How to Start a Recruitment Firm (U.S.): A Practical Guide

Starting from scratch and wondering how to start a recruitment firm that actually wins clients and delivers consistent placements? This step-by-step guide walks you through models (contingency, retained, engaged, RPO), entity setup, state/city licensing, must-know compliance, contracts, go-to-market, KPIs, and a concrete 90-day plan. It’s written for founders who want a human, credible, and compliant path to launch. (Informational only, not legal advice.)

Choose the right business model first

Your model determines your pricing, how you work, and which clients say “yes.”

Core models:

Contingency: You get paid only if the client hires your candidate. Great for mid/senior IC roles, competitive vendor lists, and faster cycles.
Typical fee: ~20–30% of first-year salary (directional benchmark).
Retained / Executive Search: Upfront commitment and exclusivity; deep research, mapping, and high-touch process.
Typical fee: ~25–35% of first-year salary (directional).
Engaged / Container: Hybrid—partial retainer plus success fee. Useful when the role is urgent and strategic but not full retained.
RPO (Recruitment Process Outsourcing): Monthly/quarterly fee to run part(s) of recruiting; best for ongoing, multi-role programs.

Make it simple for buyers: Offer two packages with clear deliverables and SLAs—e.g.,

Contingency with a 60–90-day replacement guarantee, and
Engaged/Retained with staged milestones (intake + Position Profile, shortlist cadence, interview prep, close plan).

“How to start your own recruiting firm” often begins here: pick one model as your primary lane and add the second as an upsell, not a distraction.

How to start your own recruiting firm: entity, EIN, and an important 2025 update

Set up the basics before you market your first role:

Form an entity (many founders choose an LLC for liability separation).
Get your EIN (IRS).
Open a business bank account and put minimal accounting in place.

2025 regulatory update (Corporate Transparency Act): As of March 26, 2025, FinCEN issued an interim final rule that exempts companies created in the U.S. (domestic reporting companies) from BOI reporting. Foreign companies registered to do business in the U.S. still have BOI obligations with specific deadlines. Track official guidance for changes as the interim rule is finalized.

How to set up a recruitment firm: state/city licensing (same country, different rules)

Licensing lives at the state and city level and depends on who pays fees and what you do.

New York City (DCWP): Employment agencies generally need a city license. Certain executive search / employer-paid firms that never charge candidates are exempt from the DCWP license but must comply with the New York State Employment Agency Law.

New York State (outside NYC): Employment agencies are regulated—expect licensing steps that can include experience, fingerprints, and sometimes bonds.

California: There is no single statewide “employment agency” license for firms that charge employers only, but California requires surety bonds for specific services (e.g., employment agencies at $3,000, employment counseling at $10,000), and talent agencies must be licensed by the Labor Commissioner. If you drift into services that look like counseling to candidates or talent agency work, you can trigger those regimes.

Two practical rules of thumb from your research:

If you charge candidates, many jurisdictions treat you as a regulated employment agency (license/bond).
If you charge only employers, you might be exempt from certain licenses, but still owe consumer/EEO obligations and local business registrations.

Selected states with state-level employment agency licensing/bond (especially if you charge candidates):
NY (state), NYC (city), NJ, IL (Private Employment Agency Act 225 ILCS 515), MA (license/registration under DLS + bond ~$3,000, with general exemption when you don’t charge candidates, except domestic), CT (license + bond), PA (Private Employment Agency Licensing Law), MD (Title 9, bond ~$7,000; no advance fees to candidates), MN (Ch. 184), NV (NRS 611), ND, DC.

States without a single statewide “employment agency” license for employer-paid firms (still check city/industry rules):
CA (see bonds/talent agency rules), FL (no general employment-agency license for employer-paid recruiting; separate Talent Agency license; E-Verify obligations for certain employers), WA (business license + possible city endorsements), TX (no specific statewide employment-agency license identified for employer-paid firms), and often AZ, OR, CO, GA, VA, etc. Always verify city/county requirements and whether your vertical (e.g., healthcare, entertainment/talent, PEO, temporary staffing/W-2) invokes different regimes.

Action step: Build a quick sheet for state + city where you operate: “license? bond? business license? local endorsement?” Add links to the relevant office so you can renew or update fast.

