business plan ad agency

How to Start an Advertising Agency in (2024): A Step By Step Guide

Free Advertising Agency Business Plan Template

• Vinay Kevadia
• January 3, 2024

Ever dreamt of turning your creative spark into a thriving business where your ideas not only catch attention but bring success to businesses?

Yes, the world of advertisements, the world of social media, and engaging videos grab the attention of customers from across the country too. The industry whose revenue was more than $65 billion in 2022.

If the idea of starting your own advertising business intrigues you, this guide is your pathway on how to start an advertising agency . Ready to explore and bring your vision to life? Let’s get started!

A Complete Guide to Starting an Advertising Agency

• Choose the name of your advertising agency
• Mention the type of agency you want to open
• Develop a business plan
• Choose the location
• Register your business
• Choose your pricing model
• Open a business bank account & get a credit card
• Get all required business permits and licenses
• Acquire business insurance
• Buy or lease equipment for your agency
• Get funding for your advertising agency
• Plan your marketing and advertising strategy
• Develop a team

1. Choose the name of your advertising agency

A business name is meant to reflect the vision and values of your business. Therefore, keep it creative yet simple so that people can easily remember it.

Consider your target audience, the USPs of your ad agency, and future services you might provide, before deciding on any name. As it should be in sync with all of the above.

Once you have your name, you should check the availability of the name for social media profiles and websites before getting too attached to it.

Also, check if it’s trademarked from the website of the US Patent and Trademark Office .

2. Mention the type of agency you want to open

There are various types of advertising agencies mention which one of the types you will open. For example, your business type might be one of the below:

Digital Ad Agency

These types of agencies focus on digital marketing services which include social media marketing, SEO, digital advertising, and redesigning your website.

Creative Advertising Agency

Creative agencies specialize in designing slogans, advertisements, compelling creative content, and other such copies.

Content Marketing Agencies

These type of firms concentrates only on producing content pieces like blog posts, videos, podcasts, articles, etc to advertise a product or service.

In-house Agencies

They operate within a company and manage all the marketing needs of the company.

Other than the above main categorization, there are various other types of agencies too, but decide which one you will launch after knowing your target audience.

3. Develop a business plan

Starting an advertising agency is not like eating a piece of cake easily. It requires careful planning and constant guidance to be successful. To accomplish this; an advertising agency business plan can be your roadmap.

But do you wonder what a business plan includes? Here are some elements:

• Executive summary
• Business description
• Market analysis
• SWOT analysis
• Services offered
• Business structure
• Sales and marketing strategy
• Financial projections
• Risk management plan
• Exit strategy

To write all these sections with precision requires long hours, attention to detail, and constant effort.

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4. Choose the location

An attractive location is essential to meeting clients and persuading them about why they should hire you. Plus, it provides a brand image for your business.

Apart from that, certain places are well-known for having a strong presence in the advertising and marketing industry. These areas have a lot of agencies & media outlets. Being in such a hub can offer your own agency chances to connect with others.

You can even choose to work from your home’s basement or somewhere else where you meet your clients online and hire freelancers to work for you. This is a cost-effective way of starting your agency.

5. Register your business

After knowing the name & location of the company, it is now time to indulge yourself in the legal requirements and documentation for your own advertising agency.

Here is how you register your agency:

Select the business structure

First things first, before registering you need to decide on the business structure of your advertising agency. A business’s liability, taxes, filing fees, maintenance, and other regulations depend on the business structure you choose.

There are various business structures for advertising agencies, they are:

• Sole proprietorship
• General partnership
• Limited liability company
• Limited partnership
• Corporation

Go for a registered agent

All LLCs and corporations are required to appoint a registered agent. A registered statutory agent accepts and promptly responds to legal mail and official communication on behalf of your agency.

The registered agent can be a person or an agency with a physical address in the US state so that they can receive legal documents on your behalf.

Register with the state & obtain business EIN

Register your advertising agency with your state’s Secretary’s office. The process and requirements vary by state. You may need to file articles of incorporation or organization for LLCs or corporations.

Apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This is a unique identifier for your business and is needed for tax purposes.

Apply for tax registration

Register with the appropriate tax agencies for federal and state taxes. This includes sales tax, income tax, and employment taxes if you have employees.

Business registration requirements differ state by state which is why having a registered agent by your side will help you get through the process without any hustle.

6. Choose your pricing model

Before setting up the prices, identify all the costs of your advertising agency. Then understand your value proposition and what unique you will provide to your clients to finalize your pricing strategy.

Generally, advertising agencies make money by brainstorming and developing new ideas for various other companies including advertising campaigns, content pieces, and social media ad campaigns.

The pricing model for your ad agency depends on the type of services you provide. You need to decide whether you will charge per hour, per project, or for collective service hours.

