How to start a recruitment agency: the first 90 days
To start a recruitment agency you need five things in place before the first call: a contract check on your current employer's covenants, a niche, a business model you can fund, the legal basics for your country, and enough cash to survive until a client actually pays. You already know how to recruit. This guide covers the part nobody taught you at the agency: setting the business up and getting through the first 90 days.
- Read your contract before you tell anyone. Your non-solicit and non-dealing clauses decide who you can call in month one.
- Permanent recruitment is cheap to start and slow to pay. Contract and temp pay sooner and repeat, but you fund the payroll. Pick with your bank balance in mind.
- Plan for the first fee to land after day 90, not before it. The calculator below turns that into a runway figure.
- Day one needs terms of business, a privacy notice, a domain email and a consistent candidate document. Almost everything else can wait.
How to start a recruitment agency: the 90-day plan at a glance
Three phases of roughly a month each: paperwork you only do once, then the business development you have always done minus the brand name that used to open doors, then delivery and an honest look at your numbers.
Set up
- Contract reviewed; you know exactly who is off limits and until when
- Niche written as one sentence
- Company, bank account, insurance, data protection registration
- Terms of business and privacy notice drafted
- Domain email, basic ATS, branded CV template
- A list of 50 named target clients you are free to approach
Done when: you could send terms and a shortlist tomorrow.
Fill the pipeline
- Client conversations every day, at a number you set and count
- Speak to the best candidates in the niche before you have a role for them
- Lead with candidates (the MPC approach) rather than "do you have any vacancies?"
- One useful post a week for your market
- First signed terms, first live briefs
Done when: three or more briefs you believe you can fill.
Deliver and review
- Shortlists out, interviews booked, first offer in sight
- Count the funnel: conversations → briefs → CVs sent → interviews
- Drop the briefs that were never real
- Narrow or shift the niche if the calls say so
- Re-run your runway with real numbers
Done when: a candidate has a start date. Cash comes later.
Check your restrictive covenants before anything else
Most agency employment contracts contain post-termination restrictions. The usual set: a non-solicitation clause (don't approach the clients and candidates you worked with), a non-dealing clause (don't work with them even if they approach you), a non-compete, and a clause about poaching colleagues. Each has a duration and a definition of who counts, and those two details shape your first six months.
Whether a given clause is enforceable depends on the country, the state, the wording and your seniority. Pay an employment lawyer for an hour to read the contract before you resign.
Don't export the database, forward candidate lists to a personal email or photograph your pipeline. That data belongs to your employer, and the paper trail is what turns a tolerated departure into a solicitor's letter. Build your new list from public sources and your own memory of the market.
Pick a niche narrow enough to be known for
A large agency can be "technology recruitment". A one-person firm cannot; there is no reason for a hiring manager to take that call. The useful test is whether a client could describe you to a colleague in one line: "She only does finance hires for private-equity-backed businesses in the Midlands."
Write yours as role family + sector or client type + geography. Then check it against three questions. Are there at least a few hundred employers who hire for this? Do the roles pay enough that one fee covers two or three months of your costs? Does your covenant leave enough of the market open? If your old patch is locked, an adjacent niche (same candidates, different client type) is often the answer.
Choosing a business model: how recruitment agencies make money
There are three ways to get paid, and you can combine them later. For launch, pick one as your main line.
| Model | How the fee works | When cash arrives | What you need to start |
|---|---|---|---|
| Permanent, contingent | A percentage of the candidate's first-year salary, charged only if your candidate is hired | After the start date, once the invoice terms run out | Very little capital, plenty of patience. You carry the risk of unpaid work |
| Permanent, retained | The same kind of fee billed in stages, commonly a part on engagement, a part at shortlist and the rest on placement | Part of it at the start of the search | A reputation strong enough that clients pay before they see a CV. Usually senior or hard-to-fill roles |
| Contract / temp | A margin on every hour or day worked: the gap between what the client pays you and what the worker receives | Weekly or monthly, for as long as the assignment runs | Funding for payroll, payroll administration, and tighter compliance |
Recruitment agency fees, in round terms
There is no official rate card. As practitioner convention, permanent fees are typically quoted as a percentage of first-year base salary, and many agencies work somewhere between the mid-teens and 30%, with the higher end for senior, scarce or retained work. Contract margins are usually expressed as a percentage of the charge rate or a fixed amount per day. You already know the going rate in your own market.
