How To Start an Agency: 7 Essential Steps

You’re ready to turn your industry experience into a business that will challenge your entrepreneurial skills and help you progress toward your stretch financial goals. Creating an agency could be a good approach. But what do you need to do to start your own?

An agency is a business that delivers specialized services to its customers, often by providing customized solutions that connect clients to skills and resources they may not have access to in-house. The most popular categories for new agencies on Upwork include:

• Web, mobile, and software development
• Sales and marketing
• Admin support
• Design and creative
• IT and networking
• Customer service

In this article, we’ll take a practical approach to help you get your new agency moving forward with seven essential steps.

Steps:

• Step 1: Start with clarity
• Step 2: Plan your business
• Step 3: Understand the market
• Step 4: Address legal and administrative needs
• Step 5: Build your brand
• Step 6: Set up your operations
• Step 7: Launch your agency

Step 1. Start with clarity

If you’ve built a thriving freelance business as an independent professional, growing into an agency may feel like a natural next step. For other professionals, starting an agency can be a path toward greater control over your profession and financial future.

Whatever your starting point, it’s important to set SMART goals for your new venture and get clarity around what you envision before you launch.

Sam Naji, an artificial intelligence (AI) consultant, saw an opportunity for growth when clients kept asking him to manage entire projects instead of one AI-related component. To meet their needs, he started working with other freelance experts. By formalizing relationships within an agency model, he can deliver exactly what his clients are looking for while collaborating with his trusted network.

Suzanne Ctvrtlik, a graphic designer, started looking at an agency model when she maxed out her schedule with client work. By starting an agency, she knew she could deliver the same great work at scale. She now leads a creative team that provides a larger range of services to a longer list of clients.

Making the move from solo professional to agency owner

Launching your own agency can bring a shift in income, mindset, and responsibilities. To help you prepare, you may want to consider:

• Diversification. What services will you offer through the agency and how will they differ from your freelance business? Will you keep your freelance work as a separate revenue stream?
• Skill set. Do you have the skills and capacity to lead a large project, manage a team, and take on the extra responsibilities of running an agency?
• Resources. Moving to an agency model can lead to growing pains as you learn to pitch for both bigger projects and bigger clients. How will you manage the additional risk and any change in income?  
• Client relationships. How will you maintain customer service and top-tier support as you bring on additional team members and no longer work with every client one-on-one?
• Reliable workflows. How will you standardize systems and processes so that work is done consistently across the team?
• Formalizing your services. How will you package and price your agency’s services so you can create new and diverse sources of income? For example, offering pre-packaged services on Upwork’s Project Catalog can help you connect with new clients and build a more standardized revenue stream.
• Your professional network. How will you access the skills and talent your agency needs to support its clients? Some agencies are a network of independent professionals while others build a core team of employees.

Step 2. Plan your business

As you start to plan your business, you may notice a fine line between getting strategic and getting stuck! The planning process should help you:

• Get clarity. Crystalize the core elements of your business model so you know your purpose and direction. Clear-mindedness can also help you form a network of mentors, partners, and peers who can support you, collaborate, and send referrals your way.
• Test viability. What gap in the marketplace can your agency fill? By thinking through what you will do and who needs it most you can stress test your idea and spot potential issues.
• Think strategically. Creating a roadmap for your business can help you be more intentional instead of reactive.
• Mitigate risk. Understanding potential roadblocks ahead of time can help you minimize their impact and brainstorm workarounds.
• Secure funding. If you need funds to get your business up and running, you’ll need to be able to articulate your business idea, strategy, and initial projections to potential investors.

Two popular tools—the business plan and the business model canvas—can help guide you through planning and strategy. But you may not need both.

A business plan is a comprehensive document that lays out business details such as day-to-day operations, finances, and marketing strategies. It can be a particularly important document if you’re looking for funds. You’ll find lots of examples and AI-powered business planning tools to help you get started. There’s a risk, however, that you can spend a lot of time finessing a business plan and still not know how to move forward.

“No one ever succeeded by planning for gold so don’t test, test, test—that’s a game for big companies. Don’t wait for perfection. Good enough is good enough. There is time for refinement later. It’s not how great you start—it’s how great you end up.”
— Guy Kawasaki, The Art of the Start 2.0

Instead, many new ventures start with the business model canvas, a structured but flexible tool from Strategyzer that can help you explore, design, and describe your business model. A business plan can come into play later to help you drive long-term business success.

