The four numbers on a search desk: average fee, fill rate, cycle time, repeat rate
A profitable search desk runs on just a few core numbers. The first is average fee: the dollar value of a single placement. This is usually a percentage of candidate first-year compensation, but can be a flat number in some markets. To figure this for your own desk, review the last 6 to 12 months and take the mean of the closed deals.
The next is fill rate. This is the percentage of searches you actually close. If you took ten assignments and filled six, your fill rate is 60 percent. Track this by counting every assignment, not just the ones that result in billings. The fill rate can drop sharply if you take on roles outside your specialty, or when clients insist on exclusive arrangements but slow down the process.
Cycle time is the average number of days from search launch to verbal offer acceptance. You need to record each search's start and end date. A two person firm often sees wider swings in cycle time than a larger agency, as a late-stage drop out or a slow client can push the average up quickly.
Repeat rate, or client stickiness, measures how many of your clients come back with a second search within the year. This is usually calculated as the percentage of last year's clients who gave you a new assignment this year. High repeat rate means less time prospecting and more time billing.
Keep reading: The Offer Window: What Happens Between Verbal Yes and Signed Paper
Working out break even billings for a two person firm
Break even is the monthly billings needed to cover all fixed and variable expenses before making a profit. For a small search firm, fixed costs include salaries or draws, rent, insurance, software subscriptions, and professional fees. Variable costs include advertising, data tools, and travel. Add in employer taxes if you pay payroll.
Start by listing every recurring monthly expense. Add up payroll (or owner draws), rent, and regular tools. Do not forget insurance and taxes. For variable costs, estimate an average month based on prior periods. Many firms miss line items like annual software paid up front, so divide annual costs by twelve to get a true monthly figure.
Your monthly break even billings equal the total costs divided by your average gross margin. If your average margin after splits and direct costs is 50 percent, and your monthly costs are 12,000 dollars, you need 24,000 dollars in gross billings just to break even. The real number will fluctuate with deal size, so revisit this every quarter.
Most two person firms see lumpy billings due to the nature of retained and contingent work. You may have to plan for several months with zero revenue and then a windfall when two or three deals clear. This is why working capital and reserves matter as much as headline fees.
How splits are structured between originator, recruiter, and house
The way fee splits are handled often makes or breaks a small firm. In most two person shops, one partner originates business and the other runs search execution, though sometimes both share both roles. The classic split is 50/50 between originator and recruiter, but variations abound.
Originator vs. Recruiter Share
If one person brings in the client and the other runs the search, a 60/40 or 70/30 split is common, with the larger share going to the person who landed the client. Where both partners source leads and work searches together, some firms split all billings evenly, adjusting for effort later if necessary.
House Cut
Some firms also allocate a "house" cut for overhead before dividing the fee. For example, if you charge a 30,000 dollar fee and keep 10 percent for firm expenses, you split the remaining 27,000 dollars between the two partners. This approach helps ensure the firm can cover costs even if one partner is billing much more than the other.
In some models, the "house" is not a separate entity, but simply a pool for taxes, insurance, or reserves. The key is clear agreement up front and regular review, especially as the firm grows or roles change.
Keep reading: How to Write a Contingency Fee Agreement That Holds Up in a Fee Dispute
The guarantee reserve, and why that money is not yours yet
Every placement comes with a guarantee period, usually 60 to 120 days. During this time, if the candidate leaves or is let go, most contracts require a refund, replacement, or credit. For accounting purposes, the prudent operator sets aside a reserve equal to the potential liability for each still-open guarantee.
This means that if you bill 20,000 dollars for a placement, but the candidate is only 45 days into a 90 day guarantee, you cannot treat all that money as profit. Some firms keep these funds in a separate account or at least track the exposure in their books.
The size of your guarantee reserve depends on refund policy and placement volume. Refunds are rare for seasoned operators, but they do happen, and a two person shop can feel a single refund as a real hit. The discipline is to recognize that not every dollar received is available for draws or reinvestment until the guarantee expires.
Placement to payment: mapping the cash gap on a calendar
The cash cycle in recruiting is usually longer than new operators expect. There are several steps between closing a search and seeing cleared funds. It starts when a candidate accepts the offer, but most fee invoices are not sent until the client issues a formal offer letter or until the candidate's start date.
After invoicing, payment terms often run 15 to 45 days, with some clients stretching longer. Even after the invoice is issued, it can take two weeks or more for approval, processing, and bank transfer. If your guarantee period is longer than payment terms, you may need to hold the funds in reserve until the risk window closes.
Mapping this out, a typical search may run for six weeks. Once an offer is accepted, there is a two to four week notice period before the start date. Invoice goes out on start, with payment due in 30 days. Funds may not reach your account until two and a half months after the role was opened, or longer if the client is slow. This lag can stress cash flow, especially for small firms with few placements in process.
Many operators use a simple calendar or spreadsheet to track expected payment dates and guarantee expiry for each placement. This helps with planning draws, tax payments, and investment in sourcing tools.
See how ShortlistLoop handles this for recruiting
Cost per search, including data tools, job board spend, and travel
The real cost of running a search goes beyond time and effort. Each assignment draws on resources that need to be budgeted and tracked. The biggest recurring costs are data tools and subscriptions. This can include LinkedIn Recruiter, contact enrichment tools, and resume databases. Some are billed annually, so operators often miss their impact on per-search costs.
Job board advertising is the next line item. Posting a single targeted ad can run from 300 to 700 dollars for a 30 day window, depending on the platform. Most firms do not advertise every role, but even a few placements a year with heavy ad spend can skew costs.
Travel and client meetings are less common in a remote world, but some markets still expect in-person interviews or client briefings. Even a single trip to a client site can cost 500 to 1,500 dollars when you add airfare, hotel, and meals. For small firms, this can turn a profitable search into a break even or loss if not budgeted correctly.
Finally, some firms allocate a portion of professional fees, insurance, and technology to each search. Divide annual costs by the number of searches run to get a realistic per-search figure. This helps when comparing the profitability of different types of assignments or deciding whether to take on a marginal client.
A model you can rebuild in a spreadsheet at the start of each quarter
Breaking down all these numbers into a working model is the foundation for running a two person search firm with confidence. Start by setting up a spreadsheet with the following columns: average fee, fill rate, cycle time, repeat rate, average monthly costs, splits, and guarantee exposure.
For each quarter, plug in your actuals: number of searches launched, number filled, average fee billed, and the time from search open to invoice payment. Add columns for client repeat rate and guarantee periods still open. For costs, allocate each line item, salaries, software, advertising, travel, across the quarter and per search.
Use simple formulas to map break even: (total costs) divided by (average retained margin per placement). Layer in the lag from offer acceptance to cash receipt. Flag any open guarantee liabilities. This lets you see, at a glance, whether you are running ahead or behind on the key metrics for profitability and cash flow.
Rebuilding this model every quarter keeps your projections grounded in actual numbers, not wishful thinking. If you see cycle times rising or fill rate dropping, course corrections are clearer. You can also model scenarios: what happens if a client pays late, or if you invest more in ads for a tough search?
For many small firms, keeping these figures visible is the difference between steady growth and constant crisis. A system that tracks candidate progress, client feedback, and stage movement in real time can make updating your key numbers easier, keeping the business side as clear as your candidate pipeline. This is where client-facing shortlist and feedback tools such as those found in ShortlistLoop become part of the operator's toolkit.
