How to Build an AI Agent: A Step-by-Step Guide for 2025

Verizon recently deployed AI agents for their customer service representatives and it cut down the call times and freed the agents to sell products. This resulted in a 40% up in their sales. Interesting, right?

Well, Verizon isn’t the only one. In fact, 78% of the organizations have active plans to build agents.

The reason behind this trend is - AI agents can spell out countless opportunities to apply themselves across different industries. For instance, acting as customer service agents, they can handle inquiries automatically to manage financial transactions or streamline logistics.

Being an AI development company, we’ve been building AI agents for our clients. We've shared our learnings in this article. Enjoy Reading!

To answer your question “how to build an AI agent”, let’s start with what an AI agent is.

What is an AI Agent?

AI agents are pre-programmed and trained software apps that automate tasks. These apps are built using AI technologies like machine learning models, AI chatbot development platforms, and most importantly, agent training data. Such agents may be as simple as a program that is designed to perform repetitive tasks, or as complex as a machine learning system that learns and adapts over time, through the application of machine learning algorithms.

A Capgemini survey of 1,100 executives at big enterprises found that 10% of firms already use AI agents, and 82% of them hope to incorporate them in the next three years. Around 60% answered that they intend to use AI agents within a year, while a quarter said it would take longer than that. Plus, 64 percent said the enhancements to customers’ service and satisfaction increase will outweigh the risks, 71 percent said the work will see an increase in automation with AI agents, and 57 percent said productivity gains will outweigh the risk.

AI agents are used across industries. For example:

• In customer service, AI agents can automate replies to customer queries.
• In healthcare, AI Agents can support patient management by scheduling appointments and reminding patients about drug consumption.
• AI finance agents can read through the market updates and perform trades at the best time.

Types of AI Agents – 6 Types

AI agents can be categorized into several types based on their functionality and the complexity of tasks they handle. These include:

1. Rule-Based Agents: These agents perform tasks based on predefined rules and do not adapt beyond their programmed capabilities. They are often used in simpler applications like FAQ bots or scheduling assistants.
2. Learning Agents: These agents improve their performance over time through machine learning techniques. They can adapt based on data, user interactions, and other environmental changes. They are commonly found in recommendation systems or AI-driven virtual assistants.
3. Reactive Agents: These agents react to specific stimuli or input without storing past data or learning from previous actions. They are typically used in real-time applications like automated customer service where they need to respond to queries immediately.
4. Deliberative Agents: These agents make decisions after considering multiple possibilities and outcomes. They are often more complex, integrating cognitive models to assess situations, and are used in high-level decision-making processes, such as in healthcare diagnostics.
5. Autonomous Agents: These are highly independent agents capable of performing tasks without human supervision. Autonomous agents are used in advanced robotics, like drones and self-driving cars.
6. Collaborative Agents: These agents interact with other agents and human users to achieve a common goal. For instance, AI agents that collaborate with customer support teams to solve complex issues or AI agents that assist in teamwork scenarios.

The types of AI agents we’ve defined here are the ones that are powered by generative AI technologies. If you want to know about the traditional ones, here is a good read that you can refer to later – 6 Types of AI Agents

How Do AI Agents Work?

AI agents function by processing data, learning from patterns, and making decisions based on the input they receive. Here's a simplified breakdown of their working mechanism:

1. Data Collection: AI agents gather data from various sources, such as customer queries, sensor data, or real-time feeds, depending on their purpose.
2. Data Processing and Analysis: Once the data is collected, it is processed using algorithms that help the agent understand patterns, make predictions, or perform tasks. Machine learning models play a crucial role in this step.
3. Decision Making: Based on the processed data, the AI agent makes decisions. This could range from providing a response to a customer query to recommending a product or even making an autonomous decision in the case of more complex agents.
4. Action Execution: Once a decision is made, the AI agent takes action, such as generating a response, initiating a transaction, or triggering an event.
5. Learning: For agents that include learning algorithms, they improve over time by analyzing past interactions and refining their decision-making process.

How to Build an AI Agent?

The first step to create your own AI agent includes clear objectives and an understanding of the tasks it will perform.

1. Identify the Target Tasks

This step to build AI agents includes providing a detailed description of the specific responsibilities the AI agent will take charge of. It might cover anything from responding to questions on a website to suggesting something based on the user's behavior.

