How to budget for advertising agency startup costs

Are you thinking of starting your advertising agency? Well, before you can become a successful advertising entrepreneur, you have to consider your startup costs. It may not be as glamorous of a consideration, but it will be far more critical for success. You want to be sensible with your spending when starting up; here is a guide to some of the possible costs that you may want to add to your budget.

This article will breakdown some of the likely startup costs you may incur specific to an advertising agency and how you can account for those in your budgeting:

• Legal and insurance
• Equipment
• Agency specific running costs
• Vendors/service providers
• Office space

There are some usual startup costs to any business and an advertising agency would be no different, these could include:

• Business registration with Companies House (between £12-£40)
• Logo and branding (the average startup spends between £150-£250 on a logo)
• Accountant (on average between £25-£35 an hour)
• Business insurance (average is £118 a year) 

For more information see how much does public liability insurance cost.

Regardless of the size of your advertising agency and what kind of service you intend to offer, it’s more than likely you need these two essentials:

• A decent laptop (MacBook Pros between £1,299-£1,899) 
• Business wifi (Plusnet business £22 a month)

Depending on the type of agency you are setting up, you may also need to budget for different equipment based on specific services:

• Graphic design & Video Editing – (Adobe Creative Cloud – £59 a month)
• Copywriting – (Grammarly – £23 a month)
• Video filming – (average equipment hire between £500-£10,000 per shoot)

There are some day to day running costs of an advertising agency that may be different to a typical business. 

For an advertising agency, there could be many reasons to have to travel, meaning you’ll need to account for the cost in your budget.

If you run an advertising agency by yourself, a lot of your time could be taken up by travelling to meet with prospective clients. In addition, after getting the job, you would need to travel in order to start producing certain services. For example, when considering possible locations for a video advertisement. It is common to visit each site to see whether they would fit the ad.

Despite being an advertising or marketing agency, you would have to account for the costs of marketing yourself. This would require a website which could cost between £200 and £10,000. In addition, to a site, you would need to set up social media accounts and potentially spend on advertising for them. 

For advertising agencies, events are a vital way to show off what they are capable of. You may be able to invite many potential clients and celebrate the launch of your business. Though, this will come with a cost.

According to Eventbrite the average costs are as follows:

• Venue hire (up to £500)
• Food & beverage (up to £500)
• Printing/branding (up to £500)
• Content (up to £500)

In addition to marketing your business through events and online, many advertising agencies spend a lot of money to find clients. The process may involve offering lunch to prospective customers or other gifts to show your appreciation in order to keep them. 

Advertising is an increasingly competitive industry and having the budget to offer to treat your clients might make the difference between signing them.  

Even if your agency offered a vast range of services, you would still likely need to outsource in some areas. For example, your client may ask you to design something printed. If you do not print in your agency, you must find a vendor to print for you.

Vetting is the process of investigating a company before making a decision to do business with them. To work with vendors and service providers, the agency must take on the cost of vetting them:

• It costs to search for vendors. 
• It costs to check that they exist and their financial status.
• It costs to monitor the vendors to ensure no future supply issues proactively.

To continue working with vendors and service providers, the agency must take on the costs of maintaining a working relationship:

• Losing a vendor may mean that you can not fulfil contracts, and revenue is lost.
• Failure to manage vendors may mean that their ability to provide their service changes unexpectedly. 

To have an agency that you would be comfortable bringing clients to, you may choose to move into an office space. Having a place to host clients allows them the opportunity to see what you do and trust your agency. Even if the company launches with home working, opening a physical space may become part of the long-term strategy to build a reputation.

Opening an office space can incur many costs and may require robust planning.

The location of your office space is likely to play a role in how your agency performs. The majority of the top advertising agencies in the UK are in London. They are usually based in cities, as they would ideally aim to be near their clients. The more of a significant business hub the city is, the more likely you are to find high paying clients. 

According to Statista, the cost of renting an office space in London is the highest in Europe. The most expensive average quarterly rent in 2021 is £112.50 per square foot in the West End. In the Docklands, it is the cheapest average in London at £47.50 per square foot of space. 

According to Moneysupermarket, the average annual gas price for a micro business (no more than two employees) is between £400-£820. A small business (less than 50 employees) is between £820-£1458. The average annual electricity cost is between £900-£2,244 for a micro business and between £2,367-£3,660 for a small one.

If the rent and utilities are covered, it leaves the cost of furnishing the office. According to K2 Space, it can cost between £500-£600 per employee to fit out the office. To make sure that everyone gets a desk and chair to work.

Financial management can be stressful and time-consuming when you’re starting an advertising agency. That’s why thousands of business owners use the Countingup app to make their financial admin easier. 

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Find out more here and start your three-month free trial today.

To learn more about advice running a small business, read: how to cut costs in a small business.