A recent analysis by Avid Panda has shed light on the state of the marketing industry, revealing the challenges faced by new businesses. The study, which examined data from Companies House, looked at the number of marketing companies incorporated between January 2019 and December 2023, comparing the number of start-ups to those that have since closed. Read on to discover the failure rate of marketing companies.
What is the Failure Rate of Marketing Companies?
Over the past five years, 42.5% of new marketing companies have shut down. Out of 72,981 companies that started in this period, around 31,035 have already ceased trading, whether through administration, liquidation, or dissolution.
Which Marketing Companies Struggle the Most?
The study also broke down the data based on the type of marketing businesses, revealing some notable differences in success rates.
Advertising agencies appear to be the hardest hit, with a closure rate of 43.9%. This suggests that nearly half of all new advertising agencies have failed to make it past the five-year mark.
On the other hand, public relations (PR) and communications firms are the most resilient, with a lower closure rate of 37.1%. This makes them the most successful type of marketing company to run.
| Nature of Business | Closed | Opened | Percentage Closed |
| Advertising agencies (73110) | 20,244 | 46,108 | 43.90561291 |
| Market research and public opinion polling (73200) | 2,057 | 4,749 | 43.31438198 |
| Media representation services (73120) | 4,560 | 10,887 | 41.88481675 |
| Public relations and communications activities (70210) | 4,174 | 11,237 | 37.1451455 |
| Total | 31,035 | 72,981 | 42.52476672 |
Why Are Advertising Agencies Struggling?
In response to the findings, a spokesperson for Avid Panda suggested that advertising agencies may face higher risks due to the nature of their work. “Running an advertising agency can be riskier than managing a PR firm. One potential reason is the difference in operating costs,” they explained.
PR firms can often rely on industry connections and relatively inexpensive tools, such as well-crafted press releases, to get results. A strong network and good relationships with journalists can make a significant impact without needing a large budget.
Advertising agencies, on the other hand, usually have to invest heavily in paid media campaigns, costly software, and creative production. These high overheads can make it difficult for new advertising agencies to remain profitable, especially during their early stages when budgets are tight.
Key Takeaway
The study paints a clear picture of the marketing industry’s landscape. It’s a challenging field to enter, with many businesses unable to make it past their first few years. However, companies specialising in PR and communications seem to fare better than those in advertising, potentially due to their lower overheads and reliance on industry relationships rather than high-cost media and production.
For anyone thinking of starting a marketing company, understanding these differences could be key to their success.
If you have any questions about our findings, please email lance (lance@avidpanda.com).