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Hiring to Grow Your Business in a Tight Labor Market

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The U.S. economy is thriving. The latest jobs report shows 100 straight months of increased employment—and while this is great news, it presents unique challenges for small business owners (SBOs), especially when it comes to hiring new employees and retaining current team members.

While many small businesses are poised to grow as a result of the economy, only 29 percent are looking to hire, according to Capital One's latest Small Business Growth Index. That's down from 33 percent six months ago, and SBOs who aren't looking to hire say it is due to current economic conditions (29 percent) and future stock market volatility (27 percent).

Many of the SBOs who are looking to hire are finding that the tight labor market is making recruiting even more of a challenge. It can be difficult to compete with larger businesses that have more resources and can offer higher salaries or more robust benefits packages—and with inability to hire comes an inability to grow as a business.

"In recent years it has become increasingly more difficult to find and hire the right staff, which makes growing the business a challenge," says Stan Shumbo, vice president, Eastern Refrigeration, which specializes in the sales, service, and installation of commercial refrigeration systems. "We are always looking to grow our team, but today's tight labor market can make it feel like an uphill battle."

Of those SBOs looking to hire, most say they are providing industry-leading, competitive salaries to attract employees. Business owners are also providing more benefits, marketing their businesses as a great place to work, investing in differentiated or modern office perks, and providing an option for flexible work environments.

"Offering competitive pay helps us bring in and retain talent, even in a tight labor market," says Martin Solorzano, founder and CEO of staffing firm STAFFED, Inc.

Of course, getting a new employee in the door on day one is not the only challenge. The tight labor market also means that current team members may be more likely to jump ship if a better offer lands in their LinkedIn messages. When it comes to competing with large corporations, small businesses can often be more flexible in what they offer to employees, which can be a major loyalty driver.

Here are a few best practices we see business owners taking to attract and retain top talent:

Benefits and perks can make all the difference.

Business owners should think about unique perks they can offer that larger companies simply cannot.

For example, many of our customers use their Capital One Spark credit card rewards to fund employee parties, send employees and their families on trips, or grant spot bonuses. Some customers, like Ken Jacobus from Good Start Packaging, have even used their credit card rewards to offer healthcare to their employees.

Similarly, SBOs invest in our Capital One Business Advantage Savings account with a high APY to accumulate discretionary funding that can be used for parties and team outings. These perks may make a difference to prospective job candidates and employees.

Beyond the benefits, business owners should focus on culture and work environment. Make it known that you care about your employees, and ask them to participate when deciding on activities, work projects, and incentives.

Develop your team.

According to Capital One's Small Business Growth Index, nearly half (48 percent) of SBOs with $1 to $10 million in revenue are concerned about their ability to hire the right tech talent so their businesses are ready for the future. Rather than looking for a new employee with a very specific skill set, it may make sense to "upskill" a current team member who is interested in additional career development.

Upskilling can help to motivate your workforce and is oftentimes more affordable than hiring new employees.

Flexibility is everything.

As we think about the millennial and upcoming Gen Z workforce, offering flexible work environments is an area that business owners should focus on more. Small businesses may find it easier to introduce remote work options, flexible schedules and better vacation offerings, which today's workers truly value.

Christine Andrukonis, founder and senior partner at Notion Consulting, a change leadership consultancy, says her company's flexibility is helping her attract talent. "Our employees are opting out of larger firms to work at Notion Consulting because we offer a more flexible work environment. My employees can still consult for the C-suite, but are able to have a life outside of work," Andrukonis says.

Learn more about the Capital One Small Business Growth Index here.