost that you can get for free through them.

Now, if you don’t have an SBA that’s active, that’s okay. We have another option here which is prepaid legal. Prepaid legal typically runs about $40 per month and I’ve spoken with a lawyer about this. About 90% of issues that you come across as an agency can be solved through prepaid legal. And if you decide, “Hey, you know what? That option is not necessarily for me. I wanna hire an actual lawyer.” That does scale up pretty quickly. Generally, it’s about 150 to 250 per hour and you have to pay a retainer, which means you have to pay a lot of that upfront. So if you’re looking at just getting started, definitely recommend the prepaid legal route.

Next, is accounting because with accounting you’re going to need to answer two questions. One, how much do you have to pay in taxes, and two, are you charging things correctly? And accounting can absolutely help you with that. Right now, Classy Brain pays about $160 per month for an accountant. However, through the SPA, that could be free if they offer it. I know in the Colorado Springs area, our SBA absolutely offers accounting services and so I would highly recommend, again, you looking into that option if you’d like to hire an actual accountant, typically it’s about $60 plus per hour. And, again, anything that you might need through them, you’ll usually pay on a monthly basis.

Next, a telephone. You got to answer phone calls, right? Because you’re gonna be getting so many leads. I would… Well hopefully, if you do everything correctly. If you are using your existing cell phone, that’s gonna be free and you’re not going to, you know, need to pay anything extra. If you want to separate your existing cell phone from a potential business line, you can get a landline generally through your internet service provider, and that’s only about 20 bucks per month.

Now, if you want to get a cell phone, generally, entry-level cell phone contracts are gonna be about $80 per month and you will actually have to sign a contract for that. So when we first started, I actually did just use my cell phone and customers honestly appreciated that. They liked me being accessible through texts and through after hours as well, right? However, you know, again, that does kind of get into family time. I definitely understand if that’s not the route you want to take, but it is a competitive advantage, right? Just something to keep in mind.

So, the next thing that you’re gonna need if you’re starting a digital marketing agency is insurance. And who doesn’t love to talk about insurance? You’re going to need two types of insurance. That’s going to be general liability, and the second type is professional liability. General liability is going to cover you in case a penguin attacks you while you’re at the office or if you drop something in your office, drop a computer and it breaks. A general liability can help you out there. The second thing is professional liability and that is if something happens as a result of your service, if you blow up a website or something of that nature, professional liability can help you out there. Generally, it’s about 10 to $20 per month for each of those.

Next, is a bank account. You’re going to need a place to deposit all the cheques that you’ll hopefully be getting and a business account, typically a bank, requires you to have a minimum balance in your account. Generally, that amounts around $300 or if you don’t have that, you’ll have to pay about $25 per month for a bank account. So that wraps things up for offline utilities. I think I covered everything pretty well there.

Online Utilities

Moving next to online utilities. If you’re looking at starting a digital marketing agency, you’re gonna need a website. Now, if you’re gonna bootstrap things, which is something I would highly recommend starting out, I would definitely build your own website through something like Wix, Weebly or Squarespace. And typically, they charge a monthly fee, hosting is included with that and it’s about $18 per month to have a website.

Now, if you wanna go a higher tier route, you can hire a web developer on something like Upwork or if you know of a web developer in your area. The cheapest I’ve seen web development is about 40 bucks per hour. Anything below that, I don’t know if I’d necessarily recommend. And then on the upper tier, good web developers usually charge anywhere from 100 plus per hour. And small digital marketing agency websites are generally anywhere between $1,500 to $3,000 depending on what you need that website to do.

However, again, if you’re just starting things out and you wanna bootstrap it, I would definitely recommend Wix, Weebly, Squarespace, paying around that $18 per month, absolutely 100%. That’s exactly what we did when we first started. So next, you’re gonna need a logo. A logo, the trick that I always recommend people use if you’re looking just to get a cheap logo is, go to fiverr.com and hire four people at $5 per person.

And what you’re gonna do is you’re gonna get for people who are all gonna create you a logo and you’re gonna test those logos against each other. Pick the best one and it cost you about 40 bucks. That’s pretty great, right? If you want to hire an actual graphic designer that is going to jump up quickly in cost and you can again, get a graphic designer for about 40 bucks per hour or $100 per hour for a good one.

Next, you’re gonna need a domain. You’re gonna need a place for your website to live and you’re also gonna need some email as well. Domains are generally about 1.99 per year and 12.99 per year if you get a domain that is common. Now, I have seen domains that are scaled up incredibly high, right? And you can go anywhere from 500 plus, you know, to as high as $1,000 or $2,000. Definitely, wouldn’t recommend picking one of those up. Sometimes, there’s SEO value to that, some people think so.

Anyway, I would definitely stick to the branding route and try to pick a domain that is around this cost, especially if you’re just starting out. So next is email. Email is pretty, pretty simple. It’s about $5 per person. And if you hire anybody else moving forward, it’s gonna, you know, just add generally about five bucks per person. You can use Google Suite or Microsoft. People use the Microsoft Outlook. We use Google Suite, personally. I would recommend them both. Both have their advantages and disadvantages.

