During the 1950's and 60's the world's developed economies experienced explosive growth, spearheaded by large firms which exploited economies of scale. Over the last decade or so, however, conditions of falling employment coupled with a rising price level have caused disenchantment with the performance, behaviour and accountability of large firms and their :growing bureaucracies, and as a result more attention has been directed toward so-called small business.
Small firms tend to be owner directed, concentrating on a restricted range of specialised output. Mostly they are young and unstructured. Thus, they are flexible and more adaptable than larger, more established and more hierarchically controlled firms. Often they behave in an 'entrepreneurial' way by providing innovative products or services.
The relative ease of formation of small businesses means that new entrepreneurs can get going quickly and simply. Their striving to fulfil their dreams demands dedicated, unremitting hard work, so that a rapid rate of new small business formation can, in economic terms, become a major driving force for technical adaptation and innovation. Because of the social and economic importance of the continuous structural adaptation, which new small businesses can provide, it follows that a low rate of failure (or non-survival) of small business should be regarded as desirable: and that, ideally, failure ought to be restricted to unviable enterprises. The reality is, however, that the overall attrition rate of small business is forbiddingly high, causing economic and social loss .
,Thus it appears that methods of reducing the rate of failure of small businesses could be socially as well as economically useful. This project aims at providing a practical method of reducing small business failure. It does this by analysing its various aspects, and pays particular attention to systems theory.
Appraisements of small firms mostly conclude that shortcomings in information flow and processing are at the heart of small business failures. This study stresses that entrepreneurial attitude is an essential contributing factor. The combination of the two is the root cause of failure.