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