KfW flash poll on start-up platform: Impact of coronavirus pandemic hits self-employed workers hard

• 90% report declines in turnover
• 80% plan to use government assistance schemes to remain solvent
• Only 2% of prospective business founders want to abandon their plans, but 40% have put them on hold

A flash poll among 429 self-employed workers and 167 prospective business founders conducted by KfW Research in cooperation with the start-up platform recently showed that 90% of self-employed persons have suffered turnover losses as a result of the coronavirus pandemic. Turnover has collapsed by over 75% for more than half of self-employed persons, and one third report that their earnings have dried up completely. The high losses in turnover prevent many self-employed workers from paying their running costs – an existential threat. Thus, around one third of self-employed workers reported that they had enough cash to tide over the crisis and remain solvent for one month. Another 20% can stay afloat for around two months. Only 32% of self-employed persons have enough cash to remain solvent for more than three months, while a mere 16% would able to survive for six months.

Government assistance such as one-time payouts, short-time work benefits, KfW coronavirus aid loans or tax deferments can ease the acute existential threat for many self-employed workers. Eight in ten self-employed workers (79%) intend to use or have already used one or more of these schemes, and most are the ones that have only limited reserves to ride out the crisis. Seventy-seven per cent of users expect to have enough cash for more than two months.

Many businesses and self-employed workers are attempting to mitigate their loss of turnover in the pandemic by adapting their business model. The many hospitality businesses that have switched from on-premises consumption to takeaway or delivery service have emerged as a role model for businesses and self-employed workers of other sectors as well. More than half (58%) have adapted their business model to the new circumstances at least temporarily.

Besides declines in turnover, the standstill caused by the coronavirus pandemic has further impacts that are making life hard for self-employed workers. Nearly half (49%) have no or limited access to public services such as local government offices and social insurance agencies. More than one third (36%) have less time for business activities because they are at home looking after their children. The coronavirus pandemic has shattered financing plans of 31% of self-employed workers. One fourth (26%) have problems receiving deliveries from suppliers and 13% are under strain from the loss of employees.

In light of the existential threat facing many self-employed workers in the current crisis, it would be expected that many prospective founders will abandon their start-up plans. But apparently that is not the case. The current situation has dissuaded only 2% of prospective founders from starting a business. More than half (57%) are adhering to their start-up plan. What this also means, however, is that start-up activity is likely to shift from 2020 to 2021 because four in ten intend to defer their planning.

“The coronavirus crisis is posing enormous challenges particularly for business founders and young entrepreneurs, as the significant declines in turnover are creating existential worries and concerns over the survival of their business”, said Dr Fritzi Köhler-Geib, Chief Economist of KfW. “But our flash poll also illustrates that the state liquidity aids and further relief measures are working. They are helping self-employed workers to tide over the crisis for longer and hopefully mitigate the standstill. It is also encouraging to see many self-employed persons reinvent themselves in this time of need and adapt their business models to the acute challenges. But what is crucial is that all actors in business and society contribute with their behaviour to keeping the current state of emergency as brief as possible. More will then overcome this crisis.”

The database:
For the current flash poll, KfW Research invited the users registered on the start-up platform
(www.gruenderplattform.de) operated by the German Federal Ministry of Economics and Energy, KfW and BusinessPilot to participate in an online survey on 31 March 2020. Within a week, 596 usable responses were received from 429 active self-employed workers (72%) and 167 prospective business founders (28%, see table). Although the results of the flash poll are not representative because of the way the survey was designed, they do provide an important insight into how self-employed workers and prospective founders have been affected. Most self-employed workers founded their business in the years 2018–2020, but 42% have been self-employed since 2017 or earlier. Most business plans (82%) were originally intended to be implemented in 2020.

The current KfW flash poll can be downloaded from www.kfw.de/fokus (available in German only).