Also called headhunting, an executive search business is basically a matchmaking service. This service has grown tremendously in the last few years. Few senior positions today are filled without consulting headhunters. The overwhelming majority of senior positions advertised in the classified ads section ask for applications to be made through a search consultant. 

The growth of electronic commerce has contributed to a scramble for skilled senior staff, which seems to be in short supply. Studies show that searches for e-business and Internet managers grew 739 per cent in 1999. Searches in the advertising and public relations industry climbed 45 per cent. Demand for executives earning $1m or more a year grew by 40 per cent. The reason the headhunters are so busy is that capable senior managers are in short supply. 

The executive search business differs with employment agencies in several ways. Employers pay the executive recruiters; whereas employment agencies collect their fees from the people they place. State laws also heavily regulate employment agencies, while recruiters are free of licensing requirements. 

Headhunting services are not cheap. The fee for executive search services range from 25 to 33-1/3 percent of the position's total annualized first year's compensation, including bonuses. The norm for the industry appears to be 30 percent, although home-based establishments normally charge 25 percent to be more competitive relative to office-based competitors. 

Normally, the client pays 1/3 of the anticipated total fee at the commencement of each search assignment. The rest of the fee is paid when the candidate begins his or her employment. Some recruiters work on a retainer basis. Other firms are now also demanding companies pay them a third of any signing-on fee the executive receives and some are even insisting on share options equivalent to a proportion of the executive's first-year entitlement. 

Executive searchers can earn as much as $232,000 a year, according to a survey of 2,545 consultants conducted by Fordyce Letter. Start-ups costs can be minimal, ranging from $2,000 to $10,000 depending on the equipment bought and size of the initial marketing budget. Miscellaneous expenses that are related to the search process, such as telephone charges, photocopying, postage, messenger, secretarial services and consultant time are normally invoiced monthly to the client at the flat rate. 

Additional expenses incurred associated with bringing in candidates to interview, travel that the client requests, taxi expense and meals associated with the interviewing of candidates are invoiced, at actual cost on the month in which they are incurred.

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