November 20, 2024
Digital marketing is one of the most lucrative online careers, but just like any industry, there are levels to the game. While many have found success as solo freelancers or corporate-employed creatives, owning a digital marketing business has the highest opportunity for growth. However, it’s also the most difficult path to pursue as a digital marketer.
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Thankfully, digital marketing has plenty of interested clients and investors. Plus, there are ways even complete newbies can find funding for their business, provided they do the research and planning. Still, it’s good to know everything you can do to fund a startup digital marketing firm.
1. Bootstrapping
Like the saying from which it came, bootstrapping means funding the project through personal savings or income. Doing so means you have total control over the business, with no loans to pay back or ownership stakes to share. For digital marketing firms with affordable startup costs and small scale, it’s a great idea.
That said, this does have the issue of putting all the financial burden on the founder. Everything, from staff payments to office rent, will come from the founder’s pocket. Not to mention, almost every startup business operates at a loss during its growth period, which means the founder will have to take the hit for potentially years.
Even so, it’s a strong option for people with a lot of savings and confidence in their business skills.
2. Small Business Loans
For start-up owners who don’t have quite enough capital, or don’t want the headache of bank-rolling a business all by themselves, small business loans are a solid choice. Banks and other financial institutions offer loans with set interest rates, which give borrowers ample time to pay back the loan with projected revenue.
For a digital marketing business, a small business loan could help you purchase necessary equipment, outsource IT staff as a small business, or run more significant advertising campaigns. A loan can enable all of that, boosting revenue and capitalizing on growth as soon as it starts.
3. Angel Investors
Angel investors bankroll startups in exchange for equity and a considerable role in the company’s direction. Digital marketers can make this offer to businesses they intend on promoting heavily through their firm. For example, a fellow startup entrepreneur may bankroll your digital marketing firm, and as payment, you provide marketing for them in a set amount of time.
Plus, angel investors often have a wealth of knowledge to draw from, making them valuable consultants. However, this method also means the owner has less control over their company and must adhere to or satiate another individual for major decisions.
4. Venture Capital
Unlike angel investors, which are often just individuals passionate about a business, venture capitalists (VCs) expect massive growth returns. Digital marketing firms that go this route must be able to present a plan with tangible benefits for the investors. Many VCs and private equity firms, especially those that have external guidance from experienced fund administrators and managers, prioritize high returns, making it crucial for firms to convince investors with a well-structured strategy.
Venture capitalists expect explosive returns in a relatively short amount of time. This can be very stressful for certain folks, especially if they are new to the industry. However, veterans of digital marketing may want to pursue this path, as they have the foundational knowledge and connections to convince investors.
5. Partnerships or Joint Ventures
Forming a partnership with another company or individual can provide financial backing while adding complementary skills or resources to your business. A well-chosen partnership can give you access to established networks, clients, and resources you might not reach alone.
However, more than any other financing option, this gives up the most control to another person. Partnerships need to stem from a boundless amount of trust and confidence in each other. Basically, you want to make sure you aren’t left in the dust by someone you called a friend or close confidant. Business, contrary to popular belief, can get very personal in partnerships.
6. Revenue-Based Financing
Revenue-based financing is essentially a “capital tax” on all future revenue until the debt is paid. Startups will borrow a set amount of money, and a percentage of income will automatically go towards paying off that debt. This will adjust accordingly depending on the company’s earnings, so lighter months mean a lighter payout.
However, these are hard to qualify for. A digital marketing business must convey to the borrower that they have a predictable amount of revenue coming in. Digital marketing firms that are more active during the holidays, for example, will likely have a higher chance of qualifying than other businesses.
Final Thoughts
Digital marketing has plenty of avenues for funding, but each will have its pros and cons. It’s far more important to look at compatibility instead of what’s cheapest or most expensive. Small firms likely won’t be on the radar of venture capitalists, while large firms likely can’t be sustained on business loans alone. Regardless, the first step to digital marketing success starts with good capital.
