An analysis by the Ministry of SMEs and Startups found that 70.9% of those who closed their businesses did so due to deteriorating profitability and sluggish sales. Seven out of 10 owners who decided to close carried debt, and the average liability amounted to 85.31 million won.
According to the Ministry of SMEs and Startups (MSS) on the 30th, the analysis combined quantitative statistics based on last year's closure status released by the National Tax Service on its National Tax Statistics Portal and a fact-finding survey of 1,500 small business owners who closed. The quantitative statistics focused on the scale and trends of closures, while the qualitative statistics focused on analyzing the background of closures and difficulties.
Based on National Tax Service statistics, the number of business closures last year was 976,000, down 32,000 from the previous year. The closure rate also fell 0.40 percentage points to 8.64%.
The closure rate for the six major sectors where small business owners primarily work—manufacturing, wholesale, retail, food service, lodging, and services—was 11.08%, above the overall average. The closure rate for sole proprietors (9.06%) was also higher than for corporations (5.79%), and the rate was highest for simplified taxpayers.
By sector, retail (15.40%) and food service (15.14%) posted the highest closure rates. Among reasons for closure, business slump accounted for 50.4%, the largest share, rising to 55.7% in the six key small-business sectors. While short-term closures within three years of startup decreased, the share of closures among business sites in years three to 10 increased, indicating that establishments with a certain operating base were also affected by management difficulties.
In a survey of 1,500 small business owners who closed, 70.9% of respondents cited deteriorating profitability and sluggish sales as reasons for closure. The most common cause was fewer customers due to weak domestic demand (62.5%), followed by the burden of expenses such as materials and supplies prices, labor costs, and rent.
At the time they decided to close, 68.5% of respondents held liability, and the average liability was 85.31 million won. It actually took an average of 7.7 months to close, and the biggest difficulty was repaying loans.
The average closure expense was 12.86 million won, with store demolition and restoration expenses taking the largest share. Policies seen as needing expansion included support for closure expenses, support for restarting a business or finding jobs, and repayment deferrals and interest reductions.
The biggest difficulty after closure was a shortage of household living expenses. A high share also said they covered living costs with assets held after closure (33.8%). As for current status, preparing for employment was most common at 41.4%, showing a tendency to prefer stable jobs over restarting a business.
An official at the Ministry of SMEs and Startups (MSS) said, "To build a safety net that enables small business owners to get back on their feet even in crises such as closure, we announced the 'Support plan for small business recovery and restart' in Oct. last year," adding, "We are operating a stage-by-stage support system before and after closure, from diagnosing management crises to swift closure and linking to restarting a business or employment."
The official added, "Through 'crisis sign monitoring' using sales, debt, and fixed-cost data, we will detect management crises early and proactively connect not only to management improvement but also to store demolition and debt-adjustment counseling," and "We will support store demolition costs, business wind-down consulting, and legal advice through the 'Hope Return Package.'"