A single placement pays more than most small businesses earn in a month: a $95,000 accounting manager at a 20 percent fee is a $19,000 invoice. That number is why so many people start recruiting agencies, and the reason most quit is the other number: a typical contingency recruiter works five or six job orders for every one that turns into a fee, and the first fee often arrives 75 to 100 days after the first client call.
This guide covers how to start a recruiting agency that survives that gap: picking a niche and a fee model, the entity, licensing and insurance questions specific to recruiting and staffing, the tools you actually need, how fees work in 2026, and how to win the first three job orders and fill them. It closes with what growth looks like when you add a second recruiter and where the margins go.
It is for people with sales or hiring experience: a corporate recruiter, an HR generalist, a salesperson who wants a bigger ticket, or a manager who has hired a lot and hated the agencies they used.
What a recruiting agency actually looks like day to day
Recruiting is a sales job with two customers. You sell a company on letting you fill a role, then sell a candidate on taking it, and you get paid only when both say yes and the candidate shows up on day one. A solo recruiter’s day is 40 to 60 outbound touches, a handful of candidate screens, one or two client conversations, and a lot of follow-up. It is repetitive, measurable, and lucrative in a way few solo businesses are.
The cycle is long. A job order signed today produces a fee in 45 to 90 days: two weeks to source and screen, three or four weeks of interviews, an offer, a two-week notice period. Contingency fees are paid only on a start, and the 60-to-90-day guarantee means a candidate who quits early costs you a replacement search or a refund. Year-one cash flow is lumpy and often zero for the first quarter.
Market signals: permanent-placement fees in 2026 run 18 to 25 percent of base salary for professional roles, and 25 to 35 percent for retained executive searches. The most profitable niches are ones with persistent shortages and salaries above $80,000: accounting and finance, engineering, healthcare (nurses, therapists, physicians), skilled trades supervision, sales, legal, and IT. Demand tracks the economy; hiring freezes hit agencies within weeks, and the recruiters who survive downturns have a niche where turnover is structural, not cyclical.
Who thrives: persistent, organized people who are comfortable on the phone with strangers and don’t take rejection personally. What kills these agencies: too many job orders without exclusivity, no cash reserve, candidates who ghost a client (that’s your reputation), and spreading across five industries instead of owning one.
Step 1: Choose your niche and your fee model
Generalist recruiters compete with 20,000 other agencies and with the client’s own job posting. Specialists get calls.
Niche options
- Accounting and finance: controllers, senior accountants, FP&A. Salaries $75,000–$180,000, constant demand, CPA firms and mid-market companies always hiring.
- Healthcare: RNs, nurse practitioners, PT/OT, physicians, practice managers. Huge shortages, often 25–30 percent fees, but heavy compliance and credentialing.
- Engineering and manufacturing: mechanical, electrical, quality, plant management. Strong in the Midwest and Southeast.
- IT and software: active but crowded, and AI has cooled demand for some roles. Best for people already in tech.
- Sales leadership: high fees on high bases, fast cycles, high fall-off risk.
- Skilled trades and construction management: superintendents, estimators, project managers. Underserved, loyal clients.
Pick the industry you already understand. A former plant manager placing plant managers has a two-year head start on anyone learning the vocabulary.
Fee models
- Contingency (permanent placement): 18–25 percent of first-year base, paid on start, 60–90 day guarantee. No fee if you don’t fill it. The default for new agencies.
- Engaged or container search: a $3,000–$7,500 nonrefundable deposit credited against a 22–28 percent fee. Filters unserious clients and pays some bills.
- Retained search: 25–35 percent, paid in thirds (signing, shortlist, placement). Executive roles, requires a track record.
- Contract or temporary staffing: you employ the worker and bill hourly at a 40–75 percent markup over pay rate. Recurring revenue, but you fund payroll before clients pay (30–60 days), need workers’ comp and payroll systems, and face state staffing regulations. Most agencies add this in year two through a back-office funding partner.
- Recruitment process outsourcing (RPO) or hourly recruiting: $75–$150 an hour or a monthly retainer to act as a company’s recruiter. Predictable, lower ceiling.
Start with contingency in one niche. Add engaged search once you have three placements and can point to a fill rate.
