Setting up a digital marketing agency includes far fewer complications compared to other businesses. However, like every business, you would require an initial investment to fund the digital marketing startup.
The question that lingers in your mind is: How much does it cost to start a digital marketing business?
Well, we have an answer for you. While you map out your business plan, let
us give you a detailed breakdown of digital marketing startup costs.
Not only that, we will discuss in detail the factors influencing the costs and some effective ways to bring down the initial costs.
Let’s get started.
What is the cost of starting up a digital marketing business?
The average cost to start a digital marketing agency in the USA spans between $23,400- $69,400. However, the costs can soar high up to a hundred thousand dollars for setting up a full-fledged large-scale digital marketing agency.
According to a report by HubSpot, a digital marketing business will reward you with lucrative profit margins of 20-30%. As you scale and gather expertise, the agency holds the potential to earn profit margins of up to 50-60%.
Average costs for starting a digital marketing business
Before we dive into details, check out this digital marketing business cost checklist. It will help you plan your startup budget and know how much financing you need to get started.
| Item | Average Cost |
|---|---|
| One-time Expenses | |
| Lease deposits | $3,000-$8,000 |
| Office furniture and remodeling | $2,000-$10,000 |
| Computer hardware | $3,000-$7,000 |
| Network system(router, wi-fi hubs, etc.) | $500-$1,000 |
| Annual software subscriptions | $500-$5,000 |
| Website setup | $500-$5,000 |
| Pre-launch marketing | $2,000-$3,500 |
| Business registration | $50-$500 |
| Licenses and permits | $50-$700 |
| Annual Insurance | $500-$2,000 |
| Annual professional services | $1,000-$3,000 |
| Total One-Time Expenses | $13,100-$45,700 |
| Recurring Expenses (Per Month) | |
| Payroll | $8,000-$15,000 |
| Rent | $1,000-$5,500 |
| Utility bills | $800-$1,200 |
| Marketing budget | $500-$2,000 |
| Total Recurring Expenses | $10,300- $23,700 |
| Total | $23,400-$69,400 |
Using this digital marketing business startup cost checklist, you can plan your startup budget and get an idea of how much financing you will need.
How to calculate the cost of starting a digital marketing business
You now have a list of potential expenses and a rough estimate of your startup costs. Let’s estimate your actual startup costs using these two proven methods.
The first, traditional method involves using a startup costs calculator to estimate the startup costs. However, the second, the Upmetrics method, is an innovative method that uses Upmetrics financial forecasting tool.
Let’s understand both methods so that you can choose one that suits your requirements the best.
The traditional method—startup costs calculator
The calculator includes categories such as pre-trading, website setup, marketing, operations, and people. You can enter the estimated costs in each field and let the calculator estimate the costs for you.
Remember that many startup costs fall under recurring expenses, so cover those costs monthly, quarterly, or annually.
Calculate your startup costs using this calculator.
The Upmetrics method—financial forecasting tool
It is an intuitive and efficient method of calculating startup costs. Using Upmetrics will not just help you estimate startup costs but also help with financial forecasting.
All you need to do is enter your sales, costs, and other financial assumptions and let the tool calculate monthly/quarterly/ and yearly projections for you.
Check out the financial forecasting tool for accurate financial forecasting.
Pro-tip
Check out the financial forecasting tool for accurate financial forecasting. Once you have an accurate estimate of startup costs, you can easily identify funding requirements for your bakery.
Raising funds for a new startup is certainly a nerve-wracking and time-consuming process, but having a solid Digital marketing business plan can make things a lot easier.
Once you have an accurate estimate of startup costs, you can easily identify funding requirements for your digital marketing company.
Raising funds for a new startup is certainly a nerve-wracking and time-consuming process, but having a solid digital marketing agency business plan can make things a lot easier.
Let’s move ahead and discuss the factors that affect your digital marketing company costs.
Factors that affect digital marketing business startup costs
Now that you have a fair idea of digital marketing business startup costs, let’s understand the factors influencing these costs.
1. Location
Location plays a crucial role in determining startup costs for any business. Digital marketing businesses are no exception.
The buzzing cities provide with larger target audience and opportunities compared to small towns. However, starting a business in prominent cities also results in higher rents, set-up costs, and operational expenses.
For instance, it is cheaper to start a digital marketing business in Colorado than in San Fransisco. This is because rent, licenses, equipment costs, and employee salaries are comparatively low in Colorado.
Location is crucial. However, it will not be a prominent factor in determining costs for remote digital marketing businesses.
2. Business Formation
Setting up a legal entity for your digital marketing business requires a few formalities. This includes business registration, acquiring licenses and permits, business insurance, and getting a trademark and patent.
Here are a few costs for you to consider:
- Setting up LLC and Corporations: $50-$500
- Licenses and permits: $50-$700
- Small business insurance: $500-$2,000
Getting a trademark and patent is not necessary. However, if you do decide to get a patent, be prepared to spend nearly $5,000-$15,000 on it.
There are no strict compliances or rules governing digital marketing businesses. So, it’s fairly favorable for a digital marketing business to commence its operations.
3. Office space expenses
Planning to set up a physical digital marketing agency? You have two options to choose from; lease or purchase.
Purchasing a ready office space will cost anywhere around $30,000-$1 million and more.
Now, let’s consider a lease rental option.
A small-scale digital marketing agency with 5-10 employees will require an office space of 1500-5000 sq. ft. The lease rental costs vary for different localities and cities. However, you can expect to pay anywhere between $1,000-$5,500 every month on rent.
To secure a lease you have to pay lease deposits worth 2-3 months of rent. Expect paying anywhere around $3,000-$8,000 as lease deposits.
To avoid high rental expenses, you can also start with a home office or share an office space. Shared office spaces are comparatively cheaper and can easily accommodate small-scale emerging businesses.
