Abstract This study aimed to identify the effect of staff development on retail SMEs' performance in Saudi Arabia. By using a random sampling method, this study was conducted on a sample size of 386 subjects, working in various retail workshops in Yanbu, Saudi Arabia; the response rate was 86%. An 11-item scale was developed to measure the effect of staff development on retail SMEs' performance. It consists of three parts: treating staff as individuals, staff delegation, and performance. Structural equation modelling (SEM) was used to test the research hypotheses. This study found that staff development has a positive effect on retail SMEs' performance. This informs the managers that if they work closely with each employee and delegate responsibilities and tasks to their subordinates, the latter may feel satisfied, supported, and encouraged. Thus, the employees would produce more, be engaged in effective behaviour, be loyal to their employer, and avoid neglectful behaviour in the workplace. These implications will increase performance and ultimately assist retail SMEs to survive, especially after the first 5 years of trading