If you look at some best AI agents of 2025, following are some popular use cases you’d find:

• Decision-Making Assistance
• Customer Support
• Data Processing & Analysis
• Workflow Automation
• Fraud Detection
• Healthcare Support

Here to be pointed out, the AI agent use case will significantly affect the AI agent architecture and the cost to develop it.

Also Read: How to Use AI as a Real Estate Agent in 2025?

2. Gather AI Training Data

Next step on creating an AI agent from scratch include gathering AI training data. AI agents rely on high-quality, structured data to function effectively. Decide what kind of data your agent will need privileges to, like user inputs, database records, or real-time data. Ensure this data is presented and organized, so that the agent can use it appropriately.

The type of data needed to build an AI agent depends on the agent’s purpose:

• Enterprise Data: HR Manuals, Financial Reports, Compliance Regulations.
• User Interaction Data: Chat logs, customer queries, and support tickets.
• Structured Databases: CRM records, knowledge bases, and product catalogs.
• Real-time Feeds: API integrations for live updates (e.g., stock prices, weather).
• Sensor Data: IoT and automation systems for smart AI agents.

Data Preprocessing & Cleaning

Remove duplicates, normalize values, and filter biases from the data.

Ensure labeled data for supervised learning.

Synthetic Data & Continuous Learning

Use data augmentation & simulations to expand training.

AI should learn from user feedback and update continuously.

Reinforcement learning should also take a part in continuous learning.

Example: A financial AI agent would need clean, bias-free loan approval data to prevent unfair decisions.

3. Planning AI Agent Tech Architecture

It is important to choose the right set of tools and AI platforms to make the AI agent efficient. The architecture design of AI agent will depend on the level of task complexity and the scope of work. If you don’t have an experienced team of AI engineers to build an AI agent, you'll need to connect a development partner for this. You can search one in this list of the top 10 chatbot development companies in US.

Moving forward, if you’re planning to take care of the development process by yourself, here are some things you should consider:

A. Select the Right Large Language Model

Large Language Models (LLMs), such as GPT-4o and Llama, are revolutionizing AI agents by enabling more natural, context-aware interactions. Choosing the right LLM for your AI agent requires a strategic approach based on several factors: the complexity of the task, the volume of text data it will process, and the level of personalization needed.

For instance, GPT-4 excels at generating human-like responses, making it ideal for customer support chatbots, virtual assistants, and content generation. However, selecting the best model isn’t just about linguistic fluency—it also involves evaluating performance, scalability, and cost-effectiveness.

Additionally, consider the model’s ability to fine-tune itself to your specific use case, ensuring that it not only understands context but also adapts over time to improve accuracy and relevance.

B. Backend Technologies

The backend of an AI agent is critical for ensuring its functionality, scalability, and integration with other systems. Here’s what to consider for your backend tech stack:

Programming Languages:

• Python: The go-to language for building AI models and handling machine learning tasks. Python has a wealth of libraries like TensorFlow, PyTorch, and Scikit-learn that can help with developing AI-driven functionalities.
• JavaScript/Node.js: For integrating AI models with web-based applications or chatbots. Node.js can handle asynchronous operations well and is scalable for large deployments.
• Java: Suitable for enterprise-level applications, especially where robust, high-performance systems are required.

Frameworks and Libraries:

• Flask/Django (Python): Lightweight frameworks that are useful for serving machine learning models or APIs that the AI agent can call to process data.
• FastAPI: A modern Python framework for building APIs with performance in mind. It’s ideal for handling high concurrency and quick responses.
• Spring Boot (Java): Useful for building enterprise-grade backend services to integrate your AI agent with larger systems.

Databases:

• SQL Databases (e.g., PostgreSQL, MySQL): Good for structured data storage like user interactions, logs, and transactional data.
• NoSQL Databases (e.g., MongoDB, Cassandra): Ideal for unstructured data and high-volume applications like chat logs or event tracking.
• Graph Databases (e.g., Neo4j): Useful for relationships and networks, especially if your AI agent uses knowledge graphs.

APIs and Integration:

• REST APIs: Essential for facilitating communication between the AI model and other systems, such as CRM, ERP, or third-party tools.
• GraphQL: Ideal for efficient data querying, especially when working with a wide range of data sources or requiring flexibility in how data is retrieved.
• WebSockets: For real-time communication, such as live chatbots or interactive virtual assistants.

