This paper is an exploratory study into small business failure in Queensland. It was stimulated by the claims of small businessmen in 1975 that an abnormally high number of businesses were failing at that time. The period covered by the study is January 1,1970, to December 31,1976, and the overall objective is to investigate the nature and causes of small business failures. Another objective is to compare 1975 with the other years in the study. The population of small businesses used for the study is the proprietary companies that were wound up by the Supreme Court of Queensland.
Writers from the U.S JL and Aus tra1i a provide the generally accepted reasons for failure of small businesses which, up to the early 1970's, were considered to be the lack of the various management skills. The picture changed in 1975 when cash was included as a separate reason. Before this it was considered to be a management fault to be short of cash. The small businessman is particularly at risk because of cash needs while his firm is less than five years old. There is also an underlying predisposition to failure in the risk-taking nature of the entrepreneur who often starts his own firm equipped with a technical skill, an ambition but insufficient cash and management skills.
Conclusions are that more failures than usual did occur in 1975, that younger small businesses are more likely to fail and that cash is a major reason for young small business failures. The finding that deficits left behind by failed proprietary companies is increasing in amount (the average was $96 000 per failed company in 1976) lead to the recommendation that directors be made responsible to creditors in the same way that sole traders and partners are.