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3 Common Small Business Challenges and How to Solve Them

In Hiring Strategy — by Erin Engstrom

small town small businesses We live in a world where companies like Google, Amazon, Coke, et. al are omnipresent. But here’s something that may make your jaw drop. According to the most recent U.S. Census data, 99.7 percent of all American employers had 500 or fewer employees.

“Um, that’s still kind of large,” you say. Okay, you’re right. While an organization of 500 employees technically qualifies as a small business, anyone who’s worked at one knows it certainly doesn’t feel that way.

So consider this–according to that same Census data, employer firms comprised of 20 workers or less made up 89.8 percent of businesses. And small businesses employ 57 percent of the country’s private workforce.

Build a great team with our “Small Business Hiring Guide”

It’s obvious: Small businesses are huge drivers of the American economy. And yet, 56 percent of small businesses will fail within the first four years. So what are the common challenges small business owners face? And what resources can help them surmount these challenges?


Half of respondents to a Federal Reserve 2014 small business credit survey said they received none of the financing they had applied for. The reasons banks deny small businesses loans vary. Frequently it’s a matter of of poor or nonexistent credit, or weak cash flow. Believe it or not, sometimes the loan amounts are too small . It costs a bank the same amount to process a $50,000 loan and a $1 million loan, and underwriting the larger loan will be more profitable for the bank.

Brayden McCarthy ( @btmccarthy ), head of policy and advocacy at Fundera, says that post-recession, banks have become more risk averse .

“Small business lending is riskier than large business lending. Small businesses are much more sensitive to swings in the economy, have higher failure rates, and have fewer assets to collateralize the loan.”

Small businesses can still get access to capital, however. Over the last several years, a new crop of loan providers has emerged. Kabbage , which opened in 2011, has provided more than 100,000 small businesses with over $550 million in financing. These loans are similar to credit lines: Although small business owners can gain access to as much as $100,000, they do not have to borrow the entire amount. Rather, they can take only what they need.

The loans are short-term –they don’t exceed six months–and interest can exceed 12 percent. Still, for small businesses looking for a cash injection to facilitate quick growth, lenders like Kabbage may offer the perfect solution.


Small businesses have so many ways of marketing themselves today–SEO, paid search, email marketing, contests, coupons, referral programs. It’s overwhelming to think about all the ways to generate new business. And unlike larger companies, you don’t have the resources to try your hand at everything.

It goes without saying that social media is an affordable and potentially very effective mode of marketing. It’s a great tool for businesses across industries. But author and small business expert Melinda Emerson ( @smallbizlady ) says small businesses often spread themselves thin by trying to engage customers on every possible channel–and frequently, the customers just aren’t there.

“Go for depth rather than breadth here. Find one to three sites your customers do spend time on, and focus your efforts there. Deliver so much value on these few sites that people rush to click ‘like’ or ‘follow.'”

If you’re a bricks and mortar business, don’t forget about the power of non-digital marketing. The brewery across the street from me generated a ton of buzz throughout the community by connecting with the local neighborhood association. Prior to opening, the owner would bring beer to association gatherings, pass out free T-shirts, and just generally prove himself to be an upstanding person with the neighborhood’s best interests at heart. As a result, neighbors flocked to the brewery after it opened, a constant crowd lined up outside the door for a month.

You don’t have to offer people free booze to effectively connect, either. New York Times bestselling author and former ABC News small business contributor Susan Solovic ( @SusanSolovic ) says sponsoring a Little League team or 5K race can also work well. The key is to locate your customer base and show value.


The challenge of hiring is especially acute for small businesses because when your team is small, each member’s impact is magnified. Particularly if you’re a startup, those first employees have the potential to shape the long-term outlook of your organization.

Unfortunately, founders and small business owners aren’t necessarily the people best to hire for their companies. Jay Goltz ( @JaySmallBiz ), founder and CEO of Artist Frame Services, says entrepreneurs are actually sometimes the worst at hiring for their companies : They tend to be people persons and as such lack skepticism; they talk too much about the company and not enough about the candidate; and they’ve got too much on their plate already.

Here are Recruiterbox, we’re dedicated to providing recruiting software for small businesses . Of the 1,200 businesses we count as customers, the vast majority employ 200 workers or fewer. And applicant tracking systems are great–they make it easy to collect applicants in one place, collaborate with team members and broadcast your openings on social media and job boards. As an ATS software provider, we’re obviously big fans of ATS software! But there are a few other hiring solutions that might be right for you, too.

Job boards attract millions of candidates each day–and seemingly almost as many job openings. For a small business, without the resources for paid placements, job boards may seem like deep, shark-infested waters where your openings sink and drown. But it needn’t be this way.

Small businesses are frequently niche businesses, and the internet is full of niche job boards perfect to address their staffing needs. Some of our favorites include Food and Drink Jobs for the hospitality industry and theCreativeloft , which spans a wide range of creative industries–from graphic design and photography to music and entertainment to fashion.

Another one of our favorite job boards is We Work Remotely , which brings us to another hiring tip–hiring remote workers. If your business is exclusively online, hiring remotely can offer myriad advantages. Immediately, you 100x the pool of candidates, so you’ve got more–and more quality –candidates to choose from. Candidates across geographies will also be more diverse–people from San Francisco and Oklahoma City and Raleigh are all going to have distinct life experiences and ideas to bring to the table. Another advantage of remote teams is that you also get coverage across time zones, which is especially helpful if you’re providing customer service.

As a small business owner, you know it can be hard to stay competitive. You may lack the financial and human resources of big businesses, but you’ve got some advantages, too. Your processes aren’t as entrenched and you can be more nimble in just about every aspect of business. It’s easier for you to connect with your community, and you can consider creative hiring solutions. It takes strategy and out-of-the-box thinking, but you can beat the odds and be among the 44 percent of small businesses surviving (and hopefully thriving) four (and hopefully more) years on.

Photo courtesy F.D. Richards

About the author
Erin Engstrom is the web content strategist at Recruiterbox. I’m in Chicago for now, but hope to take advantage of Recruiterbox’s remote workplace and do the digital nomad thing. Relax and eat the elephant one bite at a time.

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