Cloud Infrastructure & Orchestration:

• AWS/GCP/Azure: Cloud providers offer scalable services that include computing power (EC2, GCP’s AI services), data storage (S3, BigQuery), and database management.
• Kubernetes: For orchestrating microservices and ensuring the backend scales appropriately.
• Docker: Containerization is key for deploying machine learning models and ensuring consistency across environments.

C. Frontend Technologies

The frontend is the user-facing side of the AI agent and should focus on a seamless user experience (UX). Here’s what to consider for the frontend tech stack:

Web Frameworks:

• React.js: Popular for building responsive UIs and single-page applications (SPAs). React is highly efficient and works well for real-time user interactions, like chatbots or virtual assistants.
• Vue.js: Another lightweight frontend framework that is simple to integrate with AI-powered chat applications.
• Angular: Good for large-scale applications with complex structures, such as enterprise-level AI agents.

UI/UX Design:

• Figma/Sketch: These are great tools for designing user interfaces and prototyping before development begins.
• Tailwind CSS: A utility-first CSS framework for quickly styling and building custom UIs without bloating the code.
• Material UI: A set of React components that implement Google’s Material Design, providing a consistent and responsive UI across platforms.

Chatbot SDKs and Libraries:

• Botpress: An open-source platform for building conversational AI applications, perfect for integrating AI models like GPT-4 into chatbots.
• Dialogflow (Google): A tool for building conversational agents that can be easily integrated with Google Cloud’s AI services.
• Microsoft Bot Framework: A comprehensive set of tools for building, deploying, and managing chatbots that integrate with a variety of platforms.

Communication Protocols:

• WebSockets: For real-time communication with the AI agent, essential for applications like live chatbots or virtual assistants.
• RESTful APIs: To handle interactions between the frontend (like a web app) and backend services that serve AI functionalities.
• OAuth2: For user authentication, ensuring secure access to AI agent functionalities.

D. Data Management and Integration

Effective data management is a cornerstone of any successful AI agent. You will need to determine how data will flow within your system, how it will be stored, and how the AI agent will interact with this data.

• Data Sources: AI agents require high-quality, structured data from various sources, including user inputs, sensor data, external APIs, and real-time feeds.
• Data Storage: Choose between databases, data lakes, or data warehouses to store the data. The type of data storage you select should match the size, structure, and frequency of the data you plan to process.
• Data Integration: Seamless integration with external data sources and platforms (CRM systems, ERP systems, third-party APIs) is essential for enabling your AI agent to make informed decisions.

Ensure that the data is regularly updated and validated, as the performance of the AI agent is closely tied to the quality of data it receives.

4. AI Agent Development Process

Being an AI agent development company, our process involves coding, API integration, and testing:

A. Coding the AI Agent

Core Functions: Start with programming of basic features, for example - data management, decision-making, and user interface.

Modular Development: Design each element of the designated module, based on the modular system discussed earlier.

B. Integration with External Systems

API Connections: Integrate the AI agent to appropriate APIs, that will enable you to extract data or implement other features.

Database Integration: This step includes designing databases to store and collect useful details in the agents' operations through interactions.

C. Implementing Learning Capabilities

Machine Learning: If accessible, assimilate machine learning algorithms like TensorFlow, by using the libraries to feature the agent's ability to learn from the data.

Memory Systems: Incorporate memory systems that enable the AI agent to recall past interactions, user preferences, and context. This helps in building more personalized and intelligent responses—an essential component of smart AI agent implementation.

D. Testing the AI Agent

Unit and Integration Testing: Conduct the testing of individual modules, and their interconnection parts to ensure they work as designed.

Performance Testing: Test the agent across various conditions for its stability, and readiness to react to these conditions.

E. Documentation

Code Documentation: Comment on the program to ease the process of later adjustments and corrections.

User Documentation: Draft guides and how-to videos for users that show them how to interact with the AI agent.

5. Refining AI Agents Through Iteration

Successful AI agents require continuous improvements through iterative training cycles. Best practices for iterative AI improvement include:

• Monitoring real-time user interactions and identifying weak response patterns.
• Retraining the model using actual user queries instead of synthetic data.
• Running A/B tests on different AI models to optimize decision-making capabilities.