Why contract and temp needs funding
The worker expects to be paid every week or month. The client pays you 30 or 60 days after the invoice. You are the bank in between, and the law in some places makes that explicit: UK government guidance for employment businesses says you must pay a temporary work-seeker for all the hours they work, even if the hirer has not paid you. Ten contractors is a serious sum to float. New agencies usually close the gap in one of three ways:
- Invoice finance or factoring. A funder advances most of each invoice's value as soon as you raise it and collects from the client later, for a fee.
- Umbrella companies. The contractor is employed by a third-party umbrella that handles their pay and deductions. This moves the employment administration; it does not by itself solve the timing gap, so check who funds what.
- Employer of record (EOR). Similar idea across borders: a local entity employs the worker in a country where you have no company.
All three take a slice of your margin. Price them before you quote a client.
How to set up a recruitment agency legally: UK, EU, US
General orientation only; none of this is legal advice, and the rules change. Use the official pages linked here as your starting point and have an accountant or lawyer confirm your own position.
United Kingdom
- The company. Most founders register a limited company; GOV.UK has a step-by-step for setting one up with Companies House. Ask your accountant about VAT early: registration is compulsory once taxable turnover passes the threshold, £90,000 at the time of writing, and many agencies register voluntarily before that.
- Conduct rules. You generally don't need a licence. GOV.UK says only some agencies need one, such as those supplying workers to agriculture, horticulture, shellfish gathering and food processing, with separate registration for nursing and care agencies. Everyone else still has to follow the rules for employment agencies and employment businesses (the Employment Agencies Act 1973 and the Conduct Regulations 2003). Two that surprise new owners: you cannot charge a work-seeker a fee for finding them work, and you must give work-seekers written terms and a key information document before you look for work for them.
- The enforcer. This was the Employment Agency Standards Inspectorate. Its GOV.UK page now says it has been replaced by the Fair Work Agency, and still lists the guidance for recruiters on key information documents and the Agency Workers Regulations.
- Data protection. You will hold personal data from the first CV. The ICO says organisations that use personal information, including sole traders, need to pay a data protection fee unless exempt.
European Union
Company formation and any agency licensing are national, and several member states do regulate temporary work agencies specifically, so check locally. GDPR is common to all. For a recruiter that means a lawful basis for holding each candidate's data, telling candidates what you do with it, keeping it no longer than you need, and a data processing agreement with every tool that touches CVs. The European Commission's GDPR guide for businesses is the plain-language version.
United States: how to start a staffing agency
There is no single federal licence for a staffing or recruiting firm, and state rules differ a lot. Some states license or register employment agencies, temporary staffing firms or both; some distinguish firms that charge employers from those that charge job seekers. The SBA's guidance is simply to check your Secretary of State's website for the licences and permits you need. Do that for your home state and for each state where you place temporary workers, and involve a local accountant before the first timesheet if temps will be on your payroll.
The minimum documents
Four documents carry most of the legal and commercial weight. Have a lawyer or a trade body template behind the first one.
- Terms of business. What counts as an introduction and for how long, the fee and what salary it is calculated on, when the invoice is raised, payment terms, and what happens if the client hires your candidate into a different role.
- A rebate or guarantee clause. What the client gets back if the hire leaves early. A sliding scale over the first weeks is common, as is a free replacement instead of money. Make it conditional on the invoice having been paid on time.
- A privacy notice. Which data you hold, why, for how long, who you share it with and how a candidate can ask you to delete it.
- A representation record. A dated note or email showing the candidate agreed to be put forward to this client for this role. It settles "who sent them first" disputes.
The day-one tech stack, and recruitment agency startup costs
Buying software feels like progress. For a solo permanent desk the list is short.
| Need on day one | Add when it hurts | Skip for now |
|---|---|---|
| Email and calendar on your own domain | Job board contracts and multiposting | An office lease |
| A sourcing licence for the network your candidates use | Contact-data and outreach automation tools | A custom-built CRM |
| A simple ATS/CRM, so data lives in one place from the first candidate | A back-office or payroll provider (day one if you run contractors) | A brand agency and a ten-page website |
| Accounting and invoicing software | Video interviewing, assessments, reference checking | Paid ads |
| E-signature for terms | A marketing site beyond one clear page | Anything sold on an annual contract you can't exit |
| A branded CV template and a way to apply it quickly (a Word template by hand, or a formatter such as CVReady) | Dashboards and reporting | Tools for a team you don't have yet |
For how the categories fit together as you grow, see our overview of recruitment agency software.
