How to Set Up a Recruitment Company

Recruitment is unusually cheap to start. No stock, no premises, no equipment beyond a laptop and a phone. That low barrier is why so many agencies launch and why so many stall — the hard part was never setup, it was building a pipeline before the savings run out.

Rules vary by country, so treat what follows as the shape of the decision rather than legal or financial advice, and check the specifics where you are.

Decide what you are before anything else

The most consequential early decision is what you specialize in, and it is the one people postpone because narrowing feels like turning down business.

Answer three questions concretely. Which roles do you recruit for? Which industry, and what size of company? Which geography? "Technology recruitment" is not an answer. "Backend and platform engineers for Series A to C fintechs in Germany" is — it tells you who to call, which candidates to build relationships with, and what to say when someone asks what you do.

You can broaden later. Starting broad and narrowing is much harder, because you never build a reputation for anything.

Permanent, contract, or both?

This decision shapes your cash flow more than any other, so make it deliberately.

• Permanent placement bills a one-off fee, usually a percentage of salary, when someone starts. Simple to administer, but income is lumpy and there is often a rebate period if the placement does not stick.
• Contract placement bills a margin on hours worked, every week or month, for as long as the contractor stays. The income is recurring and far more predictable — but you usually pay the contractor before the client pays you, which needs working capital.

Most agencies start permanent because it needs no funding. If you intend to do contract work, understand the cash gap before the first placement rather than after it.

The legal and financial setup

1. 1Register the business in whatever form is standard where you are, taking advice on liability and tax.
2. 2Open a separate business bank account on day one. Mixing personal and business money is the most common early mistake and it is tedious to unpick.
3. 3Get professional indemnity and employer’s liability cover as required locally. Some clients will not sign without evidence of it.
4. 4Have your terms of business drafted or reviewed properly. This is the document that decides whether you get paid when things go wrong.
5. 5Register for data protection where required, and understand your obligations — you will be holding a lot of personal data about candidates.

Terms of business deserve the most attention. Fee percentage, when it becomes payable, payment period, the rebate scale if someone leaves, and what happens if the client hires a candidate you introduced through another route. That last clause is what protects you from the most common way agencies lose fees.

What to set up before your first client

Keep this list short. The temptation is to spend the first month on a logo.

• A way to store candidates and clients that is not a spreadsheet. Set it up while you have no data, because migrating later is the expensive version.
• A professional email address on your own domain.
• A simple one-page site saying what you do and how to reach you. It exists so people who were referred to you can check you are real.
• A LinkedIn profile that states your niche plainly.
• A way to raise invoices and track whether they are paid.

Branding, an office and a team can all wait. Revenue cannot.

How much money do you need to start?

Enough to cover personal costs for longer than you expect. The gap between starting and the first fee landing is usually three to six months for permanent recruitment — you need to win a client, work a role, place someone, wait for them to start, then wait out payment terms.

Contract work is worse before it is better, because you fund the contractor’s pay in the interim. Plenty of viable agencies fail because the founder ran out of runway while the business was working.

The first year in practice

Expect most of it to be business development, which is the part most founders enjoy least and are least practiced at. Your existing network is the highest-yield source of early clients, so tell people what you are doing before you launch rather than after.

Two habits matter more than anything else in that first year. Keep every conversation recorded, because your future pipeline is built entirely from people who said "not right now". And protect a fixed slot each week for prospecting, because once you have live roles they will consume every hour you do not defend.