There are really 2 ways to start an ad agency (or any company for that matter). The first is to convince Michael Dell to fork over 4.5 billion dollars and build one from scratch. The second, is to look at what you have in your bank account and what you can muster yourself and go on your own. With the thousands of people that have already been fired / laid off .. the first option isn’t really an option. So I am going to outline how to setup a legitimate business under $2,000 dollars startup and under $500 a month…. everything included… minus the income (you are going to have to earn that with your clients that you will get). Virtually all of the steps that you will see outlined below is ROUGHLY the route I took when I started my firm.
Please note that the way this is written, you need to cover just under $500 dollars a month in expenses just for overhead (not your salary.. just things like phone and rent).. The funny thing worth noting… this part is the easy part.. the hard part comes when you complete all the steps in this process… and you are open for business…
This document will outline some of the steps you will need to go forward with. This isn’t of course “all inclusive” but it should be one hell of a start.
1 – Find your natural strength – it will be a benefit that companies need that other agencies cannot provide or don’t provide. You need to be a NEEDED difference in this recession / great depression part II.
2 – Business Plan – Write down what your firm will be doing, how it will grow, how you will pay your bills, how you will get your clients, if you need help with this the SBA.GOV site is an excellent place to start. I don’t suggest having someone write it for you. The reason is if you are not skilled enough to figure out how to read and write a business plan for your own business… then you really have no business running a business. The directions are clear as day… just use common sense, the SBA.GOV site and Google examples and concepts.
3 – Accounting – SAVE EVERY RECEIPT … every penny that goes out and goes in must be accounted for.. otherwise you’ll be paying taxes on money you never earned… because you didn’t record the expense associated with getting that income. If you choose the Linux route.. you’ll notice about 300 programs there for accounting … all for free…. choose one that makes sense.
4 – File company structure / get bank account / ways to collect money — In my opinion you are a complete idiot if you start a business as a sole proprietorship.. if something goes wrong… someone sues you for anything… they can take your house.. your car.. everything you own or will own… maybe your first born… file some sort of protection for yourself. You might want to consult with a lawyer on this… or do it yourself if you know what you are doing… there are tons of online services that do this.. I myself am not a lawyer.. but examples are LLC structures, Sub Chapter S Corporations.. you need some sort of company structure .. and not just your name out there as a sole proprietorship that screams “please sue me and take my house” …. use Google for the research or call your lawyer.. don’t .. I repeat DO NOT go to step 4 before taking care of this first. It’s imperative that you do this first. The initial costs for this are minimal. I have budgeted $300 dollars for step… it might be more or less depending on your State and if you do it yourself or have a lawyer do it. Please do your homework on the company structure.. there are huge differences in taxation and liability surrounding this. Also worth noting, about now is when your company needs it’s own checking account… shop around for a bank that you trust … also some of your clients may want to pay online rather than via check… considering the stage in life you are in… we suggest paypal… you’ll want to revisit this later in life when you grow.. but for now it’s your lowest cost entrance to collecting funds online via credit card. Sign your bank account and paypal account under your new LLC / whatever company structure you choose name. You are no longer John Doe… you are “whatever company, LLC” moving forward.
5 – Pick a location, you need to report to work.. even if it’s just yourself. Some people disagree and say working from home is fine. I STRONGLY disagree… companies won’t take you seriously if you meet and greet them in your kitchen… Show some effort and risk on your part.. Contact your local Realtor or search online (even the local classifieds) to see what offices are up for occupancy. In a mid-sized city of about 100,000 – 300,000 people… and due to the current economy.. you should be able to find a clean, safe 1 room office in the neighborhood of a few hundred dollars a month where low cost High Speed Internet is available for your… in 2005 (in the middle of the housing boom) I found a clean single office location in a good part of town (Philadelphia Metro Area) for under $300/month… last I heard that office is going for $200… It wasn’t the Taj Mahal but it was clean and respectable for clients to come in and see. Some of my very first clients I met there… Sign your lease under your new LLC / whatever company structure you choose name. You are no longer John Doe… you are “whatever company, LLC” moving forward.
