How to Start a Recruitment Agency

You start a recruitment agency by forming an LLC for $35 to $500, checking whether your state is one of the 24 that license employment agencies, picking a niche where your background gives you an edge, and working two pipelines: companies with open roles and the people who can fill them. Direct-hire fees run 15 to 30 percent of a new hire's first-year salary, 20 percent most common, so a $90,000 placement earns $18,000. The catch is timing: you work unpaid until a placement sticks, and the first fee usually lands between day 90 and month six. Every figure below comes from our verified recruitment agency course.

This is the permanent-placement model, not temp staffing. Temp agencies become the worker's employer, float weekly payroll while clients pay in 30 to 90 days, and carry workers' comp. That is a working-capital business, deliberately out of scope for a start under $1,000.

The fee model, in plain numbers

A single placement typically earns 15 to 30 percent of first-year salary, with 20 percent the most common rate, and engineering roles commonly commanding 20 to 25 percent. Retained search runs roughly 25 to 35 percent. Payment terms are typically net-10 after the candidate starts, stretching to 30 days in practice. Guarantees sit mostly in 30, 60, or 90-day windows, with 90 days most common, and the remedy is usually a free replacement or prorated refund.

The math on one placement explains the whole business: $90,000 salary at 20 percent is $18,000, and competent full-cycle recruiters place one to two candidates a month in a healthy market, the pace agency recruiters themselves report on r/recruiting. Three placements in the first six months of revenue equals $54,000, the course's worked example. Set a personal fee floor, never below 15 percent in this course's conservative synthesis, with discounts only for stated conditions. The fee lesson works every table.

The cash-flow truth you must plan around

You work for free until a placement sticks. Professional roles commonly take 30 to 90 days to fill, and new agency owners on r/recruiting report months before the first fee lands; one thread's original poster reports seven months. December stalls on budget cycles. Notice periods run two to four weeks after acceptance, and candidates get counteroffers even after saying yes.

So the launch decision is a runway decision. Lean monthly burn can run under $300, and your household runway decides how much of the day-90-to-month-six window you get. The full treatment, including the burn table, is the cash-flow lesson. Our runway planning guide walks the household side.

The lean stack

The permanent-placement model needs a phone, an email address, a way to track people, and a legal wrapper. Total opening runs roughly $100 to $600: the LLC at $35 to $500 depending on state, about $132 on average, an EIN free from the IRS, a business bank account free to open, professional email around $6 to $8 per month, and a free-tier applicant tracking system. Zoho Recruit's free tier exists but caps at one active job; the paid tier around $25 per user per month is the natural first upgrade.

What you deliberately do not buy: an office, job board postings, a logo sprint, or an expensive ATS. Recruit CRM lists around $100 per user per month and changes almost nothing you can charge in year one. The tracker matters more than the software; a plain spreadsheet with a row per person and columns for stage, last contact, and next action captures the in-between states software misses. The whole buy list is the lean stack lesson.

Two upgrades earn themselves at specific moments. LinkedIn Recruiter Lite at about $170 per month, when free search limits throttle your sourcing volume. Errors and omissions insurance at about $82 per month on average, the first time a client's procurement asks for a certificate of insurance.

Licenses, contracts, and the law

Recruiting is one of the industries states actually regulate. Twenty-four states issue employment agency licenses, including New York, Illinois, Massachusetts, New Jersey, South Carolina, and West Virginia, while California, Florida, Indiana, and Pennsylvania are marked as not requiring licensure at the state level. The shapes differ: New York licenses through the state labor department with a separate New York City regime, and Massachusetts splits candidate-fee agencies, which must be licensed, from employer-paid placement agencies, which register instead.

Start from the ASA and NPA model recruiting agreement, then have an attorney review your template once. The law lesson maps the states. The general version is our licenses and insurance guide.

Pick a niche and commit

A niche where you already speak the language beats a broad desk every time. The course's discipline rule: commit to a niche for at least three months before judging it, an operator practice rather than a law of nature. Run the written test on background, market depth, and fee levels, then hold the choice long enough for the pipeline to prove or disprove it. The test is in the niche lesson.

Finding clients and candidates

Client acquisition is a volume habit. One operator's rhythm is outreach to about 100 potential clients per week, grouped by niche, with the list recycled every three months; the course frames it as an operator's rhythm, not a law. Venture-backed companies 60 to 90 days post-funding are prime targets by operator report, because funding announcements are public and hiring follows them. Cap client-call prep at 30 minutes and pick one or two roles to pitch, another operator practice worth copying.

Candidate sourcing runs the other pipeline. Funnel benchmarks from operator decks: 150 to 200 outreach in the first two weeks if it is your only job, 13 to 25 percent response on LinkedIn-style outreach, and 3 to 6 interested candidates delivered per week. Live 2026 benchmark data sharpens the channel point: multi-channel outreach raises typical response from about 18 percent to 34 percent, while cold email alone averages 3.4 percent. If your response rate runs below about 13 percent on a LinkedIn sequence, change the template; single-digit cold email is channel-normal, so fix the channel or targeting instead. The client playbook is the clients lesson. The candidate side is the sourcing lesson.

The screen is 30 minutes and it is a sell call, not just a filter. About half of onsite interviews convert to offers in the operator benchmark the course carries.

The first ninety days

Days 1 to 14: entity, account, state license check, niche chosen, tracker built, LinkedIn profile rewritten, first lists of 100 target companies plus the warm network, outreach templates drafted. Days 15 to 30: outreach begins, follow-ups scheduled, sourcing searches run daily in 30-to-45-minute blocks even with no client signed. Day 30 checkpoint: entity live, 100 companies listed, five warm conversations held, a starter candidate pool exists.

Days 31 to 60: fee agreements signed, first submissions going out. Zero signed agreements at day 60 means something specific is broken: replies without calls point at the pitch, silence across weeks points at the list. Change one variable, not both. Days 61 to 90: first full search cycles, invoices out the day a candidate starts. A healthy quarter-old agency can still have no fee banked, because the cycle outruns the quarter. The full calendar is the ninety-day lesson.

Common questions

How much do recruitment agencies make?

One placement at the common 20 percent rate on a $90,000 salary is $18,000, and experienced solos place one to two per month. First-year comp figures around $60,000 to $80,000 circulate on r/recruiting and get debated in the same threads, so treat them as reported claims, not expectations.

Do I need a license to start a recruiting agency?

Depends on your state. Twenty-four states license employment agencies, and the requirements range from registration in Massachusetts to licensing in Illinois and a surety bond in California. Check your state before the first fee agreement.

Can I start while employed?

Yes, and the lean $100 to $600 opening exists partly for that. The discipline is protecting daily sourcing blocks and outreach volume against a day job's calendar.

What about split placements?

Splits with other agencies typically run 50/50, and the NPA network charges a $500 enrollment fee plus $250 per additional location to access them. The scaling lesson covers the economics.

Where to go from here

Buy almost nothing, pick the niche you can defend on a call, and start the two lists this week. If you are comparing this against other laptop businesses in the catalog, the business quiz ranks them by capital and skills. The complete course, with launch checklist and pipeline tracker, is free at Start a Recruitment Agency.