How to open a recruitment firm online: compliance you really cannot ignore

Even a one-person, fully online firm touches multiple rules. From your research:

EEO in job ads & outreach: Avoid language implying protected-class preferences (e.g., age). Phrases like “recent graduates” can discriminate by age depending on context. Draft a nondiscrimination policy and run job ads through it.
Record retention: Keep placement, referral, and job order records for at least one year. Write this into your internal policy.
Classifying independent recruiters (1099): As of March 11, 2024, the DOL’s final rule uses a six-factor “economic reality” test under the FLSA. If you tightly control hours/methods or fully integrate contractors, your risk rises—document your engagements carefully.
Background checks (FCRA): If you use a background-check company, you must give disclosure/authorization and follow pre-adverse/adverse action steps if the report affects decisions.
Email outreach (CAN-SPAM): Include a valid postal address and a working opt-out honored within 10 business days.
SMS (TCPA): Promotional/telemarketing texts require the right level of consent; be conservative and log consents.
Web accessibility (ADA): Treat WCAG as your target so your website/forms are accessible for candidates and clients.
Pay transparency: Several states and D.C. require salary ranges (and sometimes benefits) in job ads—CA, CO, NY, WA, HI, MD, NV today; IL, MN, VT, MA, NJ join in 2025. Plan content by state.

How to start an executive recruiting firm: when retained, when contingency, and how to combine

Executive search lives or dies by clarity, commitment, and process.

Use retained when the role is confidential, C-suite/senior leadership, or requires deep mapping and candidate preparation. You’re selling certainty and judgment, not speed.
Use contingency for mid-senior IC or when the buyer resists commitment—pair it with a clear guarantee (60–90 days).
Consider engaged/container when urgency is high and the client wants skin in the game but not a full retainer.

Deliverables that prove value: a crisp intake and Position/Opportunity Profile; outreach that prioritizes passive talent and referrals; structured pre-evaluation (skills, motivation to move, “chemistry” with hiring manager); interview prep on both sides; debrief and close plan; offer design; counteroffer coaching; and follow-up into onboarding. That is how you de-risk fall-offs.

If you’ve searched “how to start a executive recruiting firm,” the steps above apply—focus on the retained/engaged end of the spectrum and show your market mastery with tangible artifacts (sample maps, scorecards, interview kits).

How to start HR recruitment firm: the lean operating system (GTM + tools)

Infrastructure:

Accessible website with candidate and client intake forms (WCAG-aware).
An ATS/CRM that tracks pipeline, source mix, and funnel conversion.
E-signature for agreements.
Voice/SMS (TCPA-aware) and an outreach tool that manages opt-outs (CAN-SPAM).
A basic security/privacy posture for resumes and PII.

Offer design: Two clear packages (Contingency + Engaged/Retained) with milestones, shortlist cadence, interview coordination, and a close plan to mitigate counteroffers.

Communities that actually help you close:

NAPS (training, CPC), ASA (resources, state chapters), AESC (ethics/best practices for retained), ERE / SourceCon (sourcing tactics and training), and split-fee networks like NPAworldwide and Top Echelon to extend reach and smooth feast-or-famine cycles.
ROI play: Post your toughest reqs for splits, publish tight briefs, and give fast feedback—partners route you candidates and future reqs.

Advantages and drawbacks of a 100% online agency

Advantages:

Low capex, national reach, surge capacity via splits/freelancers.
AI and skills-first search can lift outreach response and quality when used well.

Drawbacks:

Heavy competition and margin pressure—you need a niche and differentiated process.
Revenue volatility (feast-or-famine) if you rely on a few clients or “stop-go” reqs.
Candidate experience risks (ghosting, bias) that drag down offer acceptance and brand.

What to watch out for (brand and operations)

Start narrow: 1–2 role families (e.g., B2B sales + ops) to build credible content (salary guides, scorecards) and repeatable execution.
Keep the offer simple and reinforce it with professional signals (e.g., NAPS/ASA membership/certifications).
Candidate experience matters: tighten response times, set expectations, and give clean feedback.
AI boosts productivity but adds noise (more low-quality resumes). Be explicit in requirements and use skills-based evaluation templates.
Counteroffers/fall-offs: Avoid scare-stats; your research notes the “80% leave after a counteroffer” trope lacks solid basis. Instead, coach closing with data and context.

KPIs and reference ranges (to steer your firm)

Track what you can control and iterate weekly:

Time-to-fill: from req open to offer accepted (your research cites ~41 days avg in 2024 reports—expect wide variance by role).
Offer acceptance rate (OAR).
Funnel conversion: submit→interview, interview→offer, offer→accept (by role family).
Outreach metrics: open, reply, and booked meetings; test subject lines and length.
Source mix: passive vs. active.

Publish your own quarterly benchmarks—original data is valuable and builds authority.

Contracts that prevent headaches

Prepare templates (review with counsel):

Master Terms / Terms of Business: fees, payment triggers, exclusivity, candidate ownership window, interview logistics, no-solicit, and standard client obligations (timely feedback, scheduling).
Guarantee: most common is replacement for 60–90 days; define what voids it (e.g., restructuring, role change).
Record retention & privacy: spell out how long you keep files and how you handle PII.

