Contingency vs Retained Recruiting — What's Right for Your SaaS Startup

When you engage a recruiting firm for the first time, one of the first questions you will face is whether to work on a contingency basis or a retained basis. Most founders do not fully understand the difference until they have experienced both. This guide explains how each model works, what you actually get, and how to decide which is right for your situation.

How contingency recruiting works

In a contingency model, you pay the recruiting firm only when you make a hire. There is no upfront cost. If the search does not result in a placement, you pay nothing.

The fee is typically a percentage of the hired candidate's first-year base salary or total compensation, usually ranging from 15% to 25% depending on the firm and the role. For a Founding AE at $100k base, that means a fee of $15k to $25k at the time of hire.

The advantages of contingency are straightforward. You carry no financial risk upfront. You only pay for results. And it gives you a chance to evaluate the firm's candidates and process before committing to a deeper relationship.

The tradeoff is that contingency firms are typically running multiple searches at once. Your role is one of many they are working on. When the market is competitive and the role is hard to fill, a contingency firm may deprioritize your search in favor of searches that are easier to close.

How retained recruiting works

In a retained model, you pay a portion of the fee upfront — typically one third at kickoff, one third at candidate presentation, and one third at placement. This structure means the firm has skin in the game from day one and is exclusively focused on your search.

Retained search is the standard model for senior roles — VP Sales, CRO, Chief Marketing Officer — where the stakes are high and the search requires dedicated effort. The total fee is often comparable to contingency, but the payment structure aligns incentives differently.

The advantage of retained is focus. When a firm is retained, they are not going to walk away from your search if a faster contingency placement comes along. You have their dedicated attention for the duration of the engagement.

The tradeoff is upfront cost and the risk that you pay even if the search does not result in a hire. Good retained agreements include provisions for what happens if the search is paused or cancelled, so read the terms carefully before signing.

Which model is right for your startup?

For most Seed and Series A companies, contingency is the right starting point. Here is why.

• You are testing the relationship. The first search with a new firm is a trial on both sides. Contingency lets you evaluate their candidates, their process, and their communication style before committing to a deeper engagement.

• Your hiring volume may not justify retained. Retained search makes more financial sense when you have multiple searches or a high-priority senior role where dedicated attention is clearly worth the upfront investment.

• Cash is constrained at early stages. Paying upfront before a hire is made is a meaningful ask for a company that is watching its runway carefully.

Retained becomes more compelling as your hiring volume grows. If you are planning three or more searches over a six-month period, or if you are hiring for a role like VP Sales where a bad hire is especially costly, the dedicated attention of a retained engagement is often worth the upfront cost.

The ClosedWon model

We work with most clients on a contingency basis to start. After five or more placements, clients can move to ClosedWon Scale — our retainer model for companies with ongoing hiring needs. Scale clients get a monthly retainer plus a significantly lower per-hire fee, and we function as an in-house recruiting partner rather than a search firm brought in for individual roles.

The right model depends on your stage, your volume, and how much dedicated attention your searches require. We are happy to talk through what makes sense for your specific situation.

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ClosedWon Talent helps growth-stage companies hire GTM talent that actually performs. If you’re building your sales team and want a recruiting partner who understands the motion — not just the resume — reach out here or learn about The ClosedWon Method.