The Sticker Shock
You just hired a senior engineer at $180K. Your contingency recruiter sends an invoice for $45,000 (25% fee).
Ouch. But at least it’s over, right?
Wrong. That’s just where the costs begin.
The Real Cost Breakdown
Let’s walk through what contingency recruiting actually costs you over 12 months:
Direct Costs
Placement Fee: $45,000 (25% of $180K)
But wait, you’ll likely make 3-4 key hires in your first year. That’s $135,000-$180,000 in recruiting fees alone. For a seed-stage startup, that’s a significant chunk of your runway.
The Hidden Costs
1. Your Time = Your Runway
How many hours did you spend:
- Briefing different recruiters (most operating on contingency)
- Reviewing duplicate candidates sent by multiple firms
- Managing recruiter relationships and expectations
- Interviewing mediocre candidates to “give them a shot”
For founders, every hour spent managing recruiters is an hour not spent on product, customers, or fundraising.
Estimated cost: 40 hours per role × $500/hour founder time = $20,000
2. The Bad Hire Cost
Contingency recruiters are incentivized to get you to hire someone. According to the U.S. Department of Labor, a bad hire costs at least 30% of the person’s first-year salary.
For your $180K engineer who doesn’t work out after 6 months:
- Salary paid: $90,000
- Recruiting fee (non-refundable after 90 days): $45,000
- Team productivity loss: $30,000
- Second search costs: $45,000
Estimated cost: $210,000 per bad hire
Even if only 1 in 4 hires doesn’t work out, that’s a 25% chance of a $210K mistake.
3. Opportunity Cost of Delayed Hiring
Contingency recruiters work on multiple searches simultaneously. Your role is competing with their other clients for attention. If their other client is more likely to hire (easier sell), guess where their focus goes?
Average time to fill a role with contingency: 60-90 days
That’s 2-3 months of:
- Your founding team carrying extra load
- Slower product development
- Delayed market entry
- Competitors gaining ground
Hard to quantify, but easily worth: $50,000-$100,000 in lost momentum
The Competition Problem
With contingency recruiting, you’re often seeing the same candidates as 5-10 other companies. Why? Because recruiters blast the same candidates to multiple clients hoping someone bites.
This means:
- Bidding wars drive up salaries
- Candidates have less context about your specific role
- You’re not seeing the passive candidates who aren’t actively looking
- The best candidates get overwhelmed and withdraw
What Does This Look Like Over a Year?
Traditional Contingency Model:
- 4 hires at $45K each = $180,000 in fees
- 1 bad hire cost = $210,000
- Founder time managing process = $80,000
- Opportunity cost of delays = $100,000
Total: $570,000
Embedded Recruiting Model:
- Monthly retainer $7,500 × 12 = $90,000
- Unlimited hires
- Dedicated focus on your pipeline
- You own all candidate relationships
Total: $90,000
The Difference: $480,000
That’s not a typo. For an early-stage startup, that’s the difference between 6 months of runway and 12 months of runway.
The “Free Until We Hire” Trap
Contingency recruiters love to pitch “no hire, no fee” as if they’re taking all the risk.
But they’re not. You are.
You’re risking:
- Hiring the wrong person (they still get paid)
- Delayed hiring while they work other searches
- Seeing the same recycled candidates as everyone else
- Paying market-high fees when you do hire
What Founders Should Do Instead
Ask yourself: Would you rather pay for activity or outcomes?
Embedded recruiting flips the model:
- Monthly retainer aligns incentives with your success
- Dedicated team owns your entire pipeline
- You control the candidate relationships
- Predictable costs that scale with your growth, not your hires
The math isn’t even close.
The Bottom Line
That 25% fee isn’t just expensive—it’s the tip of the iceberg. When you factor in bad hires, founder time, and opportunity costs, contingency recruiting can easily cost you 3-5x what you see on the invoice.
For startups where every dollar of runway matters, that’s not just expensive. It’s existential.
Ready to see what embedded recruiting costs (and saves) for your startup? Schedule a call and let’s run the numbers together.