Why Businesses are Adopting AI Agents?

Businesses are increasingly turning to AI agents to enhance efficiency, reduce costs, and improve customer experiences. With a growing number of AI Agent Use Cases emerging across industries, it's clear that these tools are becoming essential to modern business operations. Here are the primary reasons for this adoption:

• Cost Reduction: AI agents automate repetitive tasks, freeing up human employees to focus on more complex and valuable work. This leads to significant cost savings, especially in areas like customer support and data entry.
• Improved Customer Service: With AI agents, businesses can provide instant support to customers 24/7, offering faster response times and enhancing customer satisfaction.
• Increased Productivity: By automating workflows and decision-making processes, AI agents help employees be more productive and make faster, data-driven decisions.
• Scalability: AI agents can handle a large number of tasks simultaneously without compromising quality, making them ideal for scaling business operations.
• Data-Driven Insights: AI agents can analyze vast amounts of data and provide insights that humans may miss. These insights can be leveraged to improve business strategies, product offerings, and customer interactions.

Cost to Build AI Agents in 2025

Now when you know how to build an AI agent, let’s take a look at the cost to build AI agent phase wise. Different activities occur in each phase (planning and data collection, deployment and maintenance). Below is an estimate of the costs associated with each development phase:

While building an AI agent system, the total cost can range from around $20,000 to $60,000 for basic to moderately advanced AI agents. However, if high end enterprise systems with rich feature set and scalable architecture are considered, these ranges may extend.

One suggestion – before going for full-fledged development, build AI agent PoC first and validate your idea. This way, you can channel your efforts in the right direction.

If you want to optimize the cost of building AI agents, you should get in touch with companies like Biz4Group that offer enterprise AI solutions and have experience in building solutions like AI agents.

Our AI Agents Success Stories: Innovating Across Industries

At Biz4Group, we're taking artificial intelligence to the next level with our AI agents, designed to solve real-world challenges and make everyday tasks easier. Here's a glimpse at the AI-powered solutions we've developed so far:

1. Truman-AI-Enabled Wellness App

Health is personal, and so is our approach to wellness. We’ve built an AI-driven app, Truman, that tailors health advice based on individual needs. This app uses AI to analyze user data, offering personalized recommendations that help improve wellness habits. Think of it as your personal wellness coach in your pocket.

2. CogniHelp: Supporting Dementia Patients

Cognitive health is essential, especially for those living with dementia. Our AI-powered mobile app, CogniHelp, assists dementia patients by guiding them through cognitive exercises, improving memory, and providing a sense of independence. It’s a tool that combines compassion with technology to support both patients and caregivers.

3. AI Therapy Tutors

Learning is a journey, and sometimes you need a personal guide. Our AI therapy tutors, NextLPC, use avatars to lead students through complex case studies and provide real-time feedback. It’s an interactive, engaging, and effective way to learn, whether you're tackling a tough subject or preparing for exams.

4. Insurance AI: Transforming Training

Training insurance agents just got easier. Our AI chatbot for insurance agents provides on-demand answers, helping users quickly get the information they need. This AI tool eliminates the need for lengthy training sessions, making learning more accessible and efficient.

5. Capture Life Moments: Conversational Bots

Memories matter. We’ve developed AI conversational bots, Valinor, that help people capture precious moments through natural conversation. These bots engage users, asking the right questions to preserve stories, emotions, and experiences. It’s a new way of documenting life that feels more personal than ever.

Challenges in Building AI Agents & How to Overcome Them

A major lesson learned from our years of experience in custom AI Agent development is that AI agents tend to hallucinate responses when uncertain.

In our recent project, we’ve fixed these challenges like this:

• Defined strict knowledge boundaries to prevent the AI agents from accessing & generating inaccurate information. This directly mitigates one of the key AI Agent limitations: relying on guesswork when unsure.
• Used reinforcement learning with human feedback (RLHF) to gradually improve response accuracy.

A real-world case study of an AI agent for insurance sales training found that AI agents realized 70% faster agent onboarding. The training cost was also reduced by 40%.

Ensuring AI Agent Ethics and Safety

With years of experience in AI agent development, we’ve found that AI bias is one of the biggest challenges in agent development. For example, AI models can unintentionally favor certain demographics if the AI agent training didn’t use diverse datasets.

