The Number People Focus On
A retained executive search typically costs 20-25% of the placed executive's total first-year compensation. For a VP Sales at $250K base, that's $50-62K. It's a significant number. Most founders who resist executive search get stuck on this number.
The number they rarely calculate is the cost of the alternative.
The True Cost of an Open VP Seat
Cost of an Unfilled VP Sales Seat (Illustrative)
The Cost of the Wrong Hire
According to research cited in Executive Hire Failure Rate, approximately 40% of executive hires fail within 18 months. The cost of a failed executive hire includes severance (typically 3-6 months of base salary), recruiter fees to replace them, productivity losses during the search, and the organizational disruption of the departure and re-onboarding cycle. For a VP-level role, this typically totals $300K-$800K.
A retained search that produces a placement with 90%+ offer acceptance rates and a structured replacement guarantee is not a cost item. It is risk mitigation.
The contingency comparison
Contingency firms charge 15-18% and get paid only on placement. This sounds cheaper. The structural problem is that contingency firms send fast candidates, not right candidates — their incentive is to close quickly, not carefully. A fast wrong hire costs more than a careful right hire that took 45 days longer.
The internal recruiting comparison
Internal recruiting for VP and C-suite roles requires a recruiter with an executive network, time to run a proper search, and the credibility to approach passive candidates on behalf of an early-stage company. Most internal TA teams don't have this. The search takes 4-6 months, produces fewer strong candidates, and has no replacement guarantee when the hire doesn't work out.
The Right Frame
The question is not "is 20-25% expensive?" The question is: "what is the total cost of getting this hire wrong versus getting it right the first time?" When you run that calculation honestly, retained search is almost always the cheapest option for a revenue-critical VP or C-suite seat.
See: Executive Search ROI Framework | Executive Search Fees Guide | Retained vs. Contingency
"41 days. A $275K search. Two firms failed in 60+ days. That's not luck -- that's a different system."
-- Majhi Group placement record. Read the full process anatomy