Small business owner‐managers and their attitude to risk

Small business risk is a particularly pertinent issue for researchers as there is a strong association between small business owner‐managers/entrepreneurs and risk by virtue of the high failure rates of small firms. The objective of this study was to uncover situations encountered by owner‐managers/entrepreneurs that they perceive to involve an element of risk. More importantly, it seeks to understand how owner‐managers behave when faced with such “risky” situations. A qualitative study was undertaken with owner‐managers of small firms operating in a wide spectrum of industry settings. While great variation was encountered between the entrepreneurs, areas of commonality were distilled and it was shown that the key situations owner‐managers deemed to be risky were those pertaining to cash flow, company size, entering new markets or new areas of business, and entrusting staff with responsibilities. Furthermore, it was shown that the two key tools used to manage these risky situations were the use of managerial competencies and networking.