Most defense tech founders discover the cost structure of recruiting firms at the worst possible moment. After a search takes four months, produces three unqualified candidates, and ends with a placement fee that equals 25 percent of a first-year salary. By then the damage is done. Understanding how recruiting models actually work before you engage a firm is not optional. It is the difference between a search that costs you a role and one that closes it.
The Two Models You Will Encounter
Defense tech founders typically encounter two recruiting models. Retained search and embedded recruiting. They are fundamentally different in structure, cost, and accountability. Most firms will not explain the difference clearly because the one that benefits them most is not always the one that benefits you.
Retained search works like this. You pay a firm a percentage of the role's first-year compensation, split into installments. One third at kickoff. One third at shortlist. One third at placement. The firm is paid regardless of whether the hire works out. Their incentive is to close the search, not to close the right search.
Embedded recruiting works differently. You pay a fixed monthly fee for a dedicated recruiter who works inside your organization. No placement fees. No percentage of salary. One flat rate regardless of how many roles you fill that month. The firm's incentive is aligned with yours because their continued engagement depends on your continued satisfaction.
What Retained Search Actually Costs at Your Stage
For a pre-IPO defense tech company hiring at the Director to VP level, retained search fees typically run between 25 and 33 percent of first-year total compensation.
On a VP of Engineering role with a $250,000 total compensation package, that is a recruiting fee between $62,500 and $82,500.
On a Principal Engineer at $200,000 total compensation, that is $50,000 to $66,000 per search.
If you are running three to five searches in a hiring cycle, the math becomes unsustainable quickly. A company that fills five roles in a year at the senior level can easily spend $300,000 or more in placement fees alone. That is before accounting for the cost of a wrong hire, a failed search, or a placement that does not make it past 12 months.
What Embedded Recruiting Actually Costs at Your Stage
Embedded recruiting replaces the per-placement fee model with a fixed monthly retainer. At ALAC HR Solutions, that means one flat monthly cost for unlimited searches with no additional placement fees.
For a company running three or more active searches in a given month, embedded recruiting almost always costs less than retained search. For a company with predictable quarterly hiring targets, embedded recruiting provides cost certainty that retained search cannot.
The hidden advantage is alignment. When a firm is paid per placement, every conversation is a closing conversation. When a firm is embedded, every conversation is a quality conversation. The incentive shifts from filling the role to filling it right.
When Retained Search Makes Sense
Embedded recruiting is not always the right model. There are situations where retained search is the correct choice.
Single critical hires at the C-suite level where confidentiality and market discretion are the primary concerns. A CEO search or a Chief Revenue Officer search where the wrong approach to the market could damage relationships before a conversation is even had.
Companies that are not yet at a hiring velocity that justifies a monthly retainer. If you are hiring one person this quarter and have no visibility into the next quarter, a retained search for that specific role may be more cost-effective than an ongoing embedded engagement.
The distinction matters. A firm that recommends embedded recruiting for every situation is not thinking about your specific problem. Neither is a firm that recommends retained search for every situation.
The Questions to Ask Before You Sign
Before engaging any recruiting firm, ask these questions and get clear answers in writing.
What is the total cost if you fill three roles this quarter? Get a number, not a range.
What happens if the placement does not work out within 12 months? A firm that does not offer a replacement guarantee is telling you something important about their confidence in their own work.
Who is actually running your search? The person who sells the engagement and the person who runs the search are often different people. Know who you are buying before you sign.
How many other searches is your dedicated recruiter running simultaneously? Embedded means dedicated. If the answer is more than five other companies you are not getting embedded recruiting. You are getting a shared resource at an embedded price.
The Model That Fits Pre-IPO Defense Tech
Pre-IPO defense tech companies are not Fortune 500 companies running one executive search every two years. They are building teams fast, often across multiple technical disciplines simultaneously, with a hiring bar that most recruiters cannot accurately calibrate.
The retained search model was not built for that environment. It was built for a slower, less technical, less mission-critical hiring cycle.
Embedded recruiting exists because the companies doing the most consequential work in the country needed a model that was built for their actual problem. One that aligns incentives, reduces cost at scale, and keeps a dedicated operator inside the hiring process from kickoff to close.
That is what ALAC HR Solutions was built to deliver.
If you are trying to figure out which model fits your current hiring situation, book a call. We will give you a straight answer in 24 hours and tell you if we are the right fit.