Purpose – The purpose of this paper is to address an important gap in the literature by investigating the relationship between organizational climate and performance in small businesses. Design/methodology/approach – Data were collected from 100 retail pharmacies in Sydney, Australia where a manager and up to three staff members and three buying customers were interviewed in each pharmacy. Findings – Supportive climates tend to be associated with higher organizational performance (i.e. financial performance, staff satisfaction, customer satisfaction) in small retail pharmacies, and may reduce staff turnover. Practical implications – The results suggest that managers should consider creating warm and supportive organizational climates to enhance business performance, employee job satisfaction and organizational commitment, and increase employee tenure. Originality/value – This paper is among the first to empirically establish a direct link between organizational climate and the performance of small businesses, in particular in retail pharmacies. Both financial and non-financial measures of performance confirm reports based on larger firms that performance is enhanced in the presence of more supportive organizational climates. A further benefit of supportive climates, namely lower staff turnover in small businesses, was also evident.