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How Much Does It Cost To Start A Digital Marketing Agency

Starting your own digital marketing agency can cost anywhere between $730 and $29,100, according to estimates. This is a broad range that takes into account many differences in founders' circumstances and goals.

The exact cost will be somewhere in the middle of these extremes, and there's a lot you can do to cut the related expenses and maximize your investment.

This guide will break down the total cost into its most impactful components to help you crunch the numbers and see if starting an agency is worth it.

What you will learn

  • How much it costs to incorporate your agency, create a website, get an office and the related supplies, hire a team, and check many other boxes required to start and run your business
  • Which factors influence the total cost
  • How to minimize your agency's expenses and improve its profitability

Website costs

Your agency's website will be its main point of contact with potential clients, so you must make sure it's well-built and compelling. This means the site should be visually appealing and fast enough to allow for a smooth experience.

According to a recent Forbes article, the costs of creating such a website are as follows:

  • Domain name: Up to $20 per year for standard domains (more if you want top-level domains, which are higher in the Domain Name System hierarchy and therefore increase the site's authority)
  • Web hosting: $30–$500 per year (mainly depending on your traffic volume)
  • Templates: Up to $100 (one-time cost)
  • SSL certificate: You should get it for free with web hosting services but go up to $249 per year

These are some of the universal costs you'll encounter, with the rest depending on the specific features you want your website to have.

For instance, if you want the live chat feature, Capterra's overview shows that you'll need to pay another couple hundred dollars per year.

Note that the price of your website can vary greatly depending on whether you work with professional designers or take a more DIY approach.

Working with designers to build your website can cost upwards of $5,000 according to the Forbes article.

In this case, you can significantly cut costs by using a CMS like WordPress and building your own site. You can even find free templates, themes, and useful add-ons that will make your site stand out.

The downside of this approach is that many other digital marketers can use the same templates as you. So your website won't appear as unique as it would be if you had a custom one created by developers.

However, this can easily be changed when you add your own images, fonts and colors. A little layout shift can also completely overhaul the look of your website.

If you're just starting a digital marketing agency, don't spend a lot of money on your website.

Rather, use a template that makes you look professional and focus your time and money on acquiring customers and delivering services.  

Incorporation fees

All digital marketing agencies need to register in their state or country to operate legally.

According to LegalZoom, filing incorporation paperwork in the United States will cost between $100 and $250, depending on your state and business structure.

Note that this isn't the only cost you'll face while forming your digital marketing business. Other expenses may include the following according to this Forbes guide:

  • Attorney's fees: $250–$600 (hourly rate)
  • Registered agent: $100–$300 per year
  • Annual report: $0–$300 per year (depending on your business structure and state)
  • DBA (if applicable): $25–$50 one time

You may also need a business license, which can cost anywhere from $15 to over $300 per year. Make sure to check in with your authority and inquire about all the licenses and permits you may need.

There's no way to avoid incorporation costs completely, as you must register your business before it can operate.

Doing it yourself is typically cheaper than hiring a professional, as they charge between $200 and $1,000.

You may be able to avoid some costs, though. For example, most states in the US will allow you to appoint yourself as a registered agent, so you won't need a dedicated service and can save a few hundred dollars there.

Note that administrative costs may continue even after you've incorporated your business.

You may need to protect your intellectual property (IP), go through mergers and acquisitions and deal with various situations that will expose you to legal fees.

Estimating these costs is hard because they can vary widely depending on your situation, so plan any big moves ahead because they can amount to a few thousand dollars.

Office space

If your digital marketing company will operate from a physical location, you'll need to rent an office that will support your employees and infrastructure.

The office will significantly impact your startup costs, so it's among the first considerations when outlining your budget.

According to PriceItHere, your office space will cost $8–$23 per square foot. The exact price depends on two factors:

  • Number of employees
  • Location
The best way to minimize these costs—or even avoid them altogether—is to make your business fully remote and create an online workspace.

Seeing as you'll be running a service-based business, you may not need a physical office at all.

You can find online productivity tools like Slack and Google Workspace, which should be robust enough to let you serve your first few clients until your digital agency gets off the ground.

Office equipment

If you decide to go with the brick-and-mortar approach, you'll need quite a bit of office equipment to ensure your employees have everything they need, most notably:

  • Laptops/PCs
  • Desks
  • Office supplies
  • Printers
  • Extras (entertainment like ping-pong tables or darts, coffee machines, etc.)

The opportunities are pretty much endless, so estimating the costs is difficult before you know exactly what you'll buy.

For reference, StarterStory's data shows that technology equipment requires between $500 and $5,000 per year per employee, while Chron estimates $922–$1,106 annually for office supplies.