6 – Bandwidth – You cannot run a modern office without a high speed internet connection… in fact based on this plan.. your phones won’t even work without it. We suggest high speed Cable… the bandwidth peaks at about 20 Mbps… plenty fast for a small (or even mid sized office).. the plans start off at about $80/month… (again depending on your location and service provider). DSL is much slower when you factor in step 6. Again, Sign your bandwidth agreement under your new LLC / whatever company structure you choose name. You are no longer John Doe… you are “whatever company, LLC” moving forward.
7 – Phones – I can’t stress this enough… if you grow.. their will be hell to pay if you get the wrong phone system… an IVR system will cost you thousands… Use Voice over IP.. I selected Packet8 for my services… it has everything you need (like transferring extensions)… plus as you grow and add extensions.. you are going to be much better off.. a basic phone costs about 150 dollars… and 50 bucks a month for unlimited usage (25 for metered.. as in 300 minutes a month) as of last year .. you’ll want the unlimited (more on that later).. but please shop around… I strongly suggest NOT to call your local telephone company for this… they are still on some sort of retro time warp in terms of pricing and features.. (all the bills, none of the services). I strongly suggest NOT to start off your company using your cell phone as your only number… 5 years down the line.. you’ll have 200 employees.. and you’ll still have people calling your personal cell phone. There is nothing wrong with that other than the need to separate your personal life and work… trust me on this.. your husband / wife / kid will thank you for taking this step now. Again, Sign your phone system under your new LLC / whatever company structure you choose name. You are no longer John Doe… you are “whatever company, LLC” moving forward.
8 – Computers – Ok… this is where it really is nonstandard for many in the work environment.. this isn’t 1985 .. and Microsoft Windows or Apple isn’t the only place you can get what you need. In fact going down the route will lead to disaster in the long run in my opinion. Get yourself a machine with enough horsepower budgeting $400 … and try to get it with Ubuntu Linux (or any Distro).. there is a valid reason for this.. really valid. Linux has been with us for a long time… but recently in the past few years.. it has made some serious inroads into the desktop environment and for good reason.. it’s easy to use, stable and 100% free… literally free.. but the OS isn’t what makes it cool.. it’s this neat “add and remove programs”…that literally goes out.. grabs new programs for you free of charge.. and installs them.. like a photo shop competitor called the gimp (saving you $1,800 dollars) or open office instead of Microsoft Office… (saving you about $500 dollars) or awesome video editing software for free (there are at least 40 differing programs like that… select whatever makes sense for you)… saving you at least $1,299.00 dollars .. as that is what Final Cut Pro costs currently. Yes there are Windows versions of many (but not all) of these programs… but the point is that Linux is geared towards this… it’s sort of running native when they run on Linux.
Total Saved by taking this route rather than a Apple or Windows Machine? At least $4,000 dollars per desktop..
9 – Office Furniture – This is where you need to really think about it… head to store that sells simple and low cost office furniture … and use that for now. You’re talking 100 bucks for your desk.. 100 bucks for your chair… another 50 bucks for a small filing cabinet and some cubbies to put your stuff in. Remember you are starting out… this is an area that you can save some money (within reason.. don’t buy something that will break on you in a week… and make sure you buy a chair that has proper support.. you’ll thank me for that later as well).
10 – Your initial marketing budget. This is perhaps the most interesting part.. see … the reason I wanted you to get that phone with unlimited calling…. was because that IS part of your marketing budget… you better be announcing yourself to everyone that you view as a potential client… also.. you need a website… .. you really need a website… a domain name can be purchased for as little as 8 bucks year.. and 5 bucks a month for hosting… this is a MUST have… the total cost is 68 bucks for your first year… .. it could be as simple as a wordpress.org blog …. You of course need a website and e-mail address to go on your business cards… that I budgeted $100 bucks for your business cards… you need something professional to hand out to people… on good paper… and done right.. business cards are the one of the lowest cost physical forms of marketing available. Virtually all webhosting plans come with a branded e-mail address…. marketing@example.com and sales@example.com and john.doe@example.com … you can make as many e-mail addresses as you want…. just don’t make a nightmare for yourself… design site as if you were not a tiny startup company.. but make your site look like what you WANT your firm to be 5 years from now. It will make you look more legitimate to your potential clients. There are about a million themes you can download for your wordpress website… find something that works for you.
