Amongst the types of problem faced by production managers in a wide variety of Canadian industries, those concerned with growth and change are encountered frequently and are especially severe in small firms. This paper proposes and tests the hypothesis that as small companies grow they pass through alternating phases of good and poor performance. During the latter phases there is a high probability of failure brought about by common problems in a homogeneous group of small companies in an industry. The analysis of data so far supports the hypothesis in commercial printing firms of up to 70 employees, but requires modification for larger companies,