The business model canvas provides a high-level overview of nine interrelated blocks that aim to answer four overarching questions:

• Desirability. Are customers interested in your service?
• Viability. What are the products or services you’ll deliver worth?
• Feasibility. Can you deliver what you say you will?
• Adaptability. Can your idea survive and adapt as market conditions change?

Section 1. Key partners

Relationships with suppliers, vendors, and collaborators will keep your agency up and running. Questions to consider:

• Who are the agency’s key partners and suppliers? This may include other freelance professionals in your network.
• What resources are acquired from partners, and what activities do they perform or support?
• Why are these partnerships important, and what value do they bring to the business?

Section 2. Key activities

There are things your agency must do in order to deliver on its value proposition and stay in business. Questions to consider:

• What key activities does the agency’s value proposition require?
• Which activities are essential to distribution channels, customer relationships, and revenue streams?
• What activities must we undertake to support our business model?

Section 3. Key resources

Identify the most important assets your agency will need to operate. Questions to consider:

• What key resources does the agency’s value proposition require?
• Which resources are essential to distribution channels, customer relationships, and revenue streams?
• What types of resources does our business model call for (i.e., physical, intellectual, human, financial)?

Section 4. Value proposition

The agency’s value proposition describes the unique value and benefits it promises to deliver to its customers. Questions to consider:

• What unique value does the agency deliver to our customers?
• Which customer problems does the agency solve and what needs are being fulfilled?
• What bundles of products and services can we offer to each customer segment?

Section 5. Customer relationships

Look at the types of relationships your agency will have with its customers and how it will hold on to them. Questions to consider:

• What type of relationship does each customer segment expect us to establish and maintain with them?
• How costly are these relationships, and how will they be integrated with the rest of our business model?
• How will the agency continue to acquire, retain, and grow our customer base?

Section 6. Channels

Scrutinize any channels the agency will use to interact with its customers including sales, marketing, distribution, and communication. Questions to consider:

• Through which channels do customers prefer to be reached?
• How do we currently reach customers and how can we integrate and optimize these channels?
• Which channels work best for each customer segment?

Section 7. Customer segments

Define the different audience groups you plan to deliver your agency’s products or services to. Questions to consider:

• Who are the agency’s most important customers?
• What are the characteristics and needs of each customer segment?
• Which segments will we target and why?

Section 8. Cost structure

Analyze the expenses required to run the agency. Questions to consider:

• What are the costs inherent to the agency’s business model?
• Which key resources and key activities are the most expensive?
• How do costs relate to revenue streams? Is the agency planning to use a cost-driven or value-driven approach?

Section 9. Revenue streams

Explore how the agency will earn and collect money from each customer segment. Questions to consider:

• What is the agency’s pricing strategy and projected revenue related to any goods and services produced?
• For what value are our customers really willing to pay?
• What are the pricing mechanisms for each revenue stream (e.g., fixed pricing, dynamic pricing)?

Find the right people to collaborate with

As you plan your agency, one question is bound to keep coming up: Where will you find other skilled professionals to help you do the work?

If you’re like Sam, you may already have a network of independent professionals you can tap in to to meet each project’s needs. Or maybe, like Suzanne, you’re ready to start building your own team. As an agency owner, you have the flexibility to:

• Build a geographically distributed team, bringing in complementary skills by engaging freelancers as agency members. This is the most common path for existing freelancers to take when they start a new agency on Upwork. This type of agency typically uses the Upwork site as its core sales channel for new projects and clients.
• Follow a more traditional model, which may include employees or even an office. This path is typically taken by existing agencies—ones that are already established offline—who use Upwork’s marketplace as one of several business development channels.

Need help? An independent professional can help you create your business plan or connect with a business consulting and advisory service to access custom advice and ensure you’re on the right track.

Step 3. Understand the market

Ready to take a deep dive into understanding the market? You may have already spotted service gaps and opportunities based on your hands-on experience. But what’s the big picture? To truly understand the dynamics, characteristics, and trends that will impact how your business will operate, you’re going to need data.

Types of data: Qualitative vs quantitative

At the highest level, there are two types of data:

• Qualitative data is descriptive, used to capture feelings, details, and explanations about experiences.
• Quantitative data is easily measured with numbers, such as metrics or surveys with closed questions.

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Within these two main categories, there are many other types of data that can be used for different types of analysis.