11 – Unexpected things – Nothing every goes according to plan … I budgeted nearly 800 dollars in this for your personal needs — perhaps you need a killer printer — fax machine — whatever… the point is that there is money there for you (nearly 800 dollars) that could be allocated to your $100 dollar printer.. and $50 dollar fax machine or your city “employment tax of 50 bucks”.. whatever you need… and whatever we can’t plan for not knowing your business model and specific business needs. I would also consider looking into insurance for your business.. everything from renters insurance if a fire breaks out in your building to “if someone sues me” insurance… some areas require it.. some don’t… but it is suggested… I would be unsure of the fees for this… so do your homework and what you feel is right.
Total costs Monthly:
Your own Physical office location – $300/month
Voice over IP phone (unlimited) – $50/month
High Speed Internet Access – $80
hosting – $60 (5 dollars a month * 12 months)
One Time –
phone $150
Company structure (LLC, Inc, Etc) / $300
Computer – $400
Furniture – $250
domain – $8
business cards – $100
Unexpected costs – $792
Total One Time : $1,208 (planned) $2,000 (including the $792 buffer for unexpected charges)
Total Monthly : $435
Now honestly this might or might not match your needs… this is just a guide that you may choose or not choose to follow… or take bits of it.. and put in your your own flavor and costs… but the plan above clearly gets you in an office, with a desk and chair, a phone, internet access, computer, business cards, a website, branded e-mail address and even a rudimentary marketing plan…. the only thing missing now is your source of income (new clients) and what exactly are you going to do to earn their money……. in essence.. it’s your turn to fill in the blanks.
I think this article is very well put
I think this article is very well put
You have a good detailed article. I would like to know a few things please.How do you approach large newspapers, direct mail companies, yellow pages,etc.. and determine the agency rate for new clients? What if the client already advertises with that media at the “lowest rate”possible. How would you make money? I am considering “going on my own.” Your help is appreciated.
You have a good detailed article. I would like to know a few things please.How do you approach large newspapers, direct mail companies, yellow pages,etc.. and determine the agency rate for new clients? What if the client already advertises with that media at the “lowest rate”possible. How would you make money? I am considering “going on my own.” Your help is appreciated.
FYI.. the “lowest rate possible” is NEVER the lowest rate possible…. if you show up at a media outlet.. and say I have a client that is considering advertising in your media platform (paper, yellowpages, direct mail) … I need to an agency discount or else I will suggest them going somewhere else…
it’s the great recession out there… they will take almost anything if it’s more expenseive than the ink they print it on.
that being stated.. I wouldn’t focus too much on your business with media buys.. spend more of it (and get your name out for) creative work… the problem with media buys is that honestly it can be automated…. such as Google Adwords + ad planner.. or a future version of both can theoretically put you out of business.
Creativity… that can’t be substituted by a machine…
FYI.. the “lowest rate possible” is NEVER the lowest rate possible…. if you show up at a media outlet.. and say I have a client that is considering advertising in your media platform (paper, yellowpages, direct mail) … I need to an agency discount or else I will suggest them going somewhere else…
it’s the great recession out there… they will take almost anything if it’s more expenseive than the ink they print it on.
that being stated.. I wouldn’t focus too much on your business with media buys.. spend more of it (and get your name out for) creative work… the problem with media buys is that honestly it can be automated…. such as Google Adwords + ad planner.. or a future version of both can theoretically put you out of business.
Creativity… that can’t be substituted by a machine…
Hi,
Thanks for your article.
I’m considering going it on my own. I have twenty years of big agency experience in several major markets as an AD/CD.
I have two questions:
1. How do you get accounts?
2. Where/how do you find business partners (ie., an account planner, an AE, etc)?
thnx
-c
Hi,
Thanks for your article.
I’m considering going it on my own. I have twenty years of big agency experience in several major markets as an AD/CD.
I have two questions:
1. How do you get accounts?
2. Where/how do you find business partners (ie., an account planner, an AE, etc)?
thnx
-c
Christopher,
It’s the hardest part… getting accounts… generally we rank well online.. so we get large amounts of leads online… but you’re going to have to use some of the social media tools… become an expert on linkedin for example…
use your contact list… do everything you can to scrape up a lead…
Christopher,
It’s the hardest part… getting accounts… generally we rank well online.. so we get large amounts of leads online… but you’re going to have to use some of the social media tools… become an expert on linkedin for example…
use your contact list… do everything you can to scrape up a lead…
Christopher:
It’s not easy at all. Your big agency experience might give you problems as you probably are used to the big, national accounts.