Next, is a proposal. You’re gonna need a proposal to hopefully court clients. The first thing that you can do to get a proposal is, create one yourself. And that’s free. Who doesn’t like free? Highly recommended. We created our own proposal. I would definitely recommend if you guys are just starting out, you guys create your own proposal.

There are proposal softwares out there and those generally run about $25 per month. I don’t know very many people that use them. However, people do, so I just wanted to throw that in there. Reporting, you’re going to need to report to your clients every month and you can create your own reports and that’s free. If you want to hire a graphic designer, right, maybe the same person for a logo. Generally, that’s about $100/hour. So that wraps things up for offline utilities. That wraps things up for online utilities.

Software

Now let’s jump into software. These are all the softwares I think you’ll need if you’re gonna start a digital marketing agency. The first one being Ahrefs. I think Ahrefs is the most important tool right now for search engine optimization. I think it’s great. I would highly recommend Ahrefs. Now, there are other great tools there. There’s MOZ, there’s SEMrush, there’s Majestic. We use all of those tools. However, if I had to pick one, I’d pick Ahrefs. And Ahrefs prices right now at $99 for entry level, $179 which is the package that we currently have, or $399 if you’re a huge agency, right? However, if you’re just getting started, it’s probably gonna be about $99.

Next, you’re gonna need Word and Excel. And the applications Word and Excel right now, Windows offer that at $9.99 per month for both of them. You also get PowerPoint, and the reason I recommend these two is because a lot of businesses typically use these. And so you’re gonna make your life a lot easier if you just buy it upfront, you probably already have it, but if you don’t, it’s gonna be $9.99 per month for the suite and $99 per year if you just wanna pay everything upfront.

So next, you’re gonna need keyword planner to do some keyword research that is free through Google AdWords, you just have to put in a credit card, right, to tempt you to buy ads. However, it is free and so you can use that through Google Ads. Screaming Frog is a web crawler, one that I would highly recommend. They are based overseas and they have a free version of the software, which is totally practical if you’re just starting out. We actually use this version. This is in the pound sterling, right? This is 149 which translates to about, I think it’s like $190, $194 to be exact per year. And this is just, if you’re doing really, really big websites. Websites that are 500 pages and under, I believe, again, that is free.

Keyword tracking, you’re gonna need to show results in some capacity. One KPIs, typically keyword tracking and with a keyword tracker, typically these prices scale. I’m gonna give you just a quick tip. You will see pricing tiers, which is like 49 for X amount of keywords, 99 for X amount of keywords, 399 for the big package. Just go with BrightLocal. If you’re gonna be working with local businesses, BrightLocal is great. It’s $79.99 per month. That’s something that I definitely would recommend.

Now, if you are going to be doing e-commerce or if you’re going to be doing national SEO campaigns, right, BrightLocal won’t really make sense. This is the pricing tiers that you’re gonna be looking at. Next, I want to jump into… We’re almost done guys. Google Drive is a great project management system and it’s also a great CRM. I would definitely recommend using Google Drive when you’re just getting started and that is gonna be free.

Next is AdWords, if you’re gonna be managing any AdWords campaigns. And then the last thing is the Facebook Business Manager and those two are both free. So, if we add up the cost of every single thing here, right, if I was just getting started and I could pass information onto somebody who is looking at starting their own digital marketing agency, I would tell them to do this option for rent, this option for internet, this option for prepaid legal to accounting, look for your SBA to try to get that for free. Use your existing cell phone. Definitely, definitely get these two types of insurance. Have a minimum balance of $300 so you can save some money there.

If you’re looking at building a website, using the option that I started there, which is $18 Squarespace, Wix or Weebly, logos, using the Fiverr trick, that’s gonna add about 40 bucks. Domain purchasing $1.99 domain, $5 for your email. And then using a free proposal and free reporting because you’re gonna create that. And then getting the entry level Ahrefs, $9.99 for Word if you don’t already have that.

And then just using free for the keyword planner, just have a credit card. Free screaming frog, use the $79.99 BrightLocal. That isn’t on there, but we’ll just add that really quickly here, $79.99 so that we can circle it. Google Drive, Google Ads, and Facebook Business Manager, all free. And the grand total…drum roll, is $533 and 97 cents. So just to write that down, how much money does it cost to start a digital marketing agency? This much.

That is insanely cheap. There has never been a better time to get into digital marketing. And so if you’re thinking about it, you could pay that off really quickly and even if you want to upgrade some of these options, right? You wanna hire somebody to get a professional logo or if you want to use a higher tier package or pay for an actual, you know, accountant, something of that nature, you could still probably do that for under a thousand bucks. So, what are you waiting for? Get out there and do it. My name’s Craig and thank you very much. Hopefully, this was informational and we’ll see you guys next time.