Yes, SMMA is worth it because the popularity of using social media for businesses continues to grow, allowing agency owners to earn $500-$5,000+ a month, according to Sprout Social's survey. Hootsuite noted a 12% increase in social spending after comparing the figures in Q3 2022 with Q3 2021. Also, the Social Media Advertising market, according to Statista, is the second top market in digital advertising, with a revenue of $226 billion in 2022. The report released in September 2023 shows that the market's value is expected to grow to $385 billion in 2027.
However, while the Social Media Marketing Agency (SMMA) business model has gained significant prominence in recent years, it has challenges. With a low barrier to entry, the SMMA industry has become highly competitive, making it tougher for newcomers to establish themselves. Tai Lopez, a popular SMMA guru, shares that to earn $1 million, a SMMA owner needs to get 30 clients paying $2,800 monthly. However, a SMMA business owner faces the challenges of fluctuating income, market saturation, and constant client acquisition and retention. Despite these challenges, the business model offers enticing benefits, such as high-income potential, schedule flexibility, and scalability.
In this article, we'll delve deeper into the viability of the SMMA business model, exploring its pros, cons, and the risks involved in starting a SMMA. We'll provide insights into how SMMA can be profitable if people fail in SMMA and what makes a SMMA owner successful. By the end of this post, I'll introduce you to a less saturated and less complicated business model called local lead generation.
Is SMMA Worth It?
Yes, SMMA is worth it because of the increasing demand for online marketing services. Statista's data shows 4.95 billion social media users worldwide as of October 2023. This vast market presents several opportunities for businesses to boost their profit using social media marketing. In fact, 93% of marketers use social media to reach customers.
You can be a successful social media marketing agency owner if you're willing to work hard to overcome the risks of oversaturation and the challenges of increased competition, client acquisition and retention, and price pressure. With low startup costs and flexibility in work hours and location, the SMMA industry offers scalability and high earning potential. Sprout Social surveyed 228 agencies and found out that the price of social media services runs from $500 to over $5,000 monthly.
Jordan Platten, the founder and managing director of Affluent.co from Norwich, England, United Kingdom, recognizes that while SMMA is a tough market, it remains a viable business option because of its low barrier to entry. Jordan, who grew his agency from 0 to 7 figures in less than 3 years, added that you don't need experience to start an SMMA. However, while a lack of experience is not a barrier to starting your business as an agency owner, you need the bare minimum understanding of social media and digital marketing to get started. Jordan even said that SMMA is not for everyone and that you must be consistent and driven to succeed. To emphasize, SMMA can be a lucrative opportunity, but it requires continuous effort, skill development, and meeting client expectations.
SMMA Pros and Cons in 2023
Low startup cost
High market demand
High income potential
You choose your clients
Lengthy customer conversion process
Varying client needs and workload
Complex paperwork and admin tasks
In 2018, Harvard Business Review published an article about the survey conducted among 1,500 employees by Werk. The survey showed that 96% of US professionals need flexibility, however, only 47% reported having access to flexible arrangements. Flexibility is one of the most valuable advantages of running a SMMA business. There is no necessity for a physical store, as an agency owner has the freedom to determine what to do with their time and work anywhere. SMMA owners can structure their work schedules to meet personal commitments. Starting a small business offering social media marketing services also allows an agency owner to scale their operations at a sustainable pace. This flexibility leads to opportunities to test marketing strategies and refine service offerings.
2. Low Startup Costs
It does not take a fortune to start a SMMA agency. While there is no one-size-fits-all number for starting a social media marketing agency, the essential expenses, according to David Schlais, co-creator of the SMMA Blueprint and 2GuysBuildaBiz, include:
- Website domain - $10 yearly
- Website - $0-$30 monthly
- Professional email - $3-$5 monthly
- LLC - $150-$4,000+ (onetime payment)
David adds that starting an SMMA is still one of the cheapest business models. A social media management business does not even require a physical office. It is cost-effective because it operates virtually and has minimal overhead expenses.
3. High Market Demand
The necessity of digital marketing in business also drives the high demand for social media marketing. A strong online presence sustains brand awareness and establishes credibility through the compelling social proof generated by user testimonials, reviews, and engagement of the target audience. With about 4.9 billion social media users worldwide, according to Demand Sage, businesses rely on SMMAs to navigate this landscape, stay on top of trends, and effectively manage their social media presence.
