Small Business Hiring Challenges and What to Do About Them

Running a successful small venture requires good people, and good people have to be hired. Learn strategies that work for small companies.

Small businesses are a crucial economic engine in the U.S., with more than 33 million small firms employing 61.7 million Americans, according to the Small Business Administration. They account for nearly half of private sector employees. 

But a small business is a delicate balance of investment in the business versus a tight bottom line. Running a successful small venture requires good people, and good people have to be hired. That’s a harder endeavor for a smaller shop. 

“We hear about a lot of layoffs from many companies, so one would expect that hiring top talent would be easier,” says Steven Mostyn, chief human resources officer of “However, many laid-off employees are taking a career gap and focusing on themselves and their families, making hiring a bit tricky recently.” 

Challenges of Hiring as a Small Business

Although small businesses run on a small headcount, managing that headcount is a challenge. For one thing, it takes resources to recruit, and small businesses lack the budget of a larger company. They also don’t enjoy the same name recognition. 

“You need top talent to expand, but it’s tough attracting them without the brand power or budgets of big companies,” says Finn Wheatley, a financial expert and risk analyst at The Small Business Blog. “It can feel like a Catch-22.” 

Additionally, small businesses have less money to work with, making competitive compensation a hurdle. And there’s less time to hire, since small teams are stretched across multiple responsibilities. 

“None of my customers have time or resources to quality check, reference and vet the workforce coming onto site,” says Lucy Clarke, founder and CEO of Fixed Construction, which helps construction companies hire vetted workers. 

Hiring Strategies That Work for Small Companies

Thankfully, small firms are also teeming with ingenuity and grit, so they’ve found a number of solutions to the hiring issue: 

Build a Strong Employer Brand

Business branding can attract workers and make sure you get talent that identifies with your priorities. That means giving your company a personality that brings in workers who agree with the direction you’re headed. 

“We’ve focused on building a strong brand that attracts potential employees,” says Eric Eng, founder and CEO of AdmissionSight, a college admissions counseling company. “We’ve highlighted our company culture and our dedication to our employees’ growth and development.”

Eng’s company has invested in promoting its brand on various platforms, with a focus on social media where many job seekers are active. “We’ve also partnered with local universities and attended job fairs to grow our presence and reach out to potential hires,” Eng says. 

Offer Creative Compensation and Benefits

In some cases, workers will choose a job with a less competitive salary if it comes with benefits that suit their lifestyle. Do you offer time off for volunteering, plus a great 401(k) match? Make sure prospective employees know it. 

“We highlighted flexible scheduling, remote options, professional development — perks that attract talent craving work-life balance and growth,” Wheatley says. “Where we couldn’t match salaries, we provided other enticing incentives.” 

Midwest Cards, a dealer of collectible trading cards, offers the full package: “This includes health, dental and vision insurances, HSA and PPO plans and year-end bonuses based on company performance,” says Jim Christy, owner and managing marketing director of the firm.  Also on the menu: a profit-sharing plan and cash balance pension plan. “These add significant value to our compensation package,” Christy says. 

Streamline the Hiring Process

By cutting back on unnecessary steps and automating what you can, you can make it easier for your already-stretched workforce to manage the hiring process. This could mean relying on digital tools to help with portions of the hiring process — or using digital tools for other tasks at your company to free up more time for hiring. 

You can also get ruthless about the resumes that make it to your desk. “To make our process more efficient, we’ve implemented a bold move: automatic rejection for applications without portfolios or signatures,” says Peter Howard, founder and managing director of Phd Design, a graphic design agency. “Automatic rejection if they are addressed to ‘The Manager’ or similar. Automatic rejection if it is 12-point Times New Roman on a white sheet. If they can’t be bothered, then why should we?”

Utilize Referrals

Some of your strongest assets are your current employees. Building an employee referral program can make hiring faster, lower costs to bring in new talent and help you find someone who’s a great fit. 

“Leveraging our existing network for referrals has proved invaluable,” says Jessica Moore, CEO of headwear company SilkyDurag. “People tend to know like-minded professionals.”