Here is how to prevent AI bias:

• Train your AI agents on varied datasets; i.e., different languages, cultures, and age groups.
• Test AI decisions across multiple demographic groups.
• Create transparency reports that show how AI agents make decisions.

To avoid discriminatory outcomes, major tech companies like Google and OpenAI conduct bias testing before deploying AI systems. We recommend that your AI agent should follow similar responsible AI development practices.

How to Measure Your AI Agent’s Performance?

Just like any digital tool, AI agents should be optimized based on performance data. Here are three critical KPIs you should track:

• Task Completion Rate: Measure how often the AI agents successfully resolve user queries without human intervention.
• Response Latency: The time the AI agent takes to generate an answer. A lower latency improves the user experience.
• Fallback Rate: The rate at which AI fails to respond and hands off a task to a human agent. Reducing fallback rate means a more reliable AI agent.

Just to put a benchmark, a well-optimized AI agent should aim for a task completion rate of 85%+ and response latency under 1 second.

What the Future Holds for AI Agents

The future of AI agents is bright, with advancements in artificial intelligence driving new possibilities for businesses and industries. Here are a few trends we can expect:

• More Personalized Interactions: As AI agents continue to learn and adapt, they will provide increasingly personalized experiences. For example, AI customer service agents could remember past interactions and offer tailored advice or solutions.
• Greater Integration with IoT: The integration of AI agents with Internet of Things (IoT) devices will enable more intelligent systems. For instance, AI agents could manage home automation systems or optimize energy use in smart buildings.
• Emotional Intelligence: AI agents will become more emotionally aware, capable of detecting sentiment and adjusting their responses accordingly. This will enhance the customer experience, especially in sectors like healthcare and education.
• Autonomous AI Agents: Future AI agents may become more autonomous, able to perform complex tasks with minimal human input. For example, AI-driven robots could handle everything from warehouse management to medical surgeries.
• Ethical AI: As AI agents play an increasingly significant role, ethical considerations will become paramount. There will be greater emphasis on ensuring AI agents are transparent, unbiased, and adhere to ethical standards to prevent discrimination and privacy violations.

Conclusion

The process of building an AI agent involves setting clear goals, defining the operational environment, and collecting the required data in an orderly manner. One of the key aspects of a successful project is selecting the right AI development platform. Through thoughtful analysis of your options—considering integration potential, scalability, and support—you can choose a platform that meets your needs and enables the development of diverse AI agent ideas and solutions.

From coding the AI agent and writing documentation to deployment, every step demands precision, user-focused design, and a clear direction for scalability. Ongoing monitoring and maintenance ensure the agent remains effective over time.

Book an Appointment to explore how we can bring your AI agent ideas to life.

FAQ

1. How to deal with AI agent hallucinations?

How to Prevent AI Agents from Hallucinating

• Be Explicit in Prompts – Direct AI to say "I don’t know" instead of guessing.
• Use Advanced Models – Opt for AI with better contextual accuracy.
• Lower Temperature – Reduce randomness for more factual responses.
• Improve Prompts – Structure queries to guide precise answers.
• Filter Inputs – Screen ambiguous queries to ensure reliable outputs.

2. Can we use LangChain or LanGraph as a framework for agents?

• LangChain – Initially supported AI agents but has deprecated traditional agent frameworks. Now best for LLM-based applications.
• LangGraph – The new recommended framework for building AI agents with structured workflows and state management.

For AI agents, use LangGraph!

3. For an AI chat querying 10 related SQL tables (one with 200K records), should I use RAG or LLM agents?

RAG is the better choice!

Why?

• Retrieves relevant data from SQL before generating responses.
• Handles large datasets efficiently without overloading the LLM.
• Ensures accuracy by pulling real-time data instead of relying on model memory.

Use RAG with SQL connectors for structured data retrieval!

4. What's the worst part of building agentic systems? What takes more time?

The hardest part is mapping the problem—determining if it can be solved and how to approach it. Once that's clear, the rest is mostly routine. You’d love to explore open-source models more, but commercial models are so effective that they work for almost any implementation.

5. How to find top AI agent development company in USA?

To find top AI agent development companies in USA, look for firms with proven experience, client success stories, and innovation in AI solutions. Biz4Group stands out with its custom AI agent expertise and a strong track record across multiple industries.

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