7. Open a business bank account & get a credit card

Opening a bank account under the name of an advertising agency is necessary for the personal asset protection of the owners.

Therefore, in however much hurry you are to open your business the next day, do not forget to set up a different bank account.

Open a bank account

A business bank account keeps your personal and business expenses separate while making the accounting and business tax filing process much easier.

You will need an EIN, some personal documents, and business licenses to open a business bank account.

Get a business credit card

A business credit card can help you create a strong credit history for your business which ultimately supports you in getting small business loans or grants.

Keep in mind a credit card is a must-have for a business’s financial stability.

8. Get all required permits and licenses

You can not one day randomly start your advertising agency, you will need licenses and permits, of course, to get started. Here are some of the licenses and permits to have for advertising agencies:

Business License

Obtain a general business license from the local city or county government. Then check with local authorities about other requirements.

State-specific business permits

Some states may have additional requirements or permits for advertising businesses. Check with your state’s business regulatory agency to ensure compliance.

Home occupation permit

If you are going to start your online advertising agency from your home, then you have to obtain this home occupation permit.

Professional licenses

You will need a professional license depending on the nature of your advertising services. Check with relevant professional associations or licensing boards and apply accordingly.

9. Acquire business insurance

Business insurance offers protection against financial losses, helps you manage risks, and focuses on growing your business.

Before getting insurance for your business, you need to understand the specific risks for your business such as property damage, liability claims, etc.

Considering the risks you might face; choose the type of business insurance wisely.

10. Buy or lease equipment for your agency

For providing advertising agency services, one might generally need a good internet connection, laptops, cameras, etc for minimal operations.

If you are just starting a venture, then leasing equipment is a better option. This approach helps in cost reduction and provides you with more flexibility.

11. Get funding for your advertising agency

In the advertising agency business plan above, you might have thought about the funding options. Now, here is the time when you actually go out for funding.

Various funding options for funding for advertising agencies are:

• Bootstrapping
• Family and friends
• Credit card financing
• Crowdfunding

If you are going to go for third-party funding options, then make sure your business plan says everything about your company in an engaging way.

12. Plan your marketing and advertising strategy

For a successful advertising agency, you need proven marketing strategies. Major advertising agencies fail to plan their marketing strategies before starting their businesses.

Here is a tip: start making a buzz about your agency even before the start on all social media platforms, and you will at least get brand recognition.

Being an advertising agency, you need to make sure to keep your marketing strategy top-notch to attract clients and get the desired reach.

You can join an advertising association, do social media & content marketing, and showcase all your USPs.

13. Build a team

One of the final & important steps for starting an advertising agency is building a team. Find certain people for your team that have the same enthusiasm & passion about the agency as you are.

Your team might include, content writers, graphic designers, creative managers, etc.

By now you must have a pretty clear idea about starting an advertising agency. So let’s take a first step and translate your business idea into an actionable business plan.

Writing your plan will ensure no oversight in business planning and you get a direction for your business. You can use this advertising agency business plan sample to make your business planning process easier.

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Frequently Asked Questions

Can i start an advertising agency from home.

Absolutely. You can start your new advertising business from home with minimum investment. You can hire freelancers and work in co-ordination on all the projects.

Do ad agencies make money?

Usually, ad agencies take their cut from the total marketing spend of their clients. It is around 20-15%. So, of course, marketing agencies earn and they earn good once they start retaining clients.

Is it hard to run a marketing agency?

Like any business, at the start, it is going to be difficult to convert interested people into clients. It will need strong communication, great leadership, and unique offerings. But once you start getting clients and delivering results, then it will skyrocket.

What are some common challenges faced by a new business in the advertising industry?

Some of the few challenges a new business faces while starting an ad agency are:

• Budget constraints
• High competition
• Scalability
• Relying on only one marketing channel
• Creative differentiation
• Technology disruption
• Talent retention

About the Author

Vinay Kevadiya

Vinay Kevadiya is the founder and CEO of Upmetrics, the #1 business planning software. His ultimate goal with Upmetrics is to revolutionize how entrepreneurs create, manage, and execute their business plans. He enjoys sharing his insights on business planning and other relevant topics through his articles and blog posts. Read more

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Reach Your Goals with Accurate Planning

Advertising Agency Business Plan Template

Written by Dave Lavinsky

Over the past 20+ years, we have helped over 1,000 entrepreneurs and business owners create business plans to start and grow their advertising agencies. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through a advertising agency business plan template step-by-step so you can create your plan today.

Download our Ultimate Business Plan Template here >

What Is an Advertising Agency Business Plan?

