Small Business Failures: an Analysis of Why and What Can Be Done to Prevent It

This paper examines small business failures, looking for reasons within the firm as well as external factors that make success more difficult for smaller than larger businesses. Chapter I gives a definition and description of small businesses, and looks at the special role of small business in American ideology. Chapter II examines the aggregate factors underlying business failures: in particular, the role of the business cycle in determining the business failure rate. Chapter III presents the major internal reasons for failure from the standpoint of the individual firm, which depends mostly on the quality of the small business owner-manager. Chapter IV examines the external factors that make it difficult for small businesses to succeed. The differential cost on the capital markets for small and large enterprises is examined and the manner in which federal expenditure policy discriminates in favor of big business is analyzed. Chapter V presents a number of recommendations for government policy changes to aid small businesses. Chapter VI presents a summary of the four preceding chapters and a conclusion.