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Losing key personnel is a major hit to any small business, as time spent searching for replacements and training new hires costs money and stunts business growth. According to National Federation of Independent Business (NFIB) statistics, the number of people hired to replace an employee is twice the number of people hired to fill a newly created position. Quitting is by far the most common means of separation from a small company, whether due to job dissatisfaction or competition from other employers.

Clint Smith, founding partner at Nashville marketing firm Emma, says his company relies on a "coffee chat" system in which potential employees meet informally with supervisors and staff. "It seems very casual, and we're talking and laughing and relaxed, but behind the scenes, our employees are getting a hand in the decision," Smith says.

By allowing current employees to meet and even have a say in whether an individual is hired, management gains more perspective in determining if someone is the right fit, all the while enabling existing employees to feel engaged. When hiring someone, it's also a good idea to implement a 30-day trial period—an additional measure that helps ensure you've found the right person for the job. Problems that surface early with an employee will likely get worse over time, so it's beneficial to let someone go as soon as you discover that he or she isn't a good fit. Plus, as Susan Goyer, leader of Nashville HR firm Aabakus, points out, although small business owners are often loath to terminate an employee, Tennessee law does not require that one provide a specific reason for firing an employee during a trial period.

Once you've found the right person, it's important to maintain the corporate culture that likely played a role in the employee's decision to accept the job in the first place. Little things, like taking employees out to lunch, starting an office bowling team or on-the-job competitions, are relatively inexpensive ways to build a sense of camaraderie. "Many small employers operate like families," says Jim Brown, NFIB's Tennessee director, adding that this gives such businesses an edge in building loyalty and retaining personnel.

Along those lines, Kevin Maxfield, director of the Tennessee Small Business Development Center in Chattanooga, suggests that employers celebrate birthdays and recognize professional achievements to nurture a team atmosphere. He also stresses that if employees know how much they matter, they're likely to stick around longer.

"Employees always feel like they are contributing more—and generally are—to a small business than they would to a larger company," Maxfield says.

Goyer, who says employees also appreciate a boss who realizes that they have lives outside of work, points out that it's helpful to afford employees flexibility. "Things happen in life," Goyer says. "The plumber comes in at 9 a.m., so someone needs to be half-an-hour late. Or someone's kid is sick and needs to go to the doctor."

When it comes to retaining employees, however, perhaps the biggest hurdle for small businesses is the benefits package. Brown says 52% of all startups are unable to offer health plans because such plans are often too expensive, especially for businesses in the first few years of operation.

Luckily though, Goyer says most people "don't go through the classifieds looking for benefits; they're looking for a good job." Whatever your company's status with health care, be generous when and where you can. It matters to employees that you're at least moving in the direction of a full plan, even if you can't offer one at the moment.

In the meantime, reward employees with some of those culture-related perks, and remember that most employees are working at a small company for much the same reason that company was started—the freedom and excitement of helping a business grow.

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