Step 2: Legal setup: entity, licensing, and the fee agreement
Entity and taxes
Form an LLC ($50–$500 by state) before you sign a fee agreement. You’ll invoice companies for five-figure amounts and want a corporate name on the contract, bank account, and W-9. Get a free EIN, set aside 25 to 30 percent for quarterly taxes, and ask an accountant about an S-corp election once you clear $80,000 in profit. Placement fees aren’t subject to sales tax in most states, but check “[your state] sales tax on employment agency services.”
State licensing for employment agencies
This is where recruiting differs from most agency businesses. Some states regulate “employment agencies” and may require a license, registration, a surety bond ($5,000–$25,000), or specific contract language, even for employer-paid permanent placement. New York, New Jersey, and Illinois are the well-known examples; California regulates certain agencies and any that charge candidates; many states exempt employer-fee-paid recruiters entirely. Before your first client, search “[your state] employment agency license” and call the state department of labor licensing unit. Never charge candidates; fees to job seekers trigger stricter rules almost everywhere.
If you move into temporary or contract staffing, you become the employer of record: payroll taxes, unemployment insurance registration, workers’ compensation, I-9 compliance, and in some states a separate staffing registration. Budget for a PEO or staffing back-office partner when you get there.
The fee agreement
Your client fee agreement is the whole business. A verbal “send me candidates” is worthless. Include:
- Fee percentage and the definition of base salary it applies to (base only, or base plus guaranteed bonus).
- When it’s earned (candidate’s start date) and payment terms (net 15 or net 30).
- Guarantee: replacement search at no charge if the candidate leaves within 60 or 90 days, conditioned on the invoice having been paid on time.
- Ownership of candidates: if the client hires anyone you introduced within 12 months, in any role, the fee is owed. This clause stops “we found her on LinkedIn later.”
- Referral clause covering candidates the client passes to another company or subsidiary.
- No fee for candidates the client can document they were already in process with.
Get it signed before you send a resume. Many recruiters send a redacted profile first to earn the signature.
Watch out: Sending a resume without a signed agreement is the most common way new recruiters lose a $15,000 fee. Clients hire the candidate and argue about the terms afterward.
Step 3: Insurance for a recruiting agency
- Professional liability (E&O): $800–$2,500 a year for $1 million. Covers claims of negligent placement, a missed background check, or a candidate misrepresentation that cost the client money. Larger clients require it in the vendor agreement.
- General liability: $400–$700, usually bundled with E&O.
- Cyber liability: $500–$1,500. You store resumes, Social Security numbers on some forms, and salary data. A breach is a real risk.
- Employment practices liability (EPLI): $1,000–$3,000 once you have employees, and essential if you do temp staffing, since discrimination claims can name the agency.
- Workers’ compensation: required for W-2 employees in almost every state, and a large line item for staffing agencies, since it’s priced on the workers’ job classifications.
A solo permanent-placement recruiter should budget about $1,500 to $3,000 a year for E&O, GL, and cyber.
Step 4: Tools and startup costs
Recruiting is a data and phone business. The tools are the main expense.
| Item | Lean start | Full setup |
|---|---|---|
| LLC filing, registered agent | $150 | $500 |
| State employment agency license or bond (if required) | $0 | $500–$2,500 |
| Fee agreement and candidate forms reviewed by an attorney | $300 | $1,500 |
| E&O, GL, cyber insurance (year 1) | $1,500 | $3,000 |
| LinkedIn: Sales Navigator or Recruiter Lite | $1,200 | $2,000 |
| LinkedIn Recruiter (full seat) | $0 | $9,000–$11,000 |
| Applicant tracking system / CRM (Loxo, Recruiterflow, Crelate, or similar) | $600 | $2,500 |
| Job board and resume database access (Indeed, ZipRecruiter, niche boards) | $300 | $3,000 |
| Phone system, email sequencing, data enrichment | $300 | $1,500 |
| Website, domain, email | $100 | $500 |
| Background check vendor account | $0 (pay per check) | $200 |
| Total (year 1) | About $4,500 | $22,000–$28,000 |
Skip the full LinkedIn Recruiter seat until you’ve made three placements; Sales Navigator plus a good ATS gets most solo recruiters through year one. Spend on the ATS from day one: your candidate database is the asset you’re building.
Step 5: Fees, pricing, and the math to a real income
Anyone learning how to start a recruiting agency has to get comfortable with one thing: recruiters don’t set hourly rates; they negotiate percentages. Know the market and don’t discount to win your first client.
