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How To Start A Social Media Marketing Business

How To Start A Social Media Marketing Business

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How To Start A Social Media Marketing Business

How To Start A Social Media Marketing Business

It seems as though almost everyone is using social media in one form or another. With billions of active users on platforms like Facebook, Instagram, Twitter, and more, social media provides a powerful way to reach potential customers.

If you have social media skills and are looking to start your own business, a social media marketing agency can be a great option. However, it takes more than understanding hashtags and filters to create a successful agency. This guide will provide an overview of starting a social media marketing business and equip you with the information you need to launch your own agency.

Business Overview

A social media marketing business (sometimes referred to as a digital marketing business) helps companies increase their social media presence and engagement with their target audience by creating and managing posts on social media platforms such as Facebook, Instagram, Twitter, Pinterest, Snapchat, LinkedIn, etc. Some also assist with social media content, search engine optimization (SEO), influencer marketing, social media advertising, or content marketing by creating articles to post online. 

As a business owner, you’ll need to wear multiple hats – that of a strategist, a content creator, a data analyst, and a customer service representative, all rolled into one.

Industry Summary

The social media marketing industry is rapidly growing due to the increasing number of social media users worldwide. According to Statista, as of 2022, there were approximately 4.59 billion social media users globally, and this number is expected to continue to rise.

As more businesses invest in social platforms, demand for social media experts is expected to continue rising. Trends like social commerce, influencer marketing, and live video are shaping strategies. Standing out means staying on top of platform algorithm changes and new features.

Steps To Start A Social Media Marketing Business

Step 1: Research the Market

Starting a social media marketing business is exciting, but before jumping into it, it’s important to understand the market and your target audience. With so many existing competitors, this research will help identify whether there’s a demand for your services and how best to position your business. Here are some practical ways to begin this research:

Identify your target audience: Determine who your ideal customers would be. Is it the local coffee shop needing to up their Instagram game? Or maybe tech startups looking to connect with young professionals on LinkedIn? Consider factors such as demographics, interests, and the specific challenges they face related to social media marketing. Understanding your audience will guide your marketing efforts and help you tailor your services to their needs.

Check out the competition: Next, you need to know who you’re up against. A simple search on Yelp or Google will show you other social media marketing agencies and consultants in your city. Take notes on what they do well and what you could do better. How many are there? What do they charge? Who are they helping? If there are only a few players dominating the market, it could signal an opportunity for a new entrant. On the other hand, a saturated market might require you to carve out a unique niche or offer innovative solutions to stand out.

Talk to local businesses: Your best insights will come from the very people you aim to serve. Strike up a conversation with local business owners, such as at Chamber of Commerce and other business events. Find out if they already have someone helping with their social media. Are they happy? What’s not working for them? This can tell you exactly what potential clients might be missing and how you can fill that space. Additionally, look for local business associations and groups on platforms like Facebook and LinkedIn. Join these groups and observe the discussions related to marketing and social media to gain a better understanding of the common challenges faced by local businesses.

Step 2: Write a Business Plan

Writing a business plan is the next step after gaining a deeper understanding of the potential of your social media marketing business. By creating a business plan, you are taking a practical approach to turn your exciting idea into a reality and provide a framework to objectively evaluate your business concept.

In addition, the financial projections section of the business plan helps to estimate the feasibility of your business. Here, you’ll project your income and expenses to determine the feasibility of your business idea. It’s always better to know during the planning stage whether your idea is feasible rather than investing time, effort, and resources into starting a business that may not be sustainable.

Related: How to write a business plan

Step 3: Source Funding

Finding the funds to launch your business is the next step to cover. Funding can often be a challenge, but there are several sources you can consider. Let’s take a closer look at the most common funding options for social media marketing businesses:

Self-funding: The first source to assess is your personal savings. If your savings alone are not sufficient to cover the startup costs, you may need to explore outside funding sources.

Lenders: If you require additional funding beyond your personal savings, approaching lenders is a common option. Lenders typically require borrowers to invest a portion of their personal funds, usually between 15% and 25%, towards the total project cost, in addition to having a good credit score and sufficient collateral. It’s worth noting that in some cases if a bank considers the loan too risky, they may use an SBA (Small Business Administration) loan guarantee. This guarantee provides additional security for the lender, increasing your chances of obtaining the loan.