A business plan provides a snapshot of your advertising agency business as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan for Your Advertising Agency

If you’re looking to start a advertising agency, or grow your existing ad agency business, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your advertising agency business in order to improve your chances of success. Your advertising agency business plan is a living document that should be updated annually as your company grows and changes.

Sources of Funding for Advertising agencies

With regards to funding, the main sources of funding for a advertising agency business are personal savings, credit cards, bank loans and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the advertising agency will not only want to confirm that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business. Personal savings and bank loans are the most common funding paths for social media marketing businesses.

Finish Your Business Plan Today!

How to Write a Business Plan for an Ad Agency

If you want to start an advertising agency business or expand your current one, you need a business plan. Below are links to each section of your advertising agency business plan template:

Executive Summary

Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of advertising agency you are operating and the status. For example, are you a startup, do you have an advertising agency that you would like to grow, or are you operating a chain of advertising agencies?

Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the advertising industry. Discuss the type of advertising agency you are operating. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing plan. Identify the key members of your team. And offer an overview of your financial plan.  

Company Analysis

In your company analysis, you will detail the type of advertising agency you are operating and your business model.

For example, you might operate one of the following types of advertising agencies:

• Full-Service Advertising Agency : this type of ad agency performs a variety of client services including digital, traditional, social media, radio and print advertising campaigns.
• Digital Advertising Agency: this type of ad agency focuses on digital marketing and advertising; social media marketing, email marketing, content marketing, web design, and SEO.
• Traditional Advertising Agency: this type of ad agency specializes in traditional marketing and advertising campaigns in ways such as radio and television commercials, billboards, magazines, and newspapers advertisements.

In addition to explaining the type of advertising agency business you will operate, the Company Analysis section of your business plan needs to provide background on the business.

Include answers to question such as:

• When and why did you start the business?
• What milestones have you achieved to date? Milestones could include the number of customers served, number of positive reviews, revenue generated from advertising campaigns, etc.
• Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry analysis, you need to provide an overview of the advertising agency industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the advertising agency industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your strategy, particularly if your research identifies market trends.

The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your creative agency business plan:

• How big is the advertising agency industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key suppliers in the market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential market for your advertising agency business? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

Customer Analysis

The customer analysis section of your advertising agency business plan must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: start-up companies, large corporations, small businesses and non-profit organizations.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of ad agency business you operate. Clearly, a well-established business looking to expand operations would respond to different marketing promotions than a small start-up, for example.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations and income levels of the customers you seek to serve. Because most advertising agencies primarily serve customers living in their same city or town, such demographic information is easy to find on government websites.

Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.

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Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other advertising agencies.

Indirect competitors are other options that customers have to purchase from that aren’t direct competitors. This includes marketing agencies, graphic designers and freelancers.

With regards to direct competition, you want to describe the other advertising agencies with which you compete. Most likely, your direct competitors will be house flippers located very close to your location.

For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:

• What types of customers do they serve?
• What types of advertising do they specialize in?
• What is their pricing (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

• Will you provide a wider variety of advertising services?
• Will you provide more team support?
• Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.  

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a advertising agency business plan, your marketing plan should include the following:

Product : In the product section, you should reiterate the type of advertising agency company that you documented in your Company Analysis. Then, detail the specific products you will be offering. For example, in addition to advertising services, will you include public relations and/or social media management services as well?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the services you offer and their prices.

Place : Place refers to the location of your advertising agency company. Document your location and mention how the location will impact your success. For example, is your advertising agency business located in a busy retail district, a business district, a stand-alone building, etc. Discuss how your location might be the ideal location for your customers.

Promotions : The final part of your advertising agency marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:

• Advertising in local papers and magazines
• Reaching out to local websites
• Social media marketing
• Local radio advertising

Operations Plan

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your advertising agency business, including marketing your services, obtaining new clients and launching new services.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to have X number marketing campaigns completed, or when you hope to reach $X in revenue. It could also be when you expect to expand your business to a new city.  

Management Team

To demonstrate your advertising agency business’ ability to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally you and/or your team members have direct experience in managing advertising agencies. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in overseeing advertising campaigns or successfully running their own advertising agency.  

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.

Income Statement : an income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you obtain two new clients per month or five? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets : Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your advertising agency business, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement : Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt.

In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a advertising agency business:

• Location build-out including design fees, construction, etc.
• Cost of equipment and supplies
• Payroll or salaries paid to staff
• Business insurance
• Taxes and permits
• Legal expenses

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your office location lease or sample advertising campaigns.  

Putting together a business plan for your advertising agency is a worthwhile endeavor. If you follow the template above, by the time you are done, you will have an expert ad agency business plan; download it to PDF to show banks and investors. You will really understand the advertising agency industry, your competition, and your customers. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful advertising agency business.

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