Why Small Businesses Struggle to Hire and Retain Talent—and What We Can Do About It

By Valerie Martinelli, MPA of Valerie Martinelli Consulting

(small.news) — Small businesses in the United States have an astoundingly difficult time hiring and retaining talent.

Recent data from the U.S. Chamber of Commerce indicates that as of April 2025, 34% of small businesses had unfilled job openings, with 47% unable to find qualified applicants. These shortages vary by industry, and the overall percentage of SMB’s fluctuates with economic cycles. The challenges are persistent and include

– The scarcity of qualified employees.
– Difficulty in attracting and retaining talent.
– Competition from larger businesses.

Small businesses are the backbone of the economy. We grow the economy and make it run. And we know that when small businesses thrive, the economy thrives. But one of the challenges that SMBs face is the war for talent.

If we can fix this, then small businesses could turn into economic hubs. Our staff do not just keep business running—they solve problems, help us make money with business development, sales, and marketing strategies. They are creative, data-driven, intelligent, and share good ideas. When your staff is thriving, your business runs better.

The Talent Acquisition Challenge

We all see and hear about the processes corporate America has in place. That doesn’t mean they are the right process for your business. Do they align with business strategy? Growth? Goals? Their processes could be unnecessary and expensive for your small business.

By copying these processes, you are not meeting your business goals. Yes—struggling to hire and retain talent because you are not considering your own employer brand. What kind of culture do you want to cultivate? How do you want to engage staff? The retention piece tends to get lost in the midst of it all.

There is also competition with larger firms that have brand recognition. Who has more resources to pay employees and provide them with the benefits and perks that they are looking for? This is why the recruitment process is important. Candidates can see an opportunity for engagement within that process, which convinces them that a SMB would be a great opportunity for their career.

Many of my career coaching clients have expressed their feelings about the overuse of technology in the screenings of resumes, elongated interview processes, and even tests and presentations. A lot of these things dissuade quality candidates from applying. An interview process with 7 interviews and a test or a presentation squeezed in the middle, does not look like anyone knows what they want in their hire.

In fact, quality candidates tend to drop out of these processes in favor of straightforward ones or may oftentimes end up with another offer before interviews can be completed. However, in order to be more straightforward with your hiring process it requires understanding what you are looking for. And how this new hire fits into your organization, and will help it grow.

Candidates currently value purpose-driven work, flexibility, and growth opportunities. Not all SMB’s may provide this equally, but it is about how you intend to engage your employees and demonstrate that they are truly valued.

Learning and understanding what processes feel right for your business is important. It can be as simple as having quarterly 1:1s with your new hire and all of your staff, providing feedback whenever possible, and letting them know that their input, ideas, and opinions are valued.

Meeting The Retention Challenge

Why is this important? Retention matters quite a bit. First of all, hiring costs are important for SMBs. When you are already spending to recruit and hire the right talent, you don’t want to lose them because they are unengaged or do not feel valued. Without the proper processes in place, it leaves SMBs constantly recruiting and hiring. Wasting time and money, and constantly competing with larger firms.

It is also important because, with small businesses, employees tend to wear a lot of hats, which present workload and burnout pressures. Those pressures can be alleviated with the right environment, appreciation, and growth and development initiatives.

Why This Matters Beyond Small Businesses

This matters beyond SMBs as well because if small businesses cannot or do not hire and retain talent, then it impacts local economies, innovation, community stability and growth. There are also policy implications—one of the most common errors is thinking about the issue as business mismanagement. This issue is systemic and impacts small businesses on a broader and wider scale. That is the best way to address it.

What can SMBs do to lean into solving the issue? They need to highlight flexibility, including remote, hybrid, and flexible work options. They can also emphasize culture and purpose to help people feel deeply connected and engaged with their work. Small businesses also can invest in professional development for their staff, even if it’s modest.

They also can build creative benefits and perks that candidates may not find everywhere else, such as:

– Mentorship
– Wellness days or stipends
– Volunteer days
– WFH spending accounts
– Employee recognition programs
– Virtual wellness amenities
– Snack boxes
– Invest into childcare benefits
– Shorter work weeks
– Access to development programs
– Online learning

This is also a call to action for policymakers to provide tax incentives and workforce training programs for SMBs. Small business leaders need to prioritize their talent strategies as seriously as their financial strategies.

I want job seekers not to overlook SMBs because they oftentimes offer meaningful, high-impact work. However, this means that we need to understand that small businesses cannot thrive—or even survive—without the right people.

Solving the talent challenge is not optional; it is essential for the future of local economies. If we want vibrant communities and thriving local economies, we need to make sure small businesses can find and keep the great people who make them possible.

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