Typical 2026 fee structures
| Model | Fee | Paid when | Typical roles |
|---|---|---|---|
| Contingency | 18–25% of first-year base | Candidate start date, net 30 | $60,000–$200,000 professional roles |
| Engaged / container | $3,000–$7,500 deposit, credited against 22–28% | Deposit at signing, balance at start | Hard-to-fill mid-level roles |
| Retained | 25–35% of total compensation | Thirds: signing, shortlist, placement | Director, VP, C-level |
| Contract staffing | 40–75% markup on hourly pay rate | Weekly or biweekly invoices | Technical, clerical, healthcare |
| Contract-to-hire conversion | 10–20% of base, prorated by time worked | At conversion | Any |
| RPO / hourly recruiting | $75–$150 an hour or $5,000–$15,000 a month | Monthly | High-volume hiring |
Hold at 20 percent minimum on contingency. The client who asks for 15 percent also has three other agencies on the search. Trade a lower fee for exclusivity only if the exclusivity is written.
The math
A solo recruiter working 8 to 10 active job orders fills about 1 to 1.5 a month once the pipeline is mature. At an average base of $90,000 and a 20 percent fee, that’s $18,000 to $27,000 a month. Year one looks different: zero in months one and two, one placement in month three, then a ramp. A realistic first-year gross for a disciplined solo recruiter is $120,000 to $180,000; a realistic second year is $200,000 to $300,000, on under $30,000 of expenses. Almost nothing else a solo operator can start has that ratio, or as brutal a first quarter.
Tip: Keep six months of personal expenses in the bank before you start. The recruiters who quit in month four almost always quit for cash reasons, not skill reasons.
Step 6: Build a web presence that hiring managers trust
Hiring managers vet a recruiter in 30 seconds on LinkedIn and your website before returning a call. Both need to say one thing: you place a specific kind of professional, and you’ve done it.
The website needs an employers page explaining how you work, your fee model in plain language, and your guarantee; a candidates page explaining that your service is free to them and how you handle confidentiality; a niche headline (“Accounting and finance recruiting for Chicago mid-market companies”); a current-openings page (even three roles signals activity); a recent-searches list as soon as you have one; a real photo and bio; and a request-a-search page with a phone number. A Gmail address costs you the call.
You can have Restart build it: describe the agency, your niche, your fee model, and how you want employers and candidates to reach you, and it builds the pages, writes the copy, designs the site and publishes it to a real URL. When you land your first placements, add them by asking. Like the other service businesses in these guides, the site’s job is to make you credible enough to earn a 15-minute call, not to generate inbound leads on its own.
Your LinkedIn profile matters more than in most businesses: a headline with your niche and geography, a summary aimed at hiring managers, and three posts a week about your market (salary trends, a role you filled, what candidates want). Add a Google Business Profile in the “Employment agency” category if you serve a local market. Answer your phone; a hiring manager with an urgent role calls the recruiter who picks up.
Step 7: Win your first job orders and fill them
The first three job orders take four to eight weeks. The first fee takes another six to ten. Plan your cash and your daily numbers accordingly.
How to start a recruiting agency with no track record: getting job orders
- Marketing a candidate (the MPC call). The most effective opener in recruiting. Screen an excellent candidate, then call 20 hiring managers who employ that kind of person: “I’m working with a senior cost accountant with 8 years in manufacturing who’s quietly looking. Before I place her elsewhere, would you want to see her profile?” You’ll get job orders for roles you didn’t know existed.
- Job-posting research. Companies posting your niche roles for 30+ days are struggling. Call the hiring manager, not HR, with a specific reason you can fill it.
- Your network. Former colleagues, vendors, and bosses who now run departments. Ask for the hiring manager’s name, not a job order.
- Placed candidates. They become hiring managers within a few years and remember who helped. Stay in touch quarterly.
- Industry associations. Local CPA society, engineering societies, healthcare administrator groups. Sponsor a lunch; be the only recruiter in the room.
- LinkedIn content. Salary guides and market commentary get hiring managers to message you.
Filling them
Take a thorough job order: must-haves, nice-to-haves, the real salary range, the interview process and timeline, who decides, and why the last person left. Push back on unrealistic orders; you can’t afford to work a role that won’t fill. Source from your ATS, LinkedIn, job boards, and referrals, screen by phone within 24 hours, and present three to five qualified candidates within 7 to 10 days. Prep candidates before every interview and debrief both sides within an hour. Manage the offer, the counteroffer, and the resignation. Call the candidate on day one and at 30 and 60 days.