You have to treat this as you would a freelancing position. Go to your local retailer/jeweler/shoe store and ask them if they need a web site/flier/brochure etc. You will be surprised how many small shops will need that. Also, contact your local newspaper, walk into a printer and ask them if they need someone to put together artwork for their client. Lot of printers are asked if they can help with creative work. The founder’s suggestion is also excellent to follow. As far as partners is concerned, Craigslist would be a good start, but again, use Linkedin and other social networks available.
Good Luck.
Christopher:
It’s not easy at all. Your big agency experience might give you problems as you probably are used to the big, national accounts.
You have to treat this as you would a freelancing position. Go to your local retailer/jeweler/shoe store and ask them if they need a web site/flier/brochure etc. You will be surprised how many small shops will need that. Also, contact your local newspaper, walk into a printer and ask them if they need someone to put together artwork for their client. Lot of printers are asked if they can help with creative work. The founder’s suggestion is also excellent to follow. As far as partners is concerned, Craigslist would be a good start, but again, use Linkedin and other social networks available.
Good Luck.
All good info.. I actually use to run a newspaper. Closed it a few months ago. I’ve worked in advertising for ten years and now looking at starting an ad agency/marketing consultant. But I want to deal with the smaller companies. Not national. Whats your opinion on going after that clientele. These are the ones who normally pay the most in advertising and have little knowledge how to effectively use it. I think there is a good market for this but not sure on how to price the work. I’m thinking of a monthly fee for so many hours a month. So basically what i’m asking is what do you think about the clientele i’m thinking of going after and how should I charge and how much. Any other info would be great.
All good info.. I actually use to run a newspaper. Closed it a few months ago. I’ve worked in advertising for ten years and now looking at starting an ad agency/marketing consultant. But I want to deal with the smaller companies. Not national. Whats your opinion on going after that clientele. These are the ones who normally pay the most in advertising and have little knowledge how to effectively use it. I think there is a good market for this but not sure on how to price the work. I’m thinking of a monthly fee for so many hours a month. So basically what i’m asking is what do you think about the clientele i’m thinking of going after and how should I charge and how much. Any other info would be great.
Your article was great – I always enjoy the laymen version.
I had two questions I wanted to get others take on:
1) I was wondering if you or anyone would suggest using any of the websites that aide in incorporating (LLC) (legal zoom) or whatever other ones that are out there. I want to start my own ad agency but I’m not sure if its quite necessary to go to a lawyer or if it would actually be worth it later on?
2) I want to suggest an innovative way to advertising, I would need approval of the customer in order to develop the project, but I don’t want to pitch them an idea and them go to another ad agency to develop it. This would be my first experience as an ad agency and really the sole purpose of incorporating.
The idea would work best with large fortune 500 companies and the like – paying for add space. Since I think it would be much harder for me (as the only employee) to speak with them (due to my limited connections and lack of experience), should I attack it as a joint venture and include a large marketing or ad agency to do most of the work, but I hold the right to the contract? Does this make sense? As far as the customer, how should I pitch it to them that they should give me the contract – if I do speak with them should I make them sign a non-disclosure agreement, am I allowed to do that? I just don’t want to suggest a really good idea and then they use it with another ad agency, because I’m inexperienced.
Any help or suggestions is greatly appreciated. Thanks all.
Your article was great – I always enjoy the laymen version.
I had two questions I wanted to get others take on:
1) I was wondering if you or anyone would suggest using any of the websites that aide in incorporating (LLC) (legal zoom) or whatever other ones that are out there. I want to start my own ad agency but I’m not sure if its quite necessary to go to a lawyer or if it would actually be worth it later on?
2) I want to suggest an innovative way to advertising, I would need approval of the customer in order to develop the project, but I don’t want to pitch them an idea and them go to another ad agency to develop it. This would be my first experience as an ad agency and really the sole purpose of incorporating.
