A study into the psychology and risk behaviours amongst British entrepreneurs has found that they demonstrate a far more prudent and risk-averse attitude than the general public.
The study, carried out by AXA and Psychological Consultancy Limited, in conjunction with the Association of Business Psychologists, found that small business owners were far more likely to maintain wary, prudent and deliberate (calculated) traits than the general population.
Contrary to stereotypical perceptions of entrepreneurs as maverick individuals with an inherent appetite for risk, the analysis found that the majority (52 percent) of respondents fell within one of three risk types: wary (22 percent), prudent (15.2 percent) or deliberate (14.8 percent) – please see appendix for all nine risk types and definitions.
Moreover, the entrepreneurs surveyed showed far less adventurous characteristics (3.6 percent) than the average public (12.8 percent).
Despite the seemingly conservative approach taken by entrepreneurs, the research found that individuals who are more calm, confident, optimistic, organised, methodical and measured have greater financial resources and may, therefore, be more successful small business owners.
Matthew Reed, Managing Director, Intermediary at AXA Commercial Lines and Personal Intermediary said: “It is perhaps surprising to find out that small business owners are more cautious than their entrepreneurial nature would otherwise suggest. This is encouraging news for brokers as it would indicate SMEs value the security and peace of mind that insurance brings. Brokers are in the best place to advise which products are best suited to this audience, to talk them through all the details, allowing them to make a calculated decision, ultimately, giving them the reassurance they appear to crave.”
The business owners surveyed represented limited companies, sole traders and partnerships. Those involved in partnerships were more likely to be wary, prudent and composed, when compared to their entrepreneur peers; whereas sole traders demonstrated more carefree, intense and spontaneous qualities, suggesting the nature of their roles allows for more flexibility in their decision-making. Those representing limited companies showed a proportionate balance across wary, prudent and deliberate risk types.
Appendix: the nine risk types of entrepreneurs
SPONTANEOUS (7.2 percent of respondents / 11.7 percent of general population): This Risk Type is impulsive and attracted to risk, but distressed if things go wrong. They are emotional and react strongly to disappointment. They may enjoy the spontaneity of making unplanned decisions but may not be exhaustive about gathering information and may miss important details.
INTENSE (11.6 percent of respondents / 10 percent of general population): This Risk Type is anxious and emotive. They invest passionately in people and projects but, haunted by the fear of disappointment, this may become a self-fulfilling prophecy. They feel things deeply and take it personally if these don’t work out. Self-doubt makes them their own most unforgiving critic but it also fuels their drive and determination to succeed.
WARY (22 percent of respondents / 11.3 percent of general population): Anxious about risk but well organised, this Risk Type put security high on their agenda. Vigilant in identifying risk before appreciating potential benefits, they fear that however well it worked for others, things may go wrong for them. Sensitive about uncertainty they are zealous about security and fervently seek to control people and events.
PRUDENT (15.2 percent of respondents / 10.1 percent of general population): This Risk Type is systematic, and conforming. Conservative and conventional, they prefer routine to variety, like operating within familiar procedures and prefer change to be gradual and evolutionary. Generally cautious about new ventures, they find reassurance in sticking to what they know.
DELIBERATE (14.8 percent of respondents / 12.6 percent of general population): This Risk Type is calm, self-confident and experience little anxiety. Any lack of risk awareness is balanced by a desire to do things in a planned and systematic way. Being self-controlled, compliant and usually fully informed, they are unlikely to walk into anything unprepared.
COMPOSED (7.2 percent of respondents / 11.1 percent of general population): This Risk Type is composed and self-confident. Cool-headed, calm and unemotional, their outlook will always be optimistic and untroubled. These people take everything in their stride, seem quite imperturbable and appear to manage stress very well.
ADVENTUROUS (3.6 percent of respondents / 12.8 percent of general population): This Risk Type is impulsive but fearless. They combine a deeply constitutional calmness with impulsiveness and a disregard for custom, tradition or convention. They are imperturbable and seemingly oblivious to risk.
CAREFREE (8.4 percent of respondents / 9.8 percent of general population): This Risk Type is daring, prepared to challenge convention and to make decisions ‘on the fly’. They enjoy challenges in fast moving situations but are impatient with repetitive tasks or working to prescribed routines. Conceptually innovative and distractible, they are not great with details.
TYPICAL (10 percent of respondents / 10.6 percent of general population): The most distinctive feature of the Typical group is that they show none of the extremes that characterise other types. So far as personality and risk tolerance are concerned, they are unexceptional, predictable and similar to most other people. They will not be exceptionally prudent or unusually reckless, neither will they be particularly emotional or extremely calm. Any more pronounced risk taking behaviour is likely to be due to attitudes developed towards particular types of risk resulting from specific experiences.
Notes to Editors
Methodology: the survey of 250 UK business owners was carried out by Psychological Consultancy Limited (PCL), in conjunction with the Association of Business Psychologists, on behalf of AXA Business Insurance. Respondents to the survey represented business owners from Limited Companies, Partnerships or Sole Traders, across a broad range of sectors throughout the UK. Respondents were aged 18 and over, though the majority (more than three-quarters) were aged between 31 and 60 years. A general population sample of 2,000 individuals was also used to compare the results against.