Three out of Four Small Business Owners Say "This Year Is Harder... Cause of Economic Downturn"

Small Business Association '2024 Small Business Management Outlook Survey'
96% of Respondents Say "Need for Expanded Financial Support Policies"

Three out of four small business owners expect their business to become more difficult this year. They cited reasons such as weakened consumer sentiment due to economic downturn, rising financial costs, and high inflation.

The Korea Federation of Micro Enterprise Associations announced the ‘2024 Small Business Management Outlook Survey’ on the 18th. This survey, conducted with 925 small business owners, asked about last year’s performance, difficulties, and this year’s outlook.

Small Business Association '2024 Small Business Management Outlook Survey' Results. (Source: 2024 Small Business Management Outlook Survey)

“Worsening Compared to Last Year”… Negative Outlook Increases

The survey shows that 74.8% of small business owners have a negative outlook on their '2024 business prospects.' Specifically, 37.3% responded 'will worsen significantly,' and 37.5% said 'will worsen somewhat.' Meanwhile, 17.2% answered 'will remain at the current level,' and only 7.2% expected 'some improvement.'

When asked about ‘2023 business performance,’ 73.4% responded 'poor,' which is slightly lower than the negative outlook for this year. This indicates that more small business owners expect conditions to be worse than last year.

In particular, when comparing last year’s business performance by employment size, smaller businesses experienced a tougher year. The percentage responding 'poor' was 78.8% for those with no employees or only family members working, 69.7% for 1?2 employees, 58.3% for 3?4 employees, and 56.3% for 5?9 employees. The smaller the business, the worse the management performance. However, regarding this year’s business outlook, concerns about management were high across all small business owners regardless of size.

Consumer Contraction and Financial Costs Are the Biggest Issues

The biggest reason for expecting worsening business conditions this year was 'weakened consumer sentiment due to economic downturn' (71.2%). This was followed by 'increased financial costs due to rising debt and interest rates' (56.8%) and 'rising costs due to high inflation' (55.8%).

This is not much different from the causes of difficulties faced last year. When asked about the degree of difficulty caused by various factors last year, with options ranging from ‘very difficult,’ ‘somewhat difficult,’ ‘neutral,’ ‘somewhat easy,’ to ‘very easy,’ the percentage responding ‘difficult’ was highest for price increases of raw materials and supplies (91.3%), increased financial costs due to high interest rates and loan repayments (89.1%), sales decline due to consumer contraction (88.3%), energy costs (87.6%), fixed costs such as rent (86.4%), intensified competition (83.5%), and labor costs and manpower shortages (80.0%).

However, there were slight differences by industry. The beauty and hairdressing service sector cited 'impact from weakened consumer sentiment' at 93.3%, and the lodging and food service sector cited 'labor costs and manpower shortages' at 85.9%, both higher than the average, indicating that difficulties vary somewhat by industry.

Reasons Small Business Owners Expect Deterioration in Business Performance in 2024. (Source: 2024 Small Business Management Outlook Survey)

96.3% Call for Expanded Financial Support Policies

The most needed policy for small business owners was ‘expansion of financial support for small businesses,’ with a response rate of 96.3%. This was followed by 'relief of energy cost burdens' at 93.8%, 'customized support by life cycle' at 92.7%, 'improvement of minimum wage system and manpower support measures' at 89.1%, 'strengthening regulations to prevent large corporations from encroaching on local markets' at 88.9%, 'Platform Fair Competition Promotion Act' at 84.3%, 'digital transformation support' at 83.6%, and 'online sales channel support' at 80.7%.

Cha Nam-su, Head of Policy Promotion Headquarters, said, “As of the third quarter last year, outstanding loans for self-employed individuals reached 1,052 trillion won, setting another record high, and the management of small business owners is heading toward deterioration.” He added, “This survey once again confirmed the voices from the field calling for revitalization of domestic demand and resolution of high-cost structures. Therefore, comprehensive and effective measures must be prepared to restore the vitality of small business owners.”