The idea would work best with large fortune 500 companies and the like – paying for add space. Since I think it would be much harder for me (as the only employee) to speak with them (due to my limited connections and lack of experience), should I attack it as a joint venture and include a large marketing or ad agency to do most of the work, but I hold the right to the contract? Does this make sense? As far as the customer, how should I pitch it to them that they should give me the contract – if I do speak with them should I make them sign a non-disclosure agreement, am I allowed to do that? I just don’t want to suggest a really good idea and then they use it with another ad agency, because I’m inexperienced.
Any help or suggestions is greatly appreciated. Thanks all.
Quick Answers : 1 – each state has differing laws.. you really need to research this before moving forward with your company structure.. generally there are two adopted structures that many smaller ad agencies take.. a Sub Chapter S corp.. and an LLC … but please check with your host state on the rules… the SBA.gov site might help with this.
2 : At first.. you’re going to have to get the short end of the stick… and just work as a subcontractor for firms that already have relationships… you don’t have the contacts.. and they do… hence the barrier to entry… you’ll keep getting miffed seeing them bill you out at $200 dollars an hour… and you get $20 of it.. and then make you wear their T-Shirt at company meetings with the client.. . but just keep doing the best you can.. eventually people will start to notice… and clients will to… at one point one of those people will contact you directly.. and you get in…
Quick Answers : 1 – each state has differing laws.. you really need to research this before moving forward with your company structure.. generally there are two adopted structures that many smaller ad agencies take.. a Sub Chapter S corp.. and an LLC … but please check with your host state on the rules… the SBA.gov site might help with this.
2 : At first.. you’re going to have to get the short end of the stick… and just work as a subcontractor for firms that already have relationships… you don’t have the contacts.. and they do… hence the barrier to entry… you’ll keep getting miffed seeing them bill you out at $200 dollars an hour… and you get $20 of it.. and then make you wear their T-Shirt at company meetings with the client.. . but just keep doing the best you can.. eventually people will start to notice… and clients will to… at one point one of those people will contact you directly.. and you get in…
HI SIR MY NAME IS GURUNATH IAM FROM BANGALORE I HAVE COMPLETED BSC (COMPUTER SCIENCE) I LOOKING FORWARD TO START MY OWN AD AGENCY BUT BEFORE THAT I WANT TO TAKE ANY SHORT TIME COURES IN ADEVRTISING CAN U GUIDE WHICH COLLEGE IS GOOD FOR ADEVRTISING IN MUMBAI ARE PUNE FIRST I WANT TO TAKE THEN AFTER I WANT TO WORK IN TH E AD AGENCY BECAUSE WITHOUT EXP GOING IN ANY FEILD IT DOES NOT MAKE ANY SENSE RIGHT SIR SO I WANT I ALSO I WANT TO KNOW HOW IS THE FUTURE IN AD AGENCY AND ALSO IN ABROAD AND I WANT TO KNOW STARTING A SMALL AD AGENCY HOW MUCH IT WOULD COST AND WHICH CITY IS GOOD FOR STARTRING AN AD AGENCY I WOULD LIKE ASK ONE QUESTION CAN U TEL ME SIR IF IM STARTING MUY AD AGENCY HOW MUCH I NEED TO INVEST SIR PLS PLS HELP ME IM REALLY LOOKING VERY FORWRD ABT MY GOAL BECAUSE MY AMBITION IS TO BECOME AN BIG BUSINESS MEN I WANT TO RECOGNISE MY SELF IN THIS THE BUSINESS WORLD PLS HELP ME OUT IM EGAERLY WAITING FOR YOUR REPLY SI R
HI SIR MY NAME IS GURUNATH IAM FROM BANGALORE I HAVE COMPLETED BSC (COMPUTER SCIENCE) I LOOKING FORWARD TO START MY OWN AD AGENCY BUT BEFORE THAT I WANT TO TAKE ANY SHORT TIME COURES IN ADEVRTISING CAN U GUIDE WHICH COLLEGE IS GOOD FOR ADEVRTISING IN MUMBAI ARE PUNE FIRST I WANT TO TAKE THEN AFTER I WANT TO WORK IN TH E AD AGENCY BECAUSE WITHOUT EXP GOING IN ANY FEILD IT DOES NOT MAKE ANY SENSE RIGHT SIR SO I WANT I ALSO I WANT TO KNOW HOW IS THE FUTURE IN AD AGENCY AND ALSO IN ABROAD AND I WANT TO KNOW STARTING A SMALL AD AGENCY HOW MUCH IT WOULD COST AND WHICH CITY IS GOOD FOR STARTRING AN AD AGENCY I WOULD LIKE ASK ONE QUESTION CAN U TEL ME SIR IF IM STARTING MUY AD AGENCY HOW MUCH I NEED TO INVEST SIR PLS PLS HELP ME IM REALLY LOOKING VERY FORWRD ABT MY GOAL BECAUSE MY AMBITION IS TO BECOME AN BIG BUSINESS MEN I WANT TO RECOGNISE MY SELF IN THIS THE BUSINESS WORLD PLS HELP ME OUT IM EGAERLY WAITING FOR YOUR REPLY SI R
The start up tips are good. Once you get started, what is the best online meduim to use to advertise for clients?