Collecting data: Primary vs secondary

The names primary and secondary data refer to how the information was gathered:

• Primary data is information you collect to answer your own questions. For example, you might ask clients you’ve worked with in the past to complete a survey or do a one-on-one interview with you. This information is specific to you and your interests.
• Secondary data is collected by an outside party for a different purpose, but can still offer a lot of insights. Secondary sources of information might include government reports, industry data, published research articles, or historical records. The data provides high-level context and support for the primary data you collect.

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What data should you look for when there’s such an overwhelming amount of information available? Here are some ideas to help you narrow your focus:

• Prioritize your questions and the key business decisions you still need to make. What information would help you move forward with confidence?
• Look for free sources before paying for expensive solutions. Government websites and consulting companies often provide rich and detailed information through their websites.

The key at this early stage is to focus on the vital data that will help you make high-priority business decisions. Over time, you can optimize the primary metrics you want to track and adjust your research efforts to plan ahead and access actionable insights.

Areas of research

You may want to consider core areas of interest in detail. These include:

• Industry dynamics. Size, projected growth rate, trends, established norms, regulations, and new developments.
• Customer research. Who your target customer is, their needs and challenges, current solutions and frustrations, the value to them of a solution that works.
• Competitive analysis. A look at your direct and indirect competitors. Study their offerings, pricing, positioning, and market share. Conducting a SWOT (strengths, weaknesses, opportunities, and threats) analysis can help identify possible gaps.
• Market conditions. Different factors that can influence your business or impact how receptive the market might be to your new venture. These conditions can include political climate, economic health, social sentiment, technological advances, and ecological trends.
• Marketing channels. Potential communication channels you can use to reach your customers. These may include online platforms, industry publications, and events.
• Macro factors. External factors that may influence your business, such as demographics, artificial intelligence, automation, and remote work.

Need help? A market research analyst can help you gather and analyze the data that’s most likely to move your business forward.

Step 4. Address legal and administrative needs

As the owner of an agency, you’ll take on more risk, liability, and exposure than you would as an individual freelance professional. Not only will you need to create a solid pipeline of incoming work, but you’ll also be responsible for legal and administrative setup such as filing taxes, paying your team, and getting appropriate insurance.

Let’s start by looking at business registration. Wherever your business is located, it’s important to determine what might be required by your local, state, or federal governments. This could include:

• Filing your business name
• Choosing a business entity
• Completing tax registration
• Obtaining functional registrations, licenses, or permits
• Conducting employment-related administration

Using the U.S. as an example, let’s explore some of the requirements that might apply to your agency. If you need help, check out some of the legal consulting services available on Upwork.

Register your business and choose the right business entity

Many small businesses don’t need to do much more than register their business name—and if you use your legal name as your business name, you may not need to register at all. However, a U.S.-based agency will typically use one of the following business entities; it’s good to get familiar with your options:

• Sole proprietorship, which is a one-person business
• Partnership, when two or more people contribute to and benefit from a business
• C Corporation, an independent legal entity that’s owned by shareholders
• S Corporation, similar to a C Corporation but all profits go directly to the shareholders
• Limited liability company (LLC), a structure similar to a sole proprietorship or partnership but it keeps any assets or debts of a business separate from the personal assets of its owners

Each business structure offers a different balance between legal protections and benefits. The structure you choose can also impact your taxes, ability to raise funds, the paperwork you need to file, and your personal liability.

Completing tax registration

Registering your business to facilitate paying income taxes or collecting sales tax isn’t just an important part of establishing a legitimate business; it also offers meaningful benefits to you and your agency.

The first is a boost to your business credibility. Registering your business contributes to a professional and trustworthy image that can make a difference to your customers and potential partners. Many vendor management systems ask for tax identification information for tax reporting, payment processing, compliance checks, and data management.

You also get access to business benefits. The tax benefits and deductions available can help reduce your taxable income and overall tax liability. For example, if your agency is based out of your home, you may be eligible to deduct a portion of your rent or mortgage. You may also be able to deduct any professional fees related to registering your agency.  

Business banking

Use your tax registration to create a separate business bank account. Keeping your business and personal finances separate makes it easier for you to manage the agency’s finances. Having a business account can also make it easier to apply for loans in the future.

Bookkeeping and accounting

Bookkeeping and accounting are both important when it comes to protecting the financial health of your agency:

• Bookkeeping tracks transaction-level data. This is a daily record of money coming in and operational expenses, including receivables and payables.
• Accounting provides high-level analysis. By producing financial statements, tracking net income, and identifying issues and trends, you can make better-informed decisions whether you need to cut business costs or plan for growth.

