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If you’ve had even the smallest success with digital marketing, the idea of starting your own agency has probably crossed your mind.
It’s an understandably compelling thought. Building an agency makes it possible to score larger projects, bigger wins and better clients. It means being able to drive more revenue than you can on your own, and — even better — it means increasing profits without a corresponding growth in workload by leveraging the efforts of others.
But if you’re thinking about starting a digital marketing agency in 2020, it’s time to take off the rose-colored glasses and get real about what you’ll need to be successful.
Is There Demand For Your Services?
I’ll start with the bad news first. The AdAge Agency Report 2019 found that “U.S. agency revenue rose a tepid 1.7 percent in 2018, the weakest growth since the ad market emerged from recession.”
The slightly better news is that, according to the same report, “Digital revenue for U.S. agencies increased a healthy 7.2 percent in 2018.” However, this growth hasn’t been even across all digital marketing channels.
If you take a look at Gartner’s 2019 Hype Cycle for Digital Marketing and Advertising, for example, shoppable media, influencer and advocacy marketing, and social analytics are all likely to reach a plateau in less than two years. Building an agency offering services in these areas may make future growth a struggle, compared to more up-and-coming channels.
Understanding whether or not there’s demand for the kind of digital marketing agency you want to build isn’t a clear-cut process. For instance, you could choose to focus on a channel listed as an “Innovation Trigger” by Gartner (e.g., blockchain for advertising, personification, real-time marketing and more) but still struggle to find demand in your geographic area or in an industry on which you want to focus.
There are several questions you’ll want to ask yourself as you explore demand:
• Do agencies already exist that are doing the kind of work I want to do? This could signal existing demand.
• Are agencies paying for Google Ads using the same kinds of keywords I’d target? Again, the presence of paid ads suggests companies are seeing a positive ROI from them.
• Do agencies exist that are using outdated practices? If so, they may be ripe for disruption.
One underrated approach for measuring demand is to simply start cold calling or cold emailing. If you see interest in the kinds of solutions you’re pitching, that’s a sign that opportunity exists to create an agency.
Do You Have A Compelling Differentiator?
Establishing demand for your hypothetical agency’s services is important, but it isn’t the only factor you should be considering. Not only will you need demand to be successful as an agency in 2020, but you’ll also need a compelling differentiator that sets you apart from other agencies offering similar solutions.
When we launched our agency, we did so because the specific SEO and digital marketing practices we were using were different from what others in the space were doing — and they were producing results. That made us confident we could deliver on the promises we were making to customers and that we could do so because of the new and innovative approaches we were taking.
Deciding to build an agency because you think you should isn’t a compelling differentiator. Launching because you want to make more money than you can on your own doesn’t set you apart from others in a meaningful way.
Fortunately, there are plenty of ways to differentiate your agency. For example, you could specialize in applying a particular digital marketing channel to a specific industry, or you could leverage existing digital marketing techniques in new ways. Your team could be your differentiator, as could the size of the companies you choose to work with.
However you decide to specialize, make sure you can back up any claims you make with real results. If your competitive differentiator is hypothetical, test it before you start selling it.
Can You Grow A Team?
By definition, building an agency means growing a team. But too many wannabe agency owners spend so much time thinking about the potential financial rewards of scaling up that they forget about the very real requirements that expansion places on them.
For example, in its 2019 State of the Internet Marketing Agency report, Wordstream found that just shy of 30% of its surveyed customers had at least one full-time paid search employee. You may not be focusing on paid search and you may not need full-time employees right away, but given the prevalence of full-time hires, it’s in the interest of most new agencies to plan for a future that includes them.
Adding full-time employees means navigating legal employment structures. It means developing internal hierarchies, recruiting team members, training them and issuing discipline, as needed. If you’ve built your career on digital marketing, shifting your focus to recruitment and management may mean learning a whole new skillset.
There’s nothing wrong with wanting to stay small, as I’ve written in a previous article. But if you’re serious about growing an agency in 2020, start by investing in additional training that will prepare you for the new (and potentially uncomfortable) roles you’ll need to fill.
Are You Willing To Put In The Time?
New agencies aren’t successful overnight. Sure, if you’re a strong enough salesperson, you might land some smaller contracts right away. But landing the big names whose logos you’ll be proud to put on your agency’s website may take years of committed effort.
Look past the promise of huge financial rewards or industry accolades. If you don’t have a future vision for your agency that’s built on a compelling differentiator and accounts for the challenges presented by team growth, it may be best to take a step back from your agency dreams in 2020.
