Are Business Owners Risk-Takers?

I recently read the following summary, and as a new business owner found it intriguing. During tough economic times like we have now, many business owners, including yours truly, wonder if it was the right decision to start their own business. Thankfully I can still answer with an emphatic yes.

I hope you find this interesting as well.

Chris-

Are Business Owners Risk-Takers? Not When It Comes to Their Finances

Are entrepreneurs financial risk-takers? Conventional wisdom says yes, but a recent research report from the Kauffman Foundation, Business Owners, Financial Risk, and Wealth, suggests otherwise.

Tami Gurley-Calvez, from the Department of Economics at West Virginia University, studied 1989 to 2007 data from the Federal Reserve Board, Survey of Consumer Finances (SCF) to research three questions:

1.) Are business owners generally more or less financially conservative than their non- business-owning counterparts?

2.) Do business owners accumulate more wealth?

3.) Do business owners hold a smaller share of their financial assets in risky stock holdings?

While entrepreneurs are typically portrayed as financial risk-takers, Gurley-Calvez found that when it comes to saving and borrowing, they are actually more conservative than non-business owners. For instance, 45 percent of business owners said it was important to them to save for retirement; just 32 percent of non-business owners said the same. In addition, business owners were focused on saving for the long term; they were more likely than non-business owners to say their savings horizon was five or more years in the future.

Finally, whether investing, saving or borrowing, business owners were more thorough than non-business owners in investigating their financial options. Ninety-one percent said they spent a "moderate" amount of time or more shopping for the best investment or borrowing terms; just 82 percent of non-business owners said the same.

Business owners accumulate more wealth over time than non-business owners. But although business owners showed more willingness to assume above-average risk in return for financial gain, in reality, both business owners and non-business owners invested similar shares of their portfolios in safe assets.

Business owners were less likely to say that an important reason for saving is having liquid cash available. However, they were substantially more likely than non-business owners to say they could borrow $3,000 from family or friends if needed.

They are also more likely to borrow from other sources. In the past five years, 84 percent of business owners had applied for a loan, compared to just 64 percent of non-business owners. And only 23 percent of them had been declined, compared to 31 percent of non-business owners.

Gurley-Calvez thinks perhaps the reason business owners aren't so concerned with liquidity is that they have "a stronger financial safety net." Compared to non-business owners, business owners seem to have more financial resources available to them—meaning that what others perceive as "risky" does not seem that way to them

Source: http://smallbiztrends.com/2010/09/business-owners-risk-takers-finances.html