Beefing up agro-business incubation
According to the recently published statistical yearbook of national taxes, 690,000 small businesses closed in 2014. Among them, 170,000 restaurateurs closed their businesses, and 43 percent closed down within one year of opening. Small business owners are struggling in intense competition. They are also pressured by rises in rent, product costs and labor expenses. While market conditions are not favorable for new entries, the number of new restaurants is actually growing. The baby boomers born between 1955 and 1963 are retiring and choosing to open restaurants due to low entry requirements. And restaurant franchise companies are competing to lure them in and expand.
We have already seen middle-class Koreans using early retirement packages to start a small business without being fully prepared during the foreign currency crisis and seen many of them fail. The negative image influenced the young generation, and start-ups by young people make up only 0.56 percent, six times smaller than developed countries’ average of 3.5 percent.
A start-up should be based on entrepreneurship and differentiate itself with bold challenges and innovative ideas in new fields. But when people start a business to make a living, they follow other success models. And since they cannot compete with already established businesses, they often fall behind and many of them end up shutting down.
In the barren start-up environment, some entrepreneurs accomplish success with creative items in the agriculture and food industries, including the restaurant business. Interviews with them show that they are mostly young businessmen who understand the trend of smart technologies. In the age of smart technologies, consumers determine the originality of products and ideas, and a fairer environment for success can be expected.
Aspiring entrepreneurs should focus on training to enhance creativity and foster a pioneering spirit and passion. Authorities should provide infrastructure assistance to offer them on-site experiences. In Korea, starting up a new business requires larger capital compared to other countries due to the unique contract term of “business premium.”
Therefore, incubating systems should be implemented to enhance the success rate and reduce the pressure of success. For example, the Korea Agro-Fisheries Trade Corporation operates a restaurant incubating facility in the basement of aT Center in Yangjae-dong, southern Seoul, and the trial operation confirmed that the youth unemployment problem could be relieved by offering middle-aged people with opportunities of a second career and young people with less risk of failure. Government and public agencies could utilize unused spaces to expand incubating facilities for various industries to help future entrepreneurs become rising stars in business with new challenges and dreams.
by Kim Young-han, Professor at the Agro-Food Marketing Training Institute of the Korea Agro-Fisheries Trade Corporation