How to Start a Social Media Marketing Business
It seems as though almost everyone is using social media in one form or another. Social media marketing is one of the top ways that companies reach customers. If you are social media savvy and have a marketing background, you could start a social media marketing business.
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.
According to Statista, as of 2021, 91.9% of companies with more than 100 employees use social media marketing techniques. In 2013 it was only 86.2%. In 2019 social media marketing spending in the United States was $17 billion.
Companies of all sizes are using social media to reach customers. It is a low-cost way to gain visibility and communicate with both new and existing customers. Social media marketing should continue to increase into the foreseeable future.
Your target market will be small businesses seeking social media management.
Skills, Experience, and Education Useful in Running a Social Media Marketing Business
There are several specific skills that you will need to open a social media marketing business.
- Experience. Experience in marketing with a focus on social media accounts is essential.
- Education. A degree in marketing will give you an advantage.
- Business knowledge and experience. You will need to have a basic understanding of marketing, finance/accounting, and human resources.
- People skills. You’ll need to build rapport with your customers so that you retain them as customers and keep them coming back.
Checklist for Starting a Social Media Marketing Business
If you’re thinking about starting a social media marketing business, it’s important to do your research first. Here is a checklist to help you get started.
Step 1: Write your Business Plan
After coming up with the idea, the next step in starting your social media marketing business should be to write a business plan. The business plan will make you focus on some important aspects of the business, such as your target market, how you plan to reach them, projecting sales and expenses, competitors, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be and what your ongoing expenses will be.
Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you think through all the aspects of the business and then serves as a roadmap to guide your business.
Related: How to write a business plan
Step 2: Name the Business
Finding the perfect social media marketing business name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name. Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.
Step 3: Form a Business Entity
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a social media marketing business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay. The corporation can be a good choice because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: 3 steps to forming your LLC
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!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select your Location
Many social media marketing businesses start out of their home, however, getting space in a high-visibility location near other businesses may help your business grow faster.
Related: Choosing a business location
Step 5: Apply for 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. Check with your state for specific license and permit requirements for your social media marketing business. Some other common local, state, and federal registrations an social media marketing business may need include a sales tax permit and an Employer Identification Number.
Step 6: Open a Business Bank Account
Keeping your business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 7: Get your Marketing Plan in Place
Just like you wouldn’t let your client create a social media marketing strategy without a plan, you shouldn’t start marketing without a plan. Marketing on the various social media platforms should be an area you excel at, but there are other channels, such as being active with the Chamber of Commerce, networking events, and much more.
Since there is a lot of competition in this space, some new social media marketing agencies will focus on a particular niche and build their expertise and brand awareness around an industry. Being everything to every client can be tough to tackle.
Having a portfolio and testimonials from satisfied clients to show prospects is also critical in building credibility for a new social media agency. Happy clients also talk to other business owners and help bring in more business.
Step 8: Get Business Insurance
A social media marketing business needs should consider several types of insurance to protect the business. A few common types of coverage include:
– General liability insurance can help protect you from third-party claims of bodily injury and property damage.
– Professional liability insurance protects you from claims of professional errors or negligence that result in a financial loss.
– Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.
Insurance policies will vary. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.
Step 9: Hire Employees
You may need employees such as copywriters, client managers, customer service, and others will help run your social media marketing business. Make sure that you select people with appropriate experience and training.
Payroll is the most costly expense in a marketing company and can reach up to 50% of sales. Several companies in this industry will outsource for specialty services to free up time to work on other aspects of the project.
In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.
Related: Hiring your first employee
Step 10: Set up an Accounting System
Setting up an accounting system for your social media marketing business is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
Starting a social media marketing agency can be very expensive, especially if operating as a home-based business. Here are some typical costs you will face when you open a social media marketing business.
– Website setup $100 –$200 for a basic, do it yourself website, $1,000-$5,000 for a professional site.
– A dependable desktop or laptop computer – $500-$2,000
– Project management software – $5-$100 per month
– Proposal and invoicing software – $5-$100 per month
– Strong internet connection – $30-$50/month
Generally, a newer firm can charge up to $50 – $75 per hour, while an established firm with an excellent reputation and niche can generate $250 or more per hour. If you get enough work to be full-time, at $50 per hour, you would make $104,000 per year.
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 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.
It’s extremely rare to find a grant to start a social media marketing business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov and you can check on your state’s economic development office to see if they have any grants available.
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.