4. High Income Potential
The high demand for SMMA services also means there is high-income potential. In fact, HubSpot's Agency Pricing and Financials Report reveals that the profit margin of an average digital marketing agency is between 11% and 12%. This is due in part to the variety of revenue streams available for agency owners in social media, including but not limited to content creation, graphic design, email marketing, and management of paid ads. Statista's 2023 data on "Social media advertising spending worldwide from 2021 to 2028" shows that social media advertising, which may include Facebook Ad, Google Ad, Instagram Ads, and TikTok ads, is at an all-time high of $146.38 billion.
5. You Choose Your Clients
The freedom to select clients provides flexibility in running a SMMA. This freedom allows SMMA owners to shape their clientele and align their services with brands that resonate with their expertise and interests. Not every potential client can benefit an agency. Focusing on local brands can provide valuable hands-on experience and establish a solid portfolio. As the agency's reputation grows, the opportunity to collaborate with well-known brands emerges, leading to business expansion and revenue growth.
1. High Competition
Competition is high in the SMMA industry because of its low barrier to entry. The saturation in the social media industry makes it challenging for newer agencies to stand out and differentiate themselves from others. Some of the most notable SMMA owners are Tai Lopez, Max Perzon, and Charlie Morgan. To overcome market saturation, SMMA owners must select the right niche, develop their expertise, and refine their social media efforts to attract more clients.
2. Lengthy Customer Conversion Process
Client acquisition can be challenging for a social media agency because of the lengthy customer process. Converting potential clients into paying ones involves a multifaceted process, from extensive consultations to proposal development. Onboarding clients can also be challenging, as SMMAs have to manage multiple clients simultaneously, each with different needs, expectations, and communication styles. For SMMA owners who already have a background in sales, acquiring clients can be easier.
Take the 2GuysBuildaBiz duo Derek DeMike and David Schlais, for instance. They got their first client in two weeks' time. But this team already knows the basics of sales. Kai Bax, an SMMA owner and founder of scaleclients.io from Greater Perth Area in Australia, shared it took him 18 months to land his first client and 4 years to scale his business to $400,000+ monthly. David explains that the time to acquire clients may take days, weeks, or months, depending on your experience, niche, and offers. However, the median for most SMMA owners, according to David, is between two weeks to two months.
3. Varying Client Needs and Workload
Managing multiple clients' diverse needs and expectations can be a significant challenge for SMMAs. Each client may have unique preferences, target audiences, and campaign goals, requiring a tailored approach to social media marketing. Balancing these demands while maintaining consistent quality and meeting deadlines can be overwhelming, especially for solopreneurs or small agencies with limited resources.
4. Inconsistent Income
While SMMAs have high-income potential, it takes a lot of effort to get there. SMMAs often have inconsistent income, especially when starting out, due to the project-based nature of their work and the variability in client acquisition rates. As projects come and go and new clients may only sometimes be secured immediately, income streams can fluctuate unpredictably, making it difficult to budget and plan for the future.
5. Unpredictable Results
While social media marketing is an effective way to build brand awareness and reach your target market, you might encounter unpredictable results because of the changing prices in paid ads, difficulty in measuring your ROI, and challenges in producing viral social media content. HunchAds.com explains that Facebook ads work like auctions, with advertisers vying for the center stage. But with so many players in the SMMA industry, you would need to spend time, resources, and effort to achieve your targets. There is no uniform cost of paid ads on social media platforms. For instance, WebFX reports that 22% of companies pay $0.26-$0.50 cost per click (average CPC), 26% pay $1.01-$3.00 average cost per 1,000 impressions, while 23% pay $0 - $0.25 on cost per like (CPL). In addition, WebFX says 63% of businesses spend $1.00–$500.00 monthly on Facebook ads.
The ad costs in social media platforms have also increased CPM, according to Forbes report in 2022:
Adding to this fluctuating expense is the difficulty in measuring organic content. A full-service advertising agency, MDG, reported in 2018 that 44% of businesses cannot measure their ROI from social media, while 36% say that while they have a good qualitative sense of its impact, they could not quantify it. The MDG report also shows that only 20% of businesses have quantified social media’s impact on their business.