Compliance checklist (download-friendly)

□ Entity formed (LLC or other) and EIN obtained.
□ State/city license/bond validated (if required).
□ Record retention policy (≥ 1 year for core agency documents).
□ Terms of Business + guarantee (60–90 days) ready to sign.
□ Nondiscrimination policy; review job-ad language for EEO.
□ FCRA flow set (disclosure/authorization + pre-adverse/adverse action).
□ CAN-SPAM (postal address + opt-out ≤ 10 business days).
□ TCPA consents for SMS where needed.
□ ADA/WCAG web accessibility basics in place.
□ Pay transparency rules mapped for states where you advertise.
□ If you subcontract recruiters: independent-contractor classification aligned with the DOL’s test.

90-day launch plan you can actually follow

Days 1–15

Pick a tight ICP and lock two offers (Contingency + Engaged/Retained).
Draft scorecards for your top roles and 3 outreach templates (problem → value → CTA).
Join NAPS/ASA (signal + training) and one split network.
Launch a minimal, accessible one-page site (client & candidate forms; privacy notice).
Write your record-retention and nondiscrimination policies.

Days 16–30

Validate licenses/bonds for your state/city.
Publish three anchor posts that support your sales motion:
1. State-by-state licensing overview (high level).
2. How to write lawful job ads (EEO + pay transparency).
3. Pricing models (contingency vs. retained vs. engaged) with what clients actually get.
Build a 100-account ICP list with titles, headcount, and problems worth solving.

Days 31–60

Run outbound to those 100 accounts (short, personalized sequences).
Track open/reply/booked and tighten messaging.
Do 2 trainings/events (ERE/SourceCon) to sharpen sourcing processes.

Days 61–90

Standardize your guarantee (e.g., 90-day replacement).
Publish 4 quick case notes (problems solved, timeframes).
Decide where to use splits (off-niche or overflow).
Manage the funnel: aim to lift submit→interview and interview→offer first.

State snapshot (quick orientation)

License/bond commonly required (especially if you charge candidates): NY (state), NYC (city), NJ, IL, MA (license/registration + bond ~$3,000; general exemption if employer-paid only except domestic), CT, PA, MD (bond ~$7,000), MN, NV, ND, DC.
No single statewide “employment agency” license for employer-paid firms (still check local rules): CA (bonds for certain services; talent agency license is separate), FL (talent agency rules; E-Verify threshold for some employers), WA (business license + city endorsements), TX, and often AZ, OR, CO, GA, VA, etc.

Also watch industry-specific regimes: talent agencies (entertainment) and temporary staffing/W-2 or PEO (co-employment) have different obligations.

FAQs (direct and useful)

Do I need a license to start a recruiting firm?
It depends on state/city and who pays fees. If you ever charge candidates, many states treat you as a regulated employment agency (license/bond). If you charge only employers, you may be exempt from an “employment agency” license in some places but still need local business registrations and must follow EEO/consumer rules. NYC and Massachusetts are good examples of nuanced regimes—understand the definitions before you launch.

What should my fee be?
Use directional benchmarks from your research—contingency ~20–30%, retained ~25–35%—and price by scarcity, complexity, and service level. Keep packages simple and tie them to deliverables (intake → Position Profile → shortlist cadence → interview prep → close plan).

Can I run fully online?
Yes. Many firms do. You still need entity, contracts, privacy/record retention, and compliance (EEO, FCRA, CAN-SPAM/TCPA, ADA). Pair a lean ATS/CRM with an outreach tool that manages opt-outs and a VOIP/SMS solution that respects consent rules.

How do I get clients early?
Start with a crisp ICP, two offers, and 100 accounts. Personalize outreach (short, value-led), join split networks for reach, and participate in NAPS/ASA plus ERE/SourceCon to build relationships and skills. Measure open/reply/booked and double down where response is highest.

How do I avoid ghosting and fall-offs?
Shorten response times, clarify process steps, and prepare both sides for interviews. Coach counteroffers with data and role context rather than scare-stats; your research notes that the popular “80% leave after a counteroffer” claim lacks solid backing.

Do I need insurance?
At minimum, consider Professional Liability/E&O and Cyber given that you handle resumes and other PII. It’s a practical risk-reduction move for client confidence and your own peace of mind.

What’s a realistic time-to-fill?
Your research cites an average around 41 days in 2024 reports, but it varies widely by role, level, and process. Track your own submit→interview, interview→offer, and offer→accept to spot friction and improve cycle time.

Bring it home (and get help if you want it)

Dimensional Search is a national network of independent executive search firms, combining niche specialization, a high-touch Client Focused™ process, and modern tools/training to help new firms ramp faster.

For founders: Join Our Recruitment Network to launch with methodology, brand, and ongoing training.
For hiring leaders: Find Executive Talent Now and connect with experienced niche recruiters to fill critical roles.

We’re here to bring people and possibilities together—and help you build a firm that lasts.