Also, account for $800-$1,200 on monthly utility bills.
4. Office remodeling and infrastructure
To set up a functional office space, you require basic furniture like chairs and tables. The costs for these could span anywhere between $1,000-$5,000.
Further, consider expenses for painting, lighting, and basic remodeling. The expenses for these can vary between $2,000-$10,000.
Unless you are looking for studio feels, don’t spend much on renovations. Find a space that is already functional and can be set up as a digital marketing agency with a few tweaks.
However, if you are purchasing a naked space, transforming it into a functional agency can cost anywhere between $15,000-$25,000 and more.
5. Hardware and Software costs
To run a digital marketing business, you will require enhanced digital technologies and equipment.
Firstly, you need high-spec laptops and PCs compatible with sophisticated programs and software. According to Statista, the average cost of laptops and PCs stands at $776 and $673, respectively. Considering a small size agency, you will have to spend $3,000-$7,000 on hardware.
Secondly, you need a variety of networking and communication systems. This includes modems, routers, and Wi-Fi hubs. The costs for these would account for nearly $500-$1,000.
Lastly, you need a variety of software to automate tasks and deliver high-quality digital marketing services.
Here are a few software programs you must consider:
- File hosting service: $0-$299
- Email marketing tool: $0-$100
- CRM: $50-$300
- Design programs and software: $0-$50
- Social Media Management tools: $0-$50
- Project management software: $0-$25
Overall, the annual software subscription costs can span between $500-$5,000.
Since digital services are going to be your core business offerings, you must invest in resources that allow you to deliver high-quality output. Also, look out for open-source software to save expenses on certain software.
6. Payroll costs
You will hire a variety of digital marketing specialists to offer efficient services. However, you don’t have to get into full hiring mode right from the start. Depending on your area of expertise make hiring plans.
For instance, if you plan to specialize in Email marketing, you need to hire an Email marketing specialist on a priority basis. Other services like graphics, content, and social media can be fulfilled with freelancing.
According to Zippia, the average salary of a digital marketing specialist varies between $44,000 to $81,000 annually. Considering a small team of full-time employees and freelancers, you can expect monthly payroll expenses anywhere between $8,000 to $15,000.
7. Website setup costs
A website is essential for all sorts of businesses, especially digital marketing companies. A website will sell your services and vouch for your credibility and skills.
Here are a few expenses you will have to consider for setting up a website.
- Domain name: $10-$200
- Website hosting costs: $0-$300
- Web development: $1,000-$5,000
Overall, setting up a website can cost between $500-$5,000 depending on the choices you make. However, if you plan on making a complex website, consider hiring a developer. The website costs would soar as high as $20,000 thereafter.
8. Marketing and advertisement
Marketing and advertisement expenses may seem negligible but they aren’t. Pre-launch marketing is crucial to get the word of your business out.
For a digital marketing agency starting in a small town, print media can actually be an effective medium to reach a wide market. The advertisement expenses can span between $2,000-$5,000.
Implementing a variety of digital marketing strategies to promote your business will also cost money. Consider spending at least $1,500-$3,000 on it.
Marketing expenses are recurring. Allocate a monthly budget for marketing activities as it fits your budget. However, never keep an option of no marketing at all.
A monthly budget of $500-$2,000 is decent in the beginning.
9. Professional services
You can’t do everything on your own and that’s where professionals step up. Professionals will help you with various other aspects of the business where their expertise lies.
Here are a few professional services you can avail for your business:
- Legal services: Helps setting up a business legally and fulfilling essential licensing and permit requirements. These professionals charge anywhere around $150-$500 for one time for their services.
- Accounting and bookkeeping services: Accounting professionals helps with bookkeeping, taxation, and filing returns for you on a timely basis. They charge anywhere between $100-$200 monthly.
- Business consultancy: Helps you grow your business and churn out profitable ventures for you. These professionals charge anywhere around $500-$1,000 on an hourly basis.
These are more or less all the factors that influence startup costs for a digital marketing agency. Understanding these will help you regulate the costs where needed.
Tips for reducing digital marketing agency startup costs
Now that you know the factors influencing digital marketing business startup costs, let’s learn different ways to reduce these initial costs.
1. Start with a home office
A home office can save thousands on rent every month. Office space is not mandatory for digital marketing agencies, especially new ones.
However, if a home office is not an option, look out for shared office spaces. This will help you bring down monthly rental expenses.
2. Hire freelancers
Hire freelancers and pay them merely for the projects they work on. Initially, when the work is slow and the clientele base is still developing, you might not require an entire team of full-time employees.
For non-core services like HR and accounting, opt outsourcing through some agency.
3. Start with limited services
Digital marketing encompasses a wide array of activities. Focus on one niche and build your clientele base in that. Once you are ready to scale, start adding more services to your portfolio.
4. Automate the process
Streamline the service delivery process by introducing automation where you can. Automation will reduce repetition and the need for manual intervention. This way you can save more costs by hiring less.
5. Get used equipment
The costs of purchasing new PCs and Laptops can get quite expensive. Look out for second-hand equipment in the market. Choose reliable platforms and dealers to find the best deals on second-hand equipment. However, don’t skimp on quality trying to get the best price.
6. Open source software
Being in the digital marketing industry, you will require sophisticated software to offer quality and high-level services. However, there are myriads of open-source software available in the market that are absolutely free for use.
Instead of paying subscriptions for all software, choose free software where possible.
Conclusion
And it’s a wrap. We have discussed in lengths about the digital marketing startup costs. And it’s time for you to get the actual work done.
Gather all the resources, do some ground-level research, and start calculating the precise costs for your business.
Set up a digital marketing business and create your unique competitive edge in the market.
Get started now!