The start up tips are good. Once you get started, what is the best online meduim to use to advertise for clients?
I would always advertise in like mediums, if you do SEO, then rank well, if you do PPC.. then advertise your business in PPC, if you do print.. then take out print ads.. you have to practice what you preach
This is exactly true I write commercial spots for media in Boston Ma, I find that the most difficult part of owning an advertising agency is educating the customer on what they need to do first.I have an orientation that explains step by step how to explore your business needs and what you want to project to the public aswell as the budget you can afford. People want the million dollar ads for 100 bucks and it does not work like that. If you want the best you have to be prepared to finance your advertising prject properly. Ryan Gordon 617-901-5563
I enjoyed reading this post very much!
The only thing I might be able to add is when I started my first business some time ago, I first used phone power. I think I paid $200 for two years, for two lines! It even had music on hold and transfer abilities.
I also agree with your post on filing an LLC. The problem is most people file a DBA because 1) its cheaper – $100 at most in NY County Clerk and 2) its quick. Anyone can file a DBA, have it stamped and open a bank account for the DBA all on the same day. If your starting an LLC, one can expedite the process but it will be very costly, one will need to wait for necessary documents and lets not forget about the Employer Identification Number compared to a DBA which goes by the owners Social Security Number. The lesson that needs to be learned here is “things that require less effort, probably offer less in return”
When I first opened my first business, we found a company going out of business on craigslist that gave away free office furniture. This might help those on a budget.
Good report, crazy irish millionaire did it on ebay
This was a stupid article. I’ve been successfully employed in the ad development business for years, and it had nothing to do with advertising.
This was just a generic how to set up a small business, and kind of a push to a Linux operating system, which no one really uses except computer savvy people, whom already have a computer. If you’re starting business like this, the last thing you want to get bogged down in is using a computer’s operating system.
What a fucking was of time!! Really? You need a business plan, office, phone, bank account? Who doesn’t know that? This is the type of article that……ohhhhhhhh, forget it!
Another good tip would be to look up your local SBDC ( a branch of the SBA ) and become a client – it’s all free (paid for by the state and/or sponsoring university). They can answer most of your start up business questions. Also check your state laws if you need to register your business name. Ex: in PA if your business name is not the last name of the founder and a description of the business (ex: smith plumbing) then you’ll need to file a ficticious name request. If you are incorporating this is usually included in the begining forms. Then you’ll need to place two ads in local papers to announce your business.
I just stumbled onto this…
I’ll admit that it is a good outline on how to start a business, but please, for the love of god, don’t consider yourself a “professional” if you’re using GIMP, inkscape, and scribus. They might be fine for creating graphics for the web and screen based display world, but I’d really love to see someone create a CMYK image in GIMP. (which doesn’t support CMYK) Or assign two pantone spot colors to a logo designed in inkscape. (which also doesn’t support CMYK, or spot colors.) A professional Ad agency will most likely find a decent amount of print work, and without having the proper tools…well, you’re not really a professional. This is the industry I’m in, and ever since Fred’s nephew figured out how to download photoshop, the design industry in general has been degraded. I might have a cheap power drill and a hammer, but I’m not going to claim I’m a contractor and try to build a house…
Hi , came across this article, quite detail.Would say it great.