6. Complex Paperwork and Admin Tasks
SMMA businesses, like any other business, are subject to complex paperwork and administrative tasks, including legal compliance, accounting, taxes, benefits, and insurance. For startup SMMAs, these tasks can be time-consuming and challenging, as they may need more expertise or resources to handle them in-house. One of the primary challenges is understanding and complying with legal and regulatory requirements. Also known as compliance cost, this includes registering the business, getting necessary licenses and permits, and adhering to employment laws. SMMA business owners must also maintain accurate accounting records, track income and expenses, and pay the applicable taxes. FinModelsLab shared the startup costs below which SMMA owners might encounter. The table shows legal fees for business formation and contract development may run from $2,500 to $6,000, while insurance policies may cost $3,000 to $8,000.
What are the Risks Involved in Starting a SMMA?
Market saturation, client acquisition and retention, and revenue fluctuations are risks in starting a SMMA. First, you might ask, is SMMA saturated in 2023? No, SMMA isn't saturated in 2023, however, market saturation remains a real risk posed by its low barrier to entry. The SMMA market can be highly competitive because it is open to almost anyone aspiring to offer social media marketing services. And because the SMMA business is highly competitive, acquiring and keeping clients can be very challenging, especially for newcomers who are still building a portfolio.
Redditors have varying views on the risks in starting a SMMA. For instance, this exchange between two Redditors shows a valid concern of agency owners about having an overcrowded market and having to contend with freelancers from developing countries.
Also, there is inconsistent income in SMMA. Projects come and go, and since you rely on paying clients, you might throw in many add-on services (meaning more work and lesser pay on your end) or adjust your rates when you face problems of contract cancellation or budget reductions.
To avoid these risks, consider finding a unique selling proposition that you could specialize in. Niche specialization can help you narrow down the competition or raise your chances of getting clients by becoming an expert in a certain market. It would be best if you also learned to avoid over-committing or taking on multiple clients. Instead, maintain open and clear communication with your clients and scale up gradually. Finally, to avoid revenue fluctuations, consider lean periods in your financial plan, and when you’re ready, diversify your client base.
Is SMMA Profitable?
Yes, SMMA is profitable once you find the right niche, become an expert on a market, deliver quality work to clients, and consistently work to stay relevant in special media, marketing, and advertising. Some successful SMMA owners who have been in the business for 2-4 years say earnings reach $15K-80K monthly. Companies are more aware of the importance of social media marketing, and there are those willing to outsource social media management to SMMA.
With social media marketing, businesses can generate leads, build brand awareness, implement social listening, and connect with the audience more effectively. Social media is where the clients are. In May 2023, Forbes reported that, on average, a person spends 145 minutes daily on social media. Score.org’s 2021 data says that over 77% of businesses already use social media to connect with customers.
Can People Fail in SMMA?
Yes, people can fail in SMMA if they lack a clear niche or do not know who their target audience is. Underestimating the importance of continuous learning and adapting to the latest trends in social media could also lead to failure in meeting clients’ expectations. SMMA agency owners should always be informed about the latest social media algorithms and analytics that most businesses in the digital marketing industry use.
90-99% of people fail SMMA within the first year, according to industry experts. Iman Gadzhi, creator of the Agency Incubator program and owner of IAG media, believes that 99% of SMMA owners fail. Iman’s top 5 reasons why SMMA businesses fail include:
- Non-execution of plans
- Trying to find all the information before starting
- Working on several niches
- Trying to get all business formalities set before starting
- Not reinvesting ROI
On the other hand, Adam Walsh, founder of the 6 Figure Accelerator Program, shares that the right mindset of succeeding in the SMMA business sets successful entrepreneurs apart. Ultimately, having a solid foundation or understanding of digital marketing principles and the right client acquisition and retention strategies will help you overcome the challenges faced by SMMA owners.
What Makes a SMMA Successful?
Specialization makes a successful SMMA because it leads to effective, focused marketing strategies. A specific niche will help you build your expertise in a particular market segment. With specialization, you can build your credibility and attract your target audience. Likewise, it helps you organize your resources and write more precise messages.
According to Ryan Mak, a YouTube brand growth consultant from Canada, being a SMMA owner means having an entrepreneurial mindset and being ready to take risks and learn things. It’s not just about churning out social media posts for your client. You should constantly attempt to learn trends, maintain your technical expertise, and analyze what works and what doesn’t.
You can take a SMMA course to help you build skills in digital marketing and learn about managing your ad spending or maintaining a social media presence. This way, you offer more value to your clients and build stronger relationships with them. Leading to customer satisfaction and retention.
