8 out of 10 Small Business Owners Say "Sales Down Due to COVID-19" Struggling with Adjusted Working Hours and Workforce Reduction

Small Business Association Announces Results of 'Small Business Operational Status Survey'

Closure notice in front of a store in Seoul. Photo by Yonhap News

[Asia Economy Reporter Kim Heeyoon] Small business owners affected by sales declines due to the impact of the novel coronavirus infection (COVID-19) have responded by reducing working hours and cutting staff.

The Korea Federation of Small and Medium Business (KFSB) announced the results of the "Small Business Status Survey" reflecting this on the 21st.

The survey was conducted from October 13 to November 3 last year via phone, email, and online questionnaires targeting a total of 1,000 general small business owners nationwide engaged in wholesale and retail trade, lodging, and food service industries (700 active small business owners and 300 closed small business owners).

According to the survey, 80.2% reported that their business sales were affected by COVID-19. As countermeasures against COVID-19, 24.4% responded that they adjusted working hours, and 19.2% reduced existing staff.

The motivation for starting a business was identified as "economic motivation for greater income than other career paths" at 39.6%, followed by "no other alternatives, for livelihood" at 21.8%.

The average preparation period for starting a business was 8.1 months, with 39.9% preparing for 1 to 3 months and 28.5% for 4 to 6 months. The average startup cost was 61.3 million KRW. The biggest difficulty when starting a business was securing management funds at 41.3%, and the biggest difficulty during business operation was sales at 47.2%.

Regarding the employment impact of the minimum wage increase, 77.0% reported being affected. Due to the increased labor cost burden from the minimum wage hike, 50.9% confirmed a reduction in employment. As responses to the minimum wage increase, 36.1% reduced wages of existing staff, and 19.4% cut existing staff.

The main cause of business closure was poor sales at 70.3%. The most difficult aspect during the closure process and at the time of closure was securing living expenses at 68.0%. Regarding government support policies needed at the time of closure, 34.3% requested household livelihood stabilization funds, and 20.7% requested support for re-employment or restarting a business.

The awareness rate of small business-related support programs was 35.3%, and 42.2% reported utilizing such support programs.

Kim Imyong, Acting President of the Korea Federation of Small and Medium Business, said, "The motivations for small business startups, difficulties during operation, and issues related to closures have been empirically investigated," adding, "Various practical support programs for small business owners who are responding to the minimum wage increase and the COVID-19 crisis by reducing staff should be actively implemented."