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Most Small Businesses Are Growing, but Many Aren't Hiring

By Daniel B. Kline – Updated Jun 28, 2019 at 5:41AM

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A new survey indicates workers have gotten expensive, but that's not a great reason to stop growing.

Small businesses have generally done well over the past year. Nearly 8-in-10 (79%) reported that revenue grew in 2018, while only 4% said it fell, according to Scalefactor's inaugural State of Small Business finance report (registration required).

Scalefactor surveyed 500 small U.S. business owners (less than 500 employees) in April and May to get a sense for the current state of small business finances. Despite the company growth, half of the business owners surveyed said they had no plans to hire anyone over the next 12 months. That's not always because they don't want to add workers.

The study showed that a number of other factors stopped companies from adding workers.

A help wanted sign.

Finding workers to hire may require getting creative. Image source: Getty Images.

Why aren't small businesses hiring?

Survey respondents cited salary costs as the top reason to not hire four times more than any other reason. That was followed by skills shortage, healthcare costs, and the competitive labor market. And while the labor market may be the thing employers can do the least about, they can work to make their companies as attractive to potential employees as possible.

"It is more important now than ever for SMBs to be the best employer and provide the best place to work for their employees," said ScaleFactor CEO Kurt Rathmann in an email statement to The Motley Fool. "We have seen investments in workplace intangibles over investments in increased payroll make a positive impact on employee retention of our small business customers. When employee experience is of utmost importance, there are only good outcomes."

In a tough hiring market, small business owners need to cast a wider net. That may mean being more open to non-traditional hires -- part-timers, people on flexible schedules, or workers with the right skills who don't have degrees.

If the people you need are too expensive or simply not available, it's important to find other paths to talent. Hiring interns and essentially training your own future workforce might also be a smart place to start.

"Small businesses are able to scale in new ways, which provides them with new opportunities for growth and the ability to succeed without having to fall back on the traditional hiring methods and markers of success," said Rathmann.

Be clever and open-minded

The labor market has gotten tight, but there are plenty of people who need jobs and have skills that aren't getting hired. Hiring the right people, or even finding them, sometimes means dropping traditional metrics or looking outside the box. Some people, for example, have the needed skills but interview poorly. Those workers traditionally struggle to get hired.

As a manager or business owner, you can tap those resources. Consider working with candidates on a short-term or project basis to see if they fit well with your company even if they don't present well during the traditional hiring process.

It may also make sense to scrap the interview process altogether and spend time getting to know candidates. A small business does not need to follow tradition or abide by any of the hiring rules that bigger companies use.

Find candidates that may not fit elsewhere and figure out how to best use those resources. That should result in your company getting the workers it needs at an affordable price, workers who will be loyal to your company and appreciative of you being willing to work outside of how things are generally done.

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