Friends and family: Another potential source of funding is reaching out to friends and family members who may be interested in supporting your business. All agreements should be put in writing, detailing the terms of the loan or investment, to avoid misunderstandings and preserve important relationships.

Microloans: If your funding needs are relatively small or you do not have access to credit through traditional lenders, consider exploring microloans. These loans provide smaller amounts of capital and are often more accessible to entrepreneurs who may not meet the strict requirements of traditional lenders. Some microloan programs also offer business training alongside the funding, enabling you to acquire valuable skills and knowledge.

Related: Finding the money to start your business

Step 4: Register the Business

Starting a social media marketing business involves several tasks to get properly registered and make it legal. Every state has different requirements, but here’s a general rundown of what you need to do:

Choose a business structure: There are four types of business structures: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC). Your choice will affect your legal obligations, tax implications, and personal liability.

  • Sole proprietorship: This is the simplest and most common structure for small businesses. The business is owned and operated by one person, offering ease of startup and lower costs. However, it does not provide liability protection.
  • General partnership: This structure involves two or more individuals sharing ownership and management responsibilities. The partners share the profits and liabilities of the business.
  • Corporation: A corporation is a legal entity separate from its owners. It offers limited liability protection, meaning the owners’ personal assets are protected from business liabilities. However, it involves more complex setup and administrative requirements.
  • Limited Liability Company (LLC): An LLC combines the liability protection of a corporation with the flexibility of a sole proprietorship or partnership. It offers limited liability for owners and has less formal requirements compared to a corporation. Many social media marketing businesses choose this structure for liability protection and simplicity.

Related: Comparison of business structures

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular LLC formation services include:


IncFile - $0 plus state fees & free registered agent for 1 year!

ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!

Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!

Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Obtain business licenses and permits: You may need to obtain certain business licenses and permits. These permits and licenses can vary based on the state and town where the business is located. A few of these may include a local business license, sales tax permit, and an Employer Identification Number (EIN).

Related: Common business licenses, permits, and registrations by state

Step 5: Set Up Operations

When starting a social media marketing business, you may not need a physical location immediately. Many social media marketing businesses operate remotely, allowing team members to work from their preferred locations. However, if you do decide to secure a physical location, there are a few things to consider.

You’ll want to determine the type of location that best suits your business needs. Do you need an office space, or a spare room or co-working space suffice? Once you’ve determined your needs, research suitable locations. With the location picked out, the next task is considering equipment, software staffing needs, and budget.

Step 6: Hire Staff

Some social media marketing businesses will start off with just the owner, while others will hire employees or independent contractors. Understanding the differences between employees and independent contractors is important, as misclassifying workers can lead to legal and financial consequences.

If hiring, there are certain responsibilities you need to be aware of.

First is obtaining an Employer Identification Number (EIN). An EIN is a unique identifier for your business, required for tax purposes and when reporting information to the IRS.

Ensuring employment eligibility is another important step. Before hiring, you must verify that your employees are eligible to work in the United States. This involves using Form I-9, Employment Eligibility Verification, to verify their identity and work authorization.

Each state has different reporting requirements for new hires, such as reporting their information to the appropriate state agency within a specified timeframe. Be sure to research and comply with the reporting regulations in your specific state.

Worker’s compensation insurance is generally required by most states when hiring employees. This insurance provides coverage for employees in case of work-related injuries or illnesses and protects both you and your employees.

Last, it’s important to familiarize yourself with labor laws. This includes understanding minimum wage requirements, overtime rules, anti-discrimination laws, and other regulations that govern how you should treat and compensate your employees.

Related: State guides for hiring your first employee

Step 7: Create a Marketing Strategy

Another piece of the puzzle when launching a new social media marketing business is having a marketing strategy. Just as you wouldn’t guide your clients without a strategy, you shouldn’t either. While leveraging various social media platforms is a given for a social media marketing agency, it’s important to explore other channels as well, such as being active within your local Chamber of Commerce, attending networking events, and pursuing partnerships with complementary businesses.

Competition in the social media marketing industry is fierce, so it can be beneficial for new agencies to carve out a niche and establish expertise and brand awareness within a specific industry. Trying to cater to every type of client can be overwhelming, so focusing on a particular niche can help in standing out from the crowd and becoming a go-to resource within that industry.