Of course, specifics depend on whether you'll choose budget equipment or high-end solutions, but the good news is that there's lots of room to strike a balance between the two.

For instance, you can invest more in tech equipment to ensure longevity, but you don't need highly expensive tables or printers because budget options should do the job just fine.

To limit your office expenses, you can also hire freelancers and contractors who will use their own equipment and work remotely.

Note that you may need some equipment even if you don't work from a physical location.

At the very least, you'll need it for your home office, and you can choose whether to provide the necessary tech to employees or have them work from their own devices to reduce costs.

Software and tools

Rich software infrastructure is the heart and soul of all digital marketing agencies—you need it to ensure a streamlined workflow and maximize productivity while serving clients' various needs.

Comprehensive tools are particularly important if you'll work in a remote setting, as they prevent bottlenecks and let your agency grow uninterruptedly.

While there are numerous software types you can use, some basics include the following:

  • Digital marketing software. You'll use this both for client work and promoting your own digital marketing agency. Such software can include SEO tools like Google Analytics and Surfer, email marketing software like MailChimp, and various other platforms.

    For example, an SEO platform like Surfer can perform SEO tasks from keyword research to content writing, replacing the need to hire an SEO team.
  • Communication tools. Platforms like Slack and Zoom are omnipresent among online businesses, so you'll need them to ensure seamless collaboration.
  • Project management tools. Asana, Trello, Airtable, and other project management tools can be used to delegate work without complications and keep track of progress, so you'll want to leverage them.

Luckily, the above tools don't involve significant investments.

According to Cloudwards, the average cost of communication tools for small businesses is $8.90 per user per month.

Marketing and project management tools are similarly priced, and they typically come with flexible tiers that let you optimize costs and avoid overspending.

Marketing and promotion

You'll need to invest quite a bit of time and money to promote your new digital marketing agency and attract your first few clients.

Being a new player in a fiercely competitive game isn't easy, so you should go above and beyond while marketing yourself.

While some of your online promotion can happen organically through search engine optimization (SEO) and word of mouth referrals, you may need to pay for other forms of advertising, such as:

  • Paid advertising. If you use Google Ads to draw in new leads, WordStream's data shows you'll encounter an average cost per click (CPC) of $4.22, though it can vary significantly between industries
  • Email outreach. Email marketing software is quite affordable; you can get started for as little as $5 per month
  • Social media promotion. According to Nutshell's data, the average CPC for paid ads ranges between $0.38 and $5.26 depending on your chosen platform.

You'll also want to take your marketing efforts offline to cover as much ground as possible.

You can use various strategies and tools to find clients and partner with other digital marketing agency owners, most notably:

The best way to cut traditional marketing costs is to avoid emotional decisions when it comes to design and other non tangible aspects.

Stay rational, explore different printing services, and focus on value for money over esthetics.

Salaries and Benefits

Salaries are among the highest ongoing expenses for a digital marketing company.

That said, they're a necessary investment because a high-performing team is crucial to building a profitable business. Your staff directly impacts the quality of your digital marketing services, which determines your agency's reputation and long-term viability.

According to Glassdoor's data, these are the average annual salaries of different team members a typical marketing agency has (as of this writing):

Naturally, these costs will increase as you hire more staff, but not just because of the salaries alone. You may need more equipment or even a larger space if you'll work from a physical location, so don't forget to factor in these implications.

Hiring freelancers might offset some of these costs because you won't need to pay benefits, so it may be a good idea while your business is still young.

According to average digital marketing agency rates ($138 per hour), you should have more than enough to comfortably cover the salaries of full-time employees once your agency matures.

Factors influencing the cost of starting a digital marketing agency

Your agency startup costs can vary significantly depending on several factors. Here are the most impactful ones:

Location

Besides office space costs, your business location can influence various other expenses, like incorporation fees, corporate income tax rates, and utilities.

Richer, more developed countries will also cost more, but you will often also make more money from your clients in these countries.

For example, according to SimplifyLLC's research which encompasses the above factors alongside several others, the most expensive states in the USA to form your digital marketing agencies are:

  1. Minnesota
  2. New York
  3. Louisiana

By contrast, the three cheapest states are:

  1. Nevada
  2. Colorado
  3. Arkansas

Unless you operate from a physical office, you have the flexibility of choosing your state of incorporation, which lets you find the most cost-effective option.

Scale of operations

A typical digital marketer will start small and scale up as new clients start rolling in.

That said, you may want to start a full-service agency from day one, which means you'll need a robust infrastructure and therefore a larger investment.

For instance, a small SEO consultancy isn't too expensive because you don't need many employees or extensive equipment.

