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Contract / temp vs Permanent
Should a new recruitment agency start with a contract desk or a perm desk?
The verdict
Start perm if you are self-funding and need revenue inside 90 days. Start contract if you have working capital or a funding line, because a contract book compounds weekly and is what gives the business a sale value later. Most durable agencies run perm first, then convert.
Reviewed by James Doyle · Updated 2026-09-16
Side by side
| Factor | Contract / temp | Permanent |
|---|---|---|
| Time to first cash | 6 to 10 weeks after first placement | Invoiced on start date |
| Working capital need | High and rising with headcount | Low |
| Revenue shape | Recurring weekly while the contractor works | One-off per hire |
| Gross margin | 18% to 30% of bill rate | 15% to 25% of first-year salary, one time |
| Risk | Cash and client credit | Rebates and lumpy months |
| Effect on exit value | Raises the multiple — recurring, sticky | Lower multiple unless volume is consistent |
Choose Contract / temp if
- You have funding or backing covering payroll before invoices land
- Your niche has repeat, shift-based or project demand
- You want a business with a sale value, not just an income
Choose Permanent if
- You are self-funding and need cash inside a quarter
- Your network is hiring managers filling permanent roles
- You want to use perm fees to fund a contract book later
Contract is a cash business before it is a margin business
Every contractor you place consumes cash for roughly 52 days before returning any. Ten contractors can tie up six figures. That is not a warning against contract — it is the reason funding is a day-one decision rather than a year-two one.
The upside is compounding. A contractor placed in March is still producing gross profit in November with no new sale.
Perm funds the runway, contract builds the asset
The most common successful sequence is perm billing in months one to six to cover overhead, with contract placements layered in as soon as a funding line is live.
Buyers pay more for contract-heavy books with high redeployment and low client concentration, so the desk mix you choose in year one shows up in your valuation multiple in year five.
Common questions
Can you run contract and perm at the same time from day one?
Yes, and most backed launches do. The constraint is focus rather than capability: the sales conversation, the candidate pool and the cash profile differ, so split them by consultant as soon as you have two people.
How much working capital does a contract desk need?
As a rule of thumb, weekly burdened contractor cost multiplied by about 7.4 weeks. Ten contractors at $1,350 a week burdened is roughly $100,000 before your first invoice settles.
Decision made? Let's build it.
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