Most startups do not have a recruiting budget. They have a reaction.

Here is how recruiting spending typically works at growth-stage startups: a role opens, someone scrambles to fill it, money gets spent on job postings or an agency, and nobody tracks the total cost. Repeat for every hire. At the end of the year, nobody can tell you what recruiting actually cost or whether that spending was effective.

Setting a real recruiting budget forces you to think about hiring as an investment rather than an expense. And like any investment, it should have a plan and expected returns.

The costs most founders miss

When founders think about recruiting costs, they usually think about external fees: agency commissions, job board postings, and recruiting tools. But those are often a fraction of the total cost per hire. Here is a more complete picture:

Founder and team time. If a founder spends 10 hours per week on recruiting at an implied hourly rate of $200, that is $2,000 per week or roughly $8,000 per month in opportunity cost. For a single hire that takes two months to fill, you have already spent $16,000 in founder time alone.

Job board and tool costs. A LinkedIn Recruiter license runs $10,000 to $15,000 per year. Indeed Sponsored jobs cost $5 to $15 per day per listing. An ATS (applicant tracking system) is $100 to $500 per month. These seem small individually but add up across a year of hiring.

Agency fees. Traditional placement agencies charge 20 to 25% of the hire's first-year salary. For a $120,000 hire, that is $24,000 to $30,000 per placement. If you make five agency-assisted hires in a year, you are looking at $120,000 to $150,000.

Vacancy costs. Every day a critical role sits unfilled has a cost. For revenue-generating roles, this can be calculated directly. For other roles, it shows up in delayed projects, overworked teammates, and missed deadlines. This is the cost most founders underestimate, and it is usually the largest one.

A framework for setting your budget

Start with your hiring plan. How many roles do you need to fill this year? What levels and functions? Then apply these benchmarks:

Cost per hire. The industry average for cost per hire varies widely, but for startups making $100,000 to $150,000 hires, expect to spend $8,000 to $25,000 per hire in total costs (including internal time), depending on your approach.

Budget as a percentage of payroll. A common benchmark is 5 to 15% of new hire first-year compensation for recruiting costs. So if you plan to add $1.5 million in new payroll this year, budget $75,000 to $225,000 for recruiting.

Internal vs. external split. Decide how much of your recruiting you will handle internally versus externally. Internal recruiting is cheaper per hire but requires ongoing fixed costs (salary, tools). External recruiting is more expensive per hire but is variable and can scale up or down.

Three budget scenarios

Scenario A: Do it yourself (5 to 8 hires per year)

Tools and job postings: $15,000 to $25,000 per year. Founder time: $50,000 to $80,000 in opportunity cost. Total estimated cost: $65,000 to $105,000 per year. Cost per hire: $8,000 to $21,000.

This works when hiring volume is low and the founder has bandwidth. The risk is that hiring quality suffers and time-to-fill stretches out.

Scenario B: Embedded recruiting partner (8 to 20 hires per year)

Recruiting partner: $6,000 to $15,000 per month (varies by provider). Tools (often included): $0 to $5,000 per year. Founder time (reduced): $15,000 to $25,000 per year. Total estimated cost: $87,000 to $210,000 per year. Cost per hire: $4,000 to $26,000.

This works when you need consistent hiring support but are not ready for a full-time internal recruiter. The per-hire cost is often lower because someone dedicated to recruiting is simply more efficient at it.

Scenario C: Full-time internal recruiter (15+ hires per year)

Recruiter salary and benefits: $100,000 to $160,000. Tools and subscriptions: $15,000 to $25,000 per year. Training and development: $3,000 to $5,000. Total estimated cost: $118,000 to $190,000 per year. Cost per hire (at 15 hires): $8,000 to $13,000.

This makes sense when hiring volume justifies the fixed cost and you have enough work to keep a recruiter busy year-round.

Tracking what matters

Once you have a budget, track these metrics to see if your spending is working:

Cost per hire. Total recruiting spend divided by number of hires. Track this over time to see if efficiency is improving.

Time to fill. The number of days from opening a role to accepted offer. This directly impacts your vacancy costs.

Source effectiveness. Which channels (referrals, job boards, outbound sourcing, agencies) produce the most hires, and at what cost? Double down on what works.

Quality of hire. After 6 and 12 months, how are your new hires performing? This is the ultimate measure of whether your recruiting investment is paying off.

The bottom line

Recruiting is one of the highest-ROI investments a startup can make, but only if you are intentional about how you spend. A clear budget forces discipline, enables measurement, and ensures you are getting real value from every dollar.

The worst approach is the default one: spending reactively, tracking nothing, and hoping for the best. Even a rough budget is better than no budget at all.