But if you throw in web development, graphic design, social media marketing, and content creation, you'll need a varying workforce and many different tools, which multiplies your startup costs and ongoing expenses.

Type of clients and projects

A common dilemma among marketing companies is whether to serve a small number of high-paying clients or cast a wider net by adapting their pricing model to attract more clients on a budget.

This decision doesn't only impact your costs but also the agency's overall profitability, so take your time when making it.

High-paying clients typically demand comprehensive services and intricate projects, which require more resources.

If you have such bandwidth, you can likely enjoy a better profit margin.

Budget clients won't expose you to such high costs, but too many of them might hurt your profitability as you'll overextend your resources for revenue that may not justify the spending.

Marketing activities

Climbing the digital marketing industry is no easy feat and typically requires a trade-off between spending your money and your time.

In other words, you can either boost your digital ad spend to get results more quickly or go with cheaper tactics that might take longer to work.

For example, inbound marketing strategies like SEO and content creation are time-consuming if you do it all yourself, but they're cost-effective.

Paid ads, on the other hand, are quick and easy to set up but require a higher budget.

4 ways to minimize agency costs

While the costs of starting a digital marketing agency can be substantial, there are several ways to reduce them by modifying your business model and making a few financially wise decisions.

Here's how to save up as much as possible while still ensuring your agency starts on the right foot.

1. Work remotely or share office space

Running your agency remotely can potentially save you thousands of dollars per month. Still, remote work comes with a few drawbacks—you won't have a centralized hub or a place for your team members to connect.

It's possible that your clients may want to see you face to face as well.

To avoid these limitations without spending too much on an office, you can opt for co-working spaces.

They give you the best of both worlds by ensuring you have a physical location but can avoid the costs and responsibilities of owning or renting one.

According to Coworker's data, shared office space can be up to 70% cheaper than a traditional office, so you can enjoy substantial savings.

2. Use digital tools

There's no need to pay huge amounts for robust digital tools if you have a small team—you can run successful campaigns with free ones until you're ready to invest more.

The only exceptions are specialized marketing and SEO tools, which will be the heart and soul of your business and are worth the investment.

Everything else—from design to communication and project management—can be done using free platforms, such as:

  • Google Workspace
  • Monday
  • Canva
  • Invideo
  • ClickUp

3. Hire freelancers and contract workers

While you may want to have some full-time employees—like a digital marketing strategist or SEO consultant—you can outsource various tasks to freelancers.

This includes copywriters, social media and account managers, and designers for essential functions.

You can find external collaborators for such positions on freelance platforms like Fiverr and Upwork.

You can also visit job boards and social media groups frequented by freelancers and post your ads there.

By taking this approach, you can only pay for the actual value you receive to avoid overspending on your workforce.

4. Implement organic marketing strategies

When starting your agency, it's crucial to focus on its long-term sustainability and growth.

This includes using organic marketing strategies like SEO that might require patience but can pay off multifold in the long run, especially because of their cost-effectiveness and high ROI.

According to Profitworks, SEO has an average ROI of 275%.

While you won't see these results overnight, a solid base of well-optimized content will keep yielding results for years to come.

Key takeaways

  • Starting a digital marketing business can cost between $730 and $29,100, and your specific startup costs will depend on numerous factors, most notably your business model, location, and scale of operations.
  • Every agency needs a well-designed website that will draw in potential clients. You can take a DIY approach and save money by designing your web pages independently or invest in professional services. The latter naturally costs more but allows you to create a more unique website.
  • Incorporating your business is among the first steps to getting your agency off the ground, and the fees you'll encounter depend on your business structure and location. You'll get more peace of mind by involving an attorney, but their fees can significantly increase your incorporation costs.
  • The choice between a physical office and fully remote work can make a world of difference to your initial and ongoing expenses. You can find the middle ground by implementing a hybrid model and leveraging coworking spaces.
  • Clever digital marketing strategists know how to combine paid with organic marketing efforts. Striking this balance lets you promote your agency without overspending, so leverage different marketing tactics like SEO, Google Ads, content marketing, and traditional strategies.
  • There are various ways to minimize your startup costs without stunting your agency's growth. The most effective ones include using free tools, hiring freelancers for non-critical positions, and reducing the need for a physical office and equipment by working remotely.

Conclusion

Digital marketing is a booming industry, so there's plenty of room for new agencies. While the initial investment might be substantial, it's more than worth it if you establish a high-performing team and find a few A-grade clients.

This likely won't happen right away, though, so be patient and keep spreading the word about your services. After all, it's what you'll be doing for your clients, so trust that you can do it for yourself as well.

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