KfW flash poll on the “Gründerplattform” start-up platform: 30% of recent business founders worry about their financial future

• Under pressure from high turnover losses and heavy constraints on standard of living
• Unlike established enterprises, women are particularly affected
• Start-up activity also impacted, as 35% of entrepreneurs set up businesses later than planned

Entrepreneurs who entered the market just recently have been hit particularly hard by the coronavirus crisis. This was the finding of a recent survey conducted by KfW Research in cooperation with the Federal start-up platform “Gründerplattform”. Since the outbreak of the crisis, 40% of interviewed entrepreneurs have seen their turnovers drop by more than half. As a result of their coronavirus-induced losses, 30% of responders believe it is at least likely that they will be forced to give up their self-employment. The impact of the crisis has forced the same proportion to significantly lower their standard of living. Among recent entrepreneurs, women are more often adversely impacted by the crisis than established SMEs.

The pandemic response measures have affected the recently self-employed to varying degrees. Just under half (49%) reported that official contact restrictions have had a particularly severe impact on their business. For 41%, losing patronage as customers choose to stay away fearing infection, for example, is also problematic. One third of the recently self-employed are particularly affected by mandated business closures. A stark gender difference is apparent, with shutdowns severely disrupting business activity for 41% of women but only 27% of men. This difference is mostly due to the sectoral structure. Female responders are more likely to work in sectors that are more heavily impacted by coronavirus restrictions such as hospitality, health and social services as well as the arts, cultural and creative industries. By contrast, restrictions have hardly impacted the male-dominated IT sector.

The more severe impact of the crisis on self-employed women manifests itself in various ways. They are more heavily affected by turnover losses (45% of female responders have lost more than half their turnover since the outbreak of the crisis, compared with 36% of men) and are more likely to experience very significant reductions in their standard of living (32% of women vs. 26% of men). As a result, female managers of young businesses are also more pessimistic about remaining self-employed. One in three (34%) believe there is at least a probability that they will be forced to give up because of the crisis. Among men the proportion is 27%.

While the coronavirus crisis is a threat to the survival of some sole traders, it also influences start-up activity itself. Of the entrepreneurs who started their business since the outbreak, 35% had deferred their self-employment because of the crisis. Uncertain prospects and the temporary loss of the basis for their business were the main reasons for both women and men to delay the launch. But it appears that funding problems and intolerable family pressures caused by the coronavirus crisis also played a role for women more often. The coronavirus crisis will delay start-up activity in 2021 again, as it did last year. Roughly half the responders planning to start a business in 2021 reported that they have moved back the date of the launch.

“The irregular progression of the pandemic requires us to remain flexible in our response. That, however, increases uncertainty for self-employed individuals and those planning to start a business, which in turn is not good for their prospects of success and start-up activity”, said Dr Fritzi Köhler-Geib, Chief Economist of KfW. “The best way to give self-employed persons a perspective and support start-up activity is to prevent further lockdowns. To this end, a ‘whatever-it-takes’ mentality around vaccinations, testing and contact tracing now appears to be urgently needed.”

The current study can be downloaded from:
www.kfw.de/fokus (availabe in German only)

The dataset:
For the current survey of self-employed persons and prospective entrepreneurs, KfW Research surveyed the users registered on the start-up platform (www.gruenderplattform.de) operated by the German Federal Ministry of Economics and Energy, KfW and BusinessPilot online from 4 to 15 February 2021. The survey returned 492 responses from active self-employed persons and 218 from aspiring business founders. 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 existing and aspiring entrepreneurs have been affected.