Start a creative agency by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your creative agency. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a creative agency?
The money you spend is heavily dependent on the image you want to portray to your clients. Technically, much of the work can be done with laptops, a few co-founders, and a coffee shop. However, clients will be looking to work with agencies that have a professional look and feel. When holding meetings with clients, it may be helpful to have a dedicated office space.
Should you decide on an office, you'll need a Certificate of Occupancy (CO). The price of this will vary based on where you open. The CO simply states that the office is safe for those inside and meets building standards, and can be obtained by the landlord owner should you choose to rent.
What are the ongoing expenses for a creative agency?
Owners should prepare for the following expenses:
- Rent/license renewals
- Office electronics/equipment
- Employee salaries
- Website costs
- New technology investments
- Networking expenses (e.g., client lunches, etc)
Who is the target market?
The target market of a creative agency is any company that wants to improve their reputation, connect with customers, and boost sales. Generally (but not always), it’s small to medium businesses that hire creative agencies as they may not have the capital to hire full-time employees. Some creative agencies carve out a niche for themselves, such as only taking on food-related clients.
How does a creative agency make money?
Creative agencies may charge for their services with flat fees on a per project basis. Creative agencies may also choose to charge by billable hours, where everyone involved on projects has their own hourly rate. While fee-based projects may be more attractive to clients (because they’ll know immediately how their budget will be affected), billable hours eliminates the chances that the agency will underbid for a project.
How much can you charge customers?
It all depends on the scope of the project. Much of a creative agency’s billing is trial and error as companies determine just how much work it actually takes to finish a project. Creative agencies can charge as much as $5,000 a month.
How much profit can a creative agency make?
Because you’re not selling a product, you can keep the overhead low. With fifteen clients at an average of $2,000 a month, your agency could be pulling in as much as $25,000 a month (assuming equal profit share.)
How can you make your business more profitable?
Creative agencies can expand by offering advertising services or different marketing services. For example, instead of simply creating the content, creative agencies may want to do public outreach events on behalf of the company.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your creative agency is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a creative agency. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Creative agencies should require clients to sign a services agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership. Here is an example of one such services agreement.
Recommended: Rocket Lawyer makes it easy to create a professional service agreement for your creative agency when you sign up for their premium membership. For $39.95 per month, members receive access to hundreds of legal agreements and on call attorneys to get complimentary legal advice.
Certificate of Occupancy
A creative agency is generally run out of an office. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a creative agency.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your creative agency will be in compliance and able to obtain a CO.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a creative agency
Advertising an agency generally comes in the form of online ads or even physical flyers. If you’re aiming for businesses around town, then you’ll need to establish a local presence by networking at local events. For more national campaigns, you’ll need to invest time and money in SEO tactics to start getting your name out. Until you can generate word of mouth business, being seen in search engine searches will be your best way to spark interest.
How to keep customers coming back
Creative agencies should be aiming to give companies a unifying theme when it comes to their marketing techniques. Keep clients coming back by presenting a strategy that they can implement in every department. Aim to increase the client’s revenue by increasing public awareness of their brand amongst their target demographic.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Creative Agency In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
This business is good for those who spend all day long coming up with ideas. The best entrepreneur will understand that most ideas can not (and should not) ever be brought to fruition, but will still value the process of brainstorming. Also, anyone hoping to get into this business should be comfortable with presenting their work and interacting with a variety of people.
What happens during a typical day at a creative agency?
Each creative agency will have its own rhythm, but most will have the following basic duties:
- Networking with potential clients
- Creative duties (e.g., writing, drawing, etc.)
- Pitching/selling relevant upgrades and new services
- Completing brand books
- Researching target demographics for clients
What are some skills and experiences that will help you build a successful creative agency?
It is not strictly necessary for owners to have any formal skills and experience, though it may be difficult to get started without them. An MBA or a marketing degree may give an owner a head start when it comes to building the business. Even ambiguous degrees like English, Art, or Psychology may be beneficial though, provided you also have some type of real-work experience in a marketing department.
What is the growth potential for a creative agency?
Creative agencies that prove their worth have a lot of room to grow — and small businesses can use all the help they can get. Creative agencies set themselves apart by showing their clients that their work is different, memorable, and effective at communicating a message to the public.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a creative agency?
The best advice successful owners give is to make sure you have something different to say. You need to convince the client that skimping on creative work is actually cheating the business rather than saving them money. Those in this business say that it’s far less about your official qualifications and facilities and far more about how you interact with clients and the ideas you present.
With every piece of new business won, you want to push change whenever possible. Your goal is to find the integrity behind each new product and service of a company, and tie that message into the rest of the branding. Also, be selective about who you choose to work with. You can’t benefit the local economy if you take on projects you’re uncomfortable or unfamiliar with. All clients you do take on should also be expected to sign a contract before beginning the work which states your company's terms of business.
How and when to build a team
It is not recommended that you start a creative agency without at least a few core employees as you'll need a variety of skills to round out the business. It also helps to have others to brainstorm with. Put together a small team to start with. You’re looking for those who share the same mission, but who have different talents that complement the rest of the team. You’ll also need someone organized to be able to take care of the more practical matters of business.