Building credibility is another marketing strategy to consider for new social media agencies. Prospective clients want to see evidence of your capabilities and satisfied customers. Creating a portfolio showcasing your past work and including testimonials from satisfied clients can help build trust and demonstrate your competence. Additionally, happy clients often act as advocates and refer your services to other business owners, which can bring in more business and expand your reach.

Related: Low-cost ideas to market a new business

Step 8: Prepare to Open!

As you approach the final stages of preparation, there are a few important tasks remaining to ensure a smooth launch. While every individual’s needs may vary slightly, there are several common loose ends that likely need to be addressed.

Business insurance: Consider obtaining liability insurance to safeguard against any potential risks or damages that may arise during the course of your operations.

Setting up bookkeeping: Set up accounting software and systems that can handle daily transactions, manage taxes, and generate accurate financial statements. This will help you stay organized and make informed decisions as your business grows.

Contracts: Create and utilize contracts to formalize your agreements with clients, vendors, and any other relevant parties. Examples include service agreements, independent contractor agreements, non-disclosure agreements (to protect proprietary information), and client contracts outlining the scope of work, payment terms, and deliverables. RocketLawyer and Law Depot have free and inexpensive templates that may be helpful.

Opening a business bank account: To keep your personal and business finances separate, it is important to open a dedicated business bank account. This will help you manage your finances more effectively, track business income and expenses, and simplify tax reporting.

Hiring a team: Consider the specific needs of your social media marketing business and determine if you require additional personnel. Whether hiring employees or engaging independent contractors, understand the differences between the two, as this affects taxes and labor laws.

Preparing for the grand opening: Plan how to announce your business to the world. This could involve a launch event, special promotions, or a social media blitz. Since you’re in the social media space, you’ll want your launch to exemplify the creativity and effectiveness of the services you offer.

Common Questions When Starting A Social Media Marketing Business

How much does it cost to start a social media marketing business?

Depending on the scale of operations, starting a social media marketing business is relatively cost-effective compared to many other types of businesses, but there are still some upfront expenses to consider.

It’s important to note that costs may vary depending on location and specific needs, but one could anticipate the initial costs to range between $4,000 and $10,000. Here is a rough breakdown of categories and estimated costs to start:

Location: If you opt for a physical office space, the most significant initial cost will be the deposit, which is typically the first month’s rent plus a security deposit. This can range from $1,000 to $3,000, depending on your location and the size of the space.

Equipment and software: To efficiently run your social media marketing business, you’ll need essential equipment such as computers, printers, desks, and office supplies. Additionally, social media management software and analytics tools will be needed as well. The estimated cost is $2,000 – $5,000

Business registration: Registering your business might cost between $50 and $500, depending on the state and the type of legal structure you choose.

Insurance: For general liability insurance and Errors & Omissions policies, expect to pay an initial cost of about $500 to $1,000 for a policy that protects you against client disputes and other liabilities.

Marketing: Your initial marketing efforts, including website development, promotional materials, and perhaps launch ads, could be around $1,000 to $2,000.

How profitable is a social media marketing business?

Using a hypothetical example, a social media agency starting out could expect to generate an estimated $50,000 in revenue in its first year. This factors in acquiring just 5 clients paying an average of $1,000 per month for services.

With an estimated $20,000 in expenses, including software, equipment, registration, insurance, marketing, payroll, etc., leaves a potential first-year profit of $30,000 for the business owner.

While profit margins expand as the business scales and takes on more clients, even a sole proprietor agency with a few clients can produce decent profits after covering costs. Of course, actual revenue and expenses depend on many factors, including client acquisition effectiveness, pricing structure, workload capacity, and more. But the estimates provide an idea of the profit potential for social media marketing agencies in the early stages.

It is important to manage the cash flow in this type of business as you will typically not collect until after the job is completed, which can take three months or more. In the meantime, your business is racking up expenses to complete the job. It’s not uncommon, though it can be more difficult for a new business to ask for a 1/3 – 1/2 advance to get started.

It’s also important to note that sales can be erratic, especially if you are the primary person working on the project. Even while working on a project, sales calls still need to be paid, otherwise, you are looking at some lag time before the next project starts.

What is the NAICS code for a social media marketing business?

The NAICS code for a social media marketing business is 541643 which is categorized under Marketing Consulting Services. Related businesses in this NAICS code include customer service management consulting, sales management consulting services, and more.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code and how to find yours

Author

  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

How To Start A Social Media Marketing Business

How To Start A Social Media Marketing Business

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