Startup cost checklist
Prices vary too much by country and vendor for us to quote honestly, so the table is blank on purpose. Get real quotes, type them in, and the monthly total feeds the runway calculator further down.
| Item | Notes | One-off | Per month |
|---|---|---|---|
| Company formation, accountant setup | Formation is usually cheap; the accountant is the real cost | ||
| Legal: contract review, terms of business | One hour on your covenants, a fixed fee for terms | ||
| Insurance | Ask a broker what a recruitment business needs in your country | ||
| Data protection registration | Where your regulator charges one | ||
| Sourcing licence | Often the largest software line | ||
| ATS/CRM, accounting, e-signature, CV formatting | Monthly plans; avoid annual lock-ins in year one | ||
| Domain, email, phone, one-page website | |||
| Laptop and headset | If the old ones go back to your employer | ||
| Your own pay | What your household needs each month. The line founders leave out | ||
| Your totals | 0 | 0 | |
Can you start a recruitment agency from home?
Yes, and most solo firms do. Clients don't ask where you sit. Check that your home insurance and tenancy allow business use.
Cash flow: why the first fee lands after day 90
In permanent recruitment you do the work now and are paid after the candidate starts. Here is one deal laid out day by day. The durations are an example we made up to show the mechanism; swap in the notice periods and payment terms of your own market.
Payment terms are the one bar you negotiate. In the UK, if no date is agreed, a business payment is late 30 days after the customer gets the invoice; large clients will push for longer in their own terms. Shorter terms are worth more to a new agency than an extra point on the fee.
Runway and break-even calculator
Put in your own numbers, in your own currency. "Months to first start date" means from the day you begin trading to the day your first placed candidate starts work.
The "minimum runway" figure assumes no offer is turned down, no candidate takes a counter-offer and no invoice is paid late. Those all happen. Founders who have done this tend to say hold six months of costs as a floor. Whatever number you choose, decide it before you resign, along with what you will do when two months of it are left.
Winning first clients, and holding your fee
Start with who you're allowed to call. Map your network against your covenants: former clients who are out of scope, hiring managers who moved company, people you placed years ago who now hire, candidates who became decision-makers. Tell all of them plainly what you now do and for whom.
Lead with candidates. The MPC ("most placeable candidate") approach is the fastest route to a first conversation. Find one strong, available person in your niche, get their agreement to be discussed, and call twenty relevant hiring managers about that person specifically. The calls that don't produce an interview still tell you who is hiring. Never send a CV speculatively without the candidate's permission and without terms in place.
Holding your fee
New owners discount because an empty pipeline is frightening. But the first fee you agree with a client tends to become that client's price for good.
"We normally charge 20%, but as we're just getting started I can do 12%."
The client learns your price is negotiable and that you think your new firm is worth less than your old one.
"The fee is 20%. If you give me the role exclusively for three weeks and a 14-day payment term, I can do 18%."
Any reduction buys you something that raises your fill rate or shortens the wait for cash. The percentages are examples.
Write down a walk-away number before the call.
Looking established from day one
A client deciding whether to trust a firm they have never heard of has very little to go on. They look at four things, and all four are within reach of a one-person business:
- An email address on your own domain. A free webmail address on a shortlist email undoes the rest.
- Professional terms, sent for e-signature before the first CV, without apology.
- A one-page website that states your niche and how to reach you.
- Consistent candidate documents. Every CV in the same layout, your logo and contact details on it, the candidate's direct details and any other agency's branding gone. See what to remove from a CV before sending it to a client and our candidate profile template for the layout.
The last one is what the client actually opens, forwards and compares with what the big agency sent. At your old firm an admin did it. Now it is you, at ten at night.
When to make the first hire
Later than your ego suggests. A workable rule: hire when, for three months running, you have turned down or under-served good briefs because you ran out of hours, and you hold at least six months of the new person's full cost in the bank on top of your own runway.
The first hire is usually better spent on delivery than on a second salesperson. A resourcer or part-time researcher frees your hours for clients, costs less, and doesn't walk out with half your relationships. Start tracking a handful of ratios from the first week so the decision rests on evidence; our guide to recruitment KPIs covers which ones.
Mistakes that kill new agencies in year one
- Running out of cash with a full pipeline. The most common ending. The deals were real; the money arrived two months after the savings ran out.