Business licenses and permits

Check the unique license and permit conditions for each location where your team operates or has a physical presence. For example, the requirements may change if you work from a home office, store business-related items in a physical space, share an office space, or conduct business in certain industries.

Insurance coverage

Many jurisdictions and industries require some form of insurance, and some clients may ask about your coverage. Learn about the different types of insurance coverage that may impact your agency so you can ensure you have the most relevant coverage in place.

Employment requirements

Proper worker classification of agency members is important—and the guides that determine whether someone is an independent contractor or an employee aren’t always clear.

If you decide to bring on a core team of employees, you’ll need to set up payroll, a combination of activities that includes:

• Tracking employees’ hours
• Calculating payroll taxes, allowances, and benefits
• Sending payments on time

Any independent professionals who work with your agency should also look into local requirements to help avoid unexpected issues down the road. Learn more about the costs of hiring freelance talent versus in-house employees.

Data and privacy requirements

An increasing number of jurisdictions have regulations around data security and employee data protection. A data breach can have far-reaching implications for your agency’s reputation as much as anyone whose data has been compromised.

Step 5. Build your brand

We often think of a brand as the name of a product or an iconic logo. But a brand’s impact is so much broader. Remember: Your business won’t be able to do everything or serve everybody! How your agency differentiates itself from its competitors is going to be critical—and that’s where your brand comes into play.

A brand is what your agency projects to the world. It’s the first impression you make—not just the images, messages, personality, and story you share, but the quality of the work you do and the experience you deliver to your clients.

“Your brand strategy should cover what your brand stands for, the promises you offer the market, and how you plan to grow your reach.”
— Read the Guide to Building a Brand Strategy…

A well-defined brand quickly answers key questions about your business, such as:

• What is the value your agency offers to the world?
• What do you do better than your competitors?
• What is your unique selling proposition (USP)?

As you learn about creating a strategic brand, you may experience a bit of déjà vu because it relies on much of the same data, information, and insights you’ll need to plan your business. The difference is in the objective:

• Business planning is focused on internal strategy. If a business is going to be built to last, it needs to work. Business planning revolves around the internal capabilities, processes, and structures that can set your new venture up for success.
• Branding is all about external perceptions. The research you’ve gathered can help you better understand how your business can stand out from your competitors and make itself desirable to the clients you want to work with.

Strategic branding consists of nine components that inform the long-term plan and overarching goals you’ll use to shape how customers, partners, and industry will connect with your agency at scale.

Create an audience persona

The audience persona is an in-depth exploration of the customers you want to work with—also known as a buyer persona. This represents your ideal customers, including the demographic, behavioral, and psychographic attributes of the specific people you’ll need to connect with to make the sale.

Conduct a competitive analysis

Competitive analysis takes a deep dive into what competition says and does: their products, their pricing, their brand strategies. The goal is to understand how similar businesses have positioned themselves—and how the market responded.

Assess your agency’s unique traits

Building on competitive analysis, differentiation analysis helps you figure out what makes your agency unique. With effective brand positioning, your agency can stand out from other agencies in your niche and build brand recognition and loyalty.

Define the brand’s tone of voice

A core part of the human brand persona, tone of voice—also known as brand voice—describes the style and type of language your brand will use in its marketing and communications. It’s a set of instructions that will guide your business’s verbal and written communication regardless of the platform, media, or channel you’re using.

Come up with a catchy tagline

A tagline is a short phrase that captures what your brand promises or represents—it grabs attention quickly, while the core message provides meaning. Taglines are typically short, often clever, designed to be remembered.

Understand your core message

What’s the one thing you want people to remember about your brand? That’s your core message. It’s a singular focused idea, usually a concept more than a catchy phrase—such as “safety” for Volvo or “magical” for Disney.

Learn to communicates your purpose

How are you going to get these messages out in a way that will engage your audience? Business storytelling is the bridge between your business, your brand, and the people you want to connect with. Whether through building a website for your business or creating a social media strategy, by creating stories that support your brand through characters, tension, and plots you can connect your business to more human experiences.

Pull your brand together

A brand identity brings all the different elements together—such as your business name, logo design, image style, typography, and color palette—into a brand style that has a consistent look and feel. This helps make your brand more instantly recognizable.

Step 6. Set up your operations

You’re almost ready to launch your agency! Before you do, be confident that you have the processes in place to deliver outstanding results to your customers. Standardized practices will help keep your agency moving forward as you win new work, keep the back office running, and provide guidance and leadership to your collaborators.

