Advertising agencies are a viable business idea in today’s digital world. Thousands of companies vie for the attention and loyalty of millions of potential customers, and the best way to do it is through marketing. An advertising organization is a B2B business that is dedicated to planning, creating, and executing various forms of advertising for different companies. This type of organization is comprised of marketing specialists, writers, and artists who work together to create advertisements aligned with their clients’ business goals. This custom paper tackles the process of setting up an advertising organization in the United States.
Most advertising organizations start with the founder’s skills, experience, and connection in the industry. Being an advertising professional before starting an advertising organization secures the company’s success in the field. Having these basic skills allows the founder to run the organization more effectively. Their connections, meanwhile, may serve as the organization’s first clients. With that said, it is still possible for non-advertising professionals to start an advertisement organization given that they have the right business skills.
Steps To Set Up An Advertisement Organization
Developing the Business Model
As with any business, the foundation of an advertisement organization is its business model. The founder must establish the niche service they will offer since advertising has become a multi-faceted field. They must choose whether they will offer SEO analytics, SEO article writing services, content writing, social media marketing, brand management, and so on. The contents of the business plan should include the types of clients they will aim to attract, which as mentioned earlier, could be the clients that the founder already worked with. These could be small businesses, B2C, or B2B businesses. However, they must also form strategies for increasing their clientele base for the business to be sustainable.
The operation of the organization is another factor that must be decided early on. The founder must decide on where the organization will operate and how many people they will hire. From there, they can determine the expenses they will need to start and maintain the operation until they start to gain profit.
At the very core of the business model is how the agency will earn revenues. The founder must establish how they expect the agency to earn a profit. The most popular business model among advertising agencies is the fee model, which is similar to a service business model (Healy, 2016), where clients pay a certain amount every month based on the types or set of services they wish to avail from the agency (Monllos, 2019). As long as the advertising organization is contracted, they will continue to work on the company’s advertisements. However, this model has proven to be disadvantageous for advertising agencies because of delayed payments and corporations’ preference for project-based business models.
Project-based models, on the other hand, operate like a product business model wherein clients pay for an entire service, which includes the bundle of necessary services to complete the project, for a fixed rate as if they were buying a product (Healy, 2016). This business model is a one-and-done type, meaning the contract expires as soon as the advertising organization completes the project, usually within a specified period. The client can then start another contract with the organization for new projects. Alternatively, the advertising organization can offer a combination of the two business models to accommodate the needs of different clients.
Advertisement organizations may use the business model canvas to clearly establish the important aspects of their business idea.
Choosing a Name for the Advertisement Organization
The business name is the first thing that clients see or hear about an agency. The founder should choose a name that they want to operate in, which should sound both professional and amiable. The business name, along with the organization's logo, should be carefully selected.
Writing the Business Plan
Once the core details of the organization are established, the next step is to write the business plan. The business plan should include the company description, the market analysis using one or two marketing tools, the legal structure of the organization, the services offered, the marketing plan or strategies, funding or financial requirements, and financial projections.
A business cannot run without a capital, so the advertising organization needs to obtain funding before it can start operating. Capital could either come from the founder’s pocket, through investments, or through business loans. The founder can pitch their business plan to potential investors or partners, as well as a few banks or financial institutions to get enough funding to start the advertising organization.
Legally Establishing the Organization
The next step in this process is to establish a legal entity. For advertising organizations, owners have the option to establish a sole proprietorship, partnership, limited liability company (LLC), or corporation. While it is cheapest and easiest to establish a sole proprietorship, it is not the most secure. A limited liability company (LLC) and a corporation protect the owners from being held personally responsible in case the organization is sued and may be forced to pay the company’s dues with personal savings (Oliver, 2020). Sole proprietorships and partnerships do not afford business owners’ personal assets the same protection from debt and lawsuits (Oliver, 2020). Sole proprietors may be forced to pay for debt or liability using their personal assets.
For individuals who wish to set up an advertisement organization on their own, the LLC is their best option since it can be established by an individual but provides security for personal assets. Meanwhile, partnerships can be legally registered either as a limited liability partnership (LLP) or a corporation, though many prefer the former for its tax benefits. Corporations are taxed for their profits, then the corporate shareholders are taxed on dividends and capital gains, which is costlier for companies with fewer investors and smaller capital. The founders of the organization must decide which legal identity best suits their structure and capabilities.
After they have established a legal identity, the organization must also be registered for state and federal taxes. The first step to this is registering for an Employer Identification Number (EIN), which serves as the social security number for businesses. This is vital in the advertisement organization since it is necessary for opening business bank accounts and hiring employees, in addition to tax reporting (Illinois Small Business Development Center, n.d.). Nowadays, businesses can apply for an EIN online through the IRS website.
Applying for Permits and Licenses
Before opening a business, the founder must apply for the necessary permits and licenses specific to states and cities. These include the EIN, the sales tax permit, business name registration, and license to advertise. Although marketing as a field is not as strictly regulated as other fields like law and medicine, there are established regulations that protect consumers from dishonest practices like false advertisements (Kurnit, 2019). As such, the founder should be well-informed of these regulations from the federal, state, and city-level to avoid accidentally violating them.
Opening a Business Bank Account
The organization, then, must open a business bank account where capital and revenues will be deposited. This will also be used for employees’ salaries and other financial responsibilities. Different banks may have varying requirements, but most require proof of identification of the person opening the account, articles of organization or incorporation, the EIN, and proof of business address.
Getting a Business Insurance
To navigate the risks that advertisement organizations have to face, they need to carry some types of insurance policies. These will protect both the owners and the company from going into bankruptcy. The basic insurance policies to carry are general liability insurance, business income insurance, and professional liability insurance.
Some states have specific requirements for the types of insurance businesses should carry. The founder should familiarize themselves with the types of insurance coverage they are required by their state to carry.
Setting Up a Website
A lot of clients nowadays contact or research potential businesses to hire online. Having a website is a requirement for any type of company to thrive. Regardless of the marketing niche that an organization focuses on, it should have a website to showcase its credibility and attract customers. The founder can use their expertise to set up a website for the organization or hire another firm or professional to set up the website for them initially.
An advertisement organization is a lucrative business with abundant potential for growth. Marketing professionals with the expertise and connections will be able to establish one easily. The preceding essay has detailed the steps needed to start an advertisement organization in the United States, from building a business model all the way to creating a website that would launch the business to its potential clientele.
An advertisement organization offers the services of marketing professionals to other businesses. It is a great business idea that you can explore in your business class. Take these steps for setting up an advertising agency as you write a paper or business plan for your class. If you wish to impress your professors, CustomEssayMeister can also help you write or refine your business papers.
Healy, P. (2016, May 26). 8 types of business models & the value they deliver. Harvard Business School Online. https://online.hbs.edu/blog/post/types-of-business-models
Illinois Small Business Development Center. Choosing a business structure. Southern Illinois University. https://sbdc.siu.edu/resources/choosing-a-business-structure.php
Kurnit, R. (2019, April 11). Advertising & marketing in the USA. Lexology. https://www.lexology.com/library/detail.aspx?g=9fd41625-bced-4bcb-9d3c-96dabf86b673
Monllos, K. (2019, August 6). ‘The fee model has not changed’: Why agencies’ biggest problem is their business model. Digiday. https://digiday.com/marketing/fee-model-not-changed-agencies-biggest-problem-business-model/
Oliver, C. (2020, November 23). LLC vs sole proprietorship: Which one is best for your business? Small Business Development Center Duquesne University. https://www.sbdc.duq.edu/Blog-Item-Limited-LLC-vs-Sole-Proprietorship