- Ignoring the covenant. A legal letter in month two costs money and, worse, weeks of attention.
- One client is the whole business. A hiring freeze or a new talent director ends it overnight. Keep prospecting when you are busy.
- Working without signed terms. "We'll sort the paperwork later" becomes a fee dispute the moment an offer is made.
- Starting contract supply without funding in place. One late-paying client and you cannot make payroll.
- Staying a generalist. Taking every role on offer feels safe and means you are never the obvious call for any of them.
- Stopping business development the week the first roles arrive. The gap shows up as an empty month about ten weeks later.
A one-page recruitment agency business plan
You don't need forty pages unless a lender asks for them. You need one page you will actually reread on a bad Friday. Copy this and fill it in.
[AGENCY NAME] · one-page plan · [date]
1. NICHE (one sentence)
We place [role family] with [sector / client type] in [geography].
2. WHY US
[Years in this market, number of placements, what clients say
you do better than the large agencies.]
3. MODEL AND FEES
Main line: [perm contingent / retained / contract]
Standard fee: [__% of first-year salary / margin per day]
Walk-away fee: [__] Payment terms: [__ days]
Rebate: [scale and conditions]
4. WHO I CAN AND CANNOT APPROACH
Covenants end: [date] Off limits until then: [categories]
Target list: [50 named employers, attached]
5. MONEY
Monthly costs (personal + business): [__]
Average fee: [__] Break-even: [__] placements a month
Runway held: [__] months = [amount]
Funding for contractors (if any): [provider / none]
6. FIRST 90 DAYS: WEEKLY ACTIVITY
Client conversations: [__] Candidate conversations: [__]
MPC campaigns: [__] Posts for the market: [1]
Targets: day 30 [setup done] · day 60 [__ live briefs]
· day 90 [first start date agreed]
7. TOOLS
Day one: [email, sourcing, ATS, accounting, e-sign, CV template]
Not yet: [list, so you stop thinking about them]
8. TRIPWIRES
I hire when: [condition]
I change niche when: [condition]
I stop or take interim work when: runway falls below [__] months
Questions people ask about starting a recruitment agency
How much does it cost to start a recruitment agency?
A solo permanent-recruitment desk run from home can start with modest fixed costs: company formation, insurance, a sourcing licence, a basic ATS or CRM, accounting software and a domain. The larger cost is your own living expenses while you wait for the first fee to be paid, which commonly takes several months. Budget for runway first and tools second.
Do you need a licence to start a recruitment agency?
It depends on where you are and who you supply. In the UK, GOV.UK says a licence is only needed for certain sectors, such as agriculture and food processing, while every agency must follow the conduct rules. In the US the rules vary by state, and some states license employment or staffing agencies. Check before you trade.
How do recruitment agencies make money?
Permanent recruiters charge the employer a fee when a candidate starts, usually calculated as a percentage of first-year salary. Retained search firms bill the same kind of fee in stages. Contract and temp agencies earn a margin on every hour or day the worker bills, which builds recurring income but requires money to pay workers before clients pay.
Can I start a recruitment agency from home?
Yes. Most solo agencies begin at a kitchen table with a laptop, a phone, a sourcing licence and a domain email address. Clients rarely ask where you sit. What they do notice is whether your terms, emails and candidate documents look like they come from an established business, so spend your effort there rather than on an office.
How long does it take a new recruitment agency to make money?
Longer than most founders plan for. In permanent recruitment you are paid after the candidate starts and the invoice terms run out, so a brief taken in month one can easily turn into cash in month four or later once interviews, notice periods and payment terms are added. Contract placements pay sooner but need funding.
What should a recruitment agency business plan include?
One page is enough: your niche in a sentence, the business model and fee structure, a list of named target clients, monthly costs, your break-even number of placements, the runway you hold, weekly activity targets for the first 90 days, and the conditions under which you would hire or stop. Lenders may ask for more detail.
What is the difference between a recruitment agency and a staffing agency?
In everyday use they overlap: recruitment agency is the common UK and European term, staffing agency the US one. UK rules draw a sharper line between an employment agency, which introduces people who are then employed by the hirer, and an employment business, which engages workers itself and supplies them to hirers, usually for temporary work.
Where to go next
Once the company exists, the next decisions are tooling and measurement: which recruitment agency software you need at each stage and which KPIs are worth tracking on a small desk. For the document your clients will judge you by, start with the candidate profile template.