Make sure you’ve covered the basics

Core operations for a service-based agency typically fall into one of four categories:

• Client services, such as account management and project management
• Specialization-driven products and services, such as design or development deliverables
• Business operations, such as sales, finance, and recruiting
• Leadership activities such as strategy, hiring, training, and mentorship

Many different tools are available to help you juggle your agency’s requirements. For example, you may want to check out:

• Capacity planning tools. Capacity planning tools are built to help you monitor your operations and adjust as business conditions fluctuate. For example, the right tool can help you identify when you need to scale capacity up in order to deliver on a new project.
• Collaboration tools. Running—and scaling—an agency depends on effective collaboration through reliable communication tools, project management tools, document collaboration tools, creation tools, and even recognition tools that help keep your team motivated.
• AI customer service tools. Customer expectations are high—nearly a third of customers expect a response to emails within an hour or less. New AI customer service tools are giving businesses lots of ways to reshape customer experience, from powerful data analytics, to effective automation, to 24/7 support through natural language chatbots.
• AI scheduling assistants and tools. An AI scheduling tool can help you optimize your own calendar or better coordinate tasks and streamline meetings across your whole business.
• AI finance tools. With help from AI finance tools, it’s easier than ever for businesses to get real-time insights through data analysis, performance analysis, and forecasting. AI can be leveraged to help with everything from expense and income tracking to fraud detection and risk management.
• Workforce management (WFM) tools. A WFM tool is typically an all-in-one platform that combines core business activities such as bookkeeping, payroll, HR, and talent management software.

Whatever tools you choose, develop processes so you know you can rely on them. For example, map out the customer journey from onboarding to delivered work so it will be delivered in a consistent, branded, and reproducible way every time. Keep refining and optimizing these processes.

Find ways to delegate and automate

When you run a freelance business, it’s up to you to keep everything running—from managing client projects, taking care of admin, updating financial records, rolling out marketing ideas to taking steps to grow your business.

As an agency owner, each of these roles is magnified—with other management and leadership responsibilities added on top. Ask yourself which roles you’re ready to take on yourself and which you can delegate or share with a team member, specialized independent professional, or cofounder.

Look for ways to share responsibilities with others. Finding the right role for each person isn’t just about their technical skills or experience; it’s also about their ability to drive the work they’ve been given and move the agency’s reputation forward.

If you create an Upwork agency account, you can assign different roles to different team members so it’s easier to delegate business operations, support admin, or complete financial functions. You can also designate which agency members have permissions to view different areas of your agency account.

With so many AI-driven tools entering the marketplace, you can automate your agency in a growing number of ways. There are three pillars behind building a more cost-effective and efficient agency: organization, systemization, and automation.  

Need help? Lean on independent professionals on Upwork to help with operational activities such as project management or administration.

Step 7. Launch your agency

Are you feeling confident about the foundation you’re building for your new agency? Let’s do one final check before you start onboarding new clients!

Agency launch checklist

Provide a simple introductory paragraph.

Start with clarity

Plan your business

Understand the market

Adress legal and administrative needs

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Build your brand

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Set up your operations

Help your agency grow and scale with Upwork

Clearly, launching an agency takes preparation. Once the groundwork is done, however, you can start building your new business by finding projects and exploring new ways to help your agency keep running smoothly.

Make progress by doing, rather than overplanning. Activities that directly acquire clients, demonstrate services in action, and start real-world conversations are the most critical as you start to build your reputation and cultivate your sales pipeline.

For many agencies, creating a presence on Upwork can be an important part of that pipeline, offering a source for new business opportunities and revenue streams as well as easy access to Upwork’s global pool of specialized talent.  

“We’ve focused on investing in Upwork for so long and our experience has been amazing. Not only for me, but now for the more than 50 people working with us. It’s been an amazing ride and Upwork changed everything for sure.”
— Thiago Maior, owner of EZOps Cloud. Read Thiago’s story…

An agency account on Upwork works in much the same way as an individual account, enabling agency members to search open projects, submit proposals, and build the agency’s reputation through client feedback, a growing portfolio, and by qualifying for Rising Talent and Top Rated badges. You can also use Upwork’s platform to create a branded profile for your agency and share responsibilities with other people on your team through designated roles and permissions.

Help your agency find new opportunities on Upwork…

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This article is intended for educational purposes and should not be viewed as legal or tax advice. Please consult a professional to find the solution that best fits your situation.