For the first three job orders, charge your standard 20 percent. If a client hesitates, offer a 90-day guarantee instead of 60, never a discount; a discount on your first fee becomes your permanent rate.
Step 8: Operate, protect your fees, and grow
Operations that keep placements from falling off
- Track daily activity: calls, conversations, submittals, interviews, offers. If the top of the funnel is empty, month three is empty too.
- Send invoices on the start date, not after. Follow up at day 15.
- Log every candidate and every client interaction in the ATS; ownership disputes are won with timestamps.
- Keep prospecting in big months. Recruiters who stop when a fee lands have a dry spell 60 days later.
- Never work more than 8 to 10 active job orders at once; quality drops and fill rate collapses.
Growing to a small team
The first hire is usually a sourcer or junior recruiter at $45,000–$60,000 plus 10–20 percent commission on fees they contribute to, who finds and screens candidates while you handle clients. A team of three producing 3 to 4 placements a month at $18,000 grosses $650,000 to $850,000 a year, with 40 to 50 percent going to compensation.
What breaks at 2×: candidate quality slips when you’re not screening, clients still want you, cash gets tighter because payroll is fixed and fees aren’t, and commission plans get contentious. Fix it with written screening standards, CRM discipline that lets anyone pick up a search, a payroll reserve of two months’ compensation, and a commission plan documented before the hire starts. Adding contract staffing here is the classic path to recurring revenue; most agencies use a back-office funding partner that runs payroll and advances receivables for 3 to 5 percent of billings. The consulting business guide covers the transition from doing the work to managing people who do it.
How much can you make?
| Scenario | Placements and fees | Annual gross | Annual costs | Net before tax |
|---|---|---|---|---|
| Part-time (evenings, one niche, year 1) | 4 placements at $16,000 | $64,000 | $8,000 | About $56,000 |
| Full-time solo, year 1 | 8 placements at $18,000 (ramping from month 3) | $144,000 | $22,000 | About $122,000 |
| Full-time solo, mature (year 2+) | 14 placements at $19,000 | $266,000 | $28,000 | About $238,000 |
| Small team (you + 2 recruiters) | 40 placements at $18,500 | $740,000 | $360,000 (comp, tools, insurance, office) | About $380,000 |
People ask how to start a recruiting agency because of the top row’s ratio; they stay because of the bottom row’s. The solo ceiling is real: 15 to 18 placements a year is about the most one person can source, sell, and close. Past that you’re managing recruiters, and margins fall from 85 percent to 45 or 50 percent as the top line grows.
Mistakes that sink new recruiting agency owners
- Working without a signed fee agreement. You’ll fill the role and fight for the fee. Signature first, then resumes.
- Taking every job order. A below-market salary, a slow client, and three competing agencies means a 10 percent fill chance. Decline it.
- Discounting to 15 percent for the first client. That’s your rate with them forever, and their referrals expect it too.
- No cash reserve. Ninety days to the first fee is normal. Start with six months of personal expenses banked.
- Ignoring the candidate after the offer. Fall-offs during notice periods cost you the fee and the client. Call weekly until the start date.
- Skipping the ATS. Your database is the business. A spreadsheet in year one means starting over in year two.
- Assuming you don’t need a license. A few states regulate even employer-paid placement. One call to the state labor department settles it.
Your first 30 days
Week 1
- Choose your niche and confirm you’ll start with contingency.
- Form the LLC, get an EIN, open a business bank account.
- Call your state labor department about employment agency licensing; file if required.
- Draft your fee agreement and candidate forms; send them to an attorney for review.
- Build the website on Restart: employers, candidates, openings, about, request-a-search.
Week 2
- Buy E&O, GL, and cyber insurance.
- Set up the ATS, Sales Navigator or Recruiter Lite, domain email, and a business phone.
- Rewrite your LinkedIn profile for your niche; post your first market commentary.
- Build a target list of 100 companies and 200 hiring managers in your niche and metro.
Week 3
- Source and screen five excellent candidates in your niche.
- Make 40 outbound touches a day: MPC calls, emails to hiring managers with aging postings, network asks.
- Send fee agreements to every interested manager; get at least two signed.
- Take your first full job orders and start sourcing the same day.
Week 4
- Present three to five screened candidates on each active job order.
- Keep prospecting: 40 touches a day regardless of how the searches are going.
- Set up your daily activity tracker and a weekly pipeline review.
- Review cash: confirm you can cover 90 more days before the first fee lands.