SMMA Frequently Asked Questions
SMMA is an acronym for social media marketing agency, which offers expertise in handling a company's social media management needs. SMMA works by helping companies build strategies that align their social media marketing effort with their business plans. The SMMA services usually include SEO, content creation, community management, blog writing, paid traffic, and graphic design. Some SMMA owners also offer appointment setting and lead generation. The business of SMMA is understanding your client's pain points and helping them overcome challenges by building strategies that align their social media marketing effort with their business plans. As a SMMA business owner, your goal would be to optimize your clients' social media channels to meet their objectives. It requires constantly monitoring the latest trends, algorithms, and user behavior.
No, SMMA is not easy because even after you have set up your agency, you must put in a lot of consistent work and clock in several hours a day, especially once you have scaled. Evan Vance, a 23-year-old SMMA owner working with realtors from Toronto, Ontario, Canada, works 65 hours a week or 13-14 hours daily. He said beginners in SMMA tend to work fewer hours. However, as you go deeper into the market, you realize SMMA owners who are ahead of you work for a longer time. SMMA is a competitive market. Many SMMA owners offer similar services, and if you are not willing to work hard, it will not be easy to grow your business at the rate or scale you intend it to.
To start a Social Media Marketing Agency (SMMA), you need to define the services that your agency will offer, incorporate your business, and start approaching clients. Defining your agency's services includes picking a niche you will specialize in. Covering multiple niches is tempting, but it is not a good way to start your SMMA because it will spread your resources too thinly, leading to burnout and unsatisfied customers. Aside from your niche, you should select the services based on your core strengths. Social media content, graphic design, paid social media advertising, and email marketing. There are so many services you could offer your client, but it is important that you define which area to focus on. Once your services are clear, you can incorporate your entity and acquire clients via cold calling, emailing, direct messages, or social media posts.
It costs zero to $250 monthly to do SMMA. One of the main advantages of the SMMA business model is its low upfront cost. If you consider David Schlais computation, which we discussed above, at the minimum, you'll probably spend around $163 to start a SMMA. Vince Opra-Szabó (aka Vince Opra), a social media content agency owner from Győr, Győr-Moson-Sopron, Hungary, shared that you don’t need thousands of dollars to do SMMA. Vince started his agency when he was only 16 years old, and now he is the Co-Chief Executive Officer of OpraMedia.
Meanwhile, you can charge $40-$350 per hour or $500 to $5,000 monthly to do SMMA for your clients, depending on the type of service you offer, according to Planable.io. The factors you need to consider when pricing your SMMA service include your social media skills and experience, the size of the business, and the work involved.
Local Lead Generation is Less Saturated and Complicated Than Starting a SMMA
Local lead generation is less saturated and complicated than starting a SMMA. Unlike the SMMA business model, which has low barriers to entry, local lead generation is a learned skill set with natural barriers such as geographical location and population, making it less saturated. This advantage can narrow down the competition, making market saturation a nonissue.
Besides stiff competition, there's also a complicated client acquisition process. So, while you can easily start a SMMA without experience, sustaining it in the long term isn't easy. Yes, SMMA can be profitable if you're willing to put in much work consistently to get clients. New SMMA owners could work tirelessly to get a client for long periods, getting no feedback or closing a deal, just like this Redditor, Dmitry_Dar, who reached over 400 business owners but received only 5-10 replies when he started in SMMA. Daniel Avello from Spain started his SMMA journey in December 2022 without a single client. He emailed over 4,000 people and sent DMs until he learned about the need to do cold-calling.
Meanwhile, local lead generation offers a simpler and stable income stream in the long term, thanks to its low level of competition and the control you have over the digital assets. Unlike SMMA, where the clients own the assets you manage, in local lead generation, you own the websites, and clients only rent them. The control you get from local lead generation allows you to pick your client (who to work with) and scale your business as you grow.
You also don't need to send in so many emails or DMs because your target clients are already limited to the number of business owners under your chosen niche in the locality. Also, SMMA owners struggle to create and promote consistent, high-quality content to establish an online presence. But in local lead generation, we use organic search engine result ranking, a more straightforward method of maintaining visibility. As to earnings, local lead generation provides you with a more predictable and stable income. The tree care site above exemplifies the potential passive income you can earn from just one website. I continue earning $2,000 monthly from this tree care site, built in 2015. Learn about the local lead gen biz model and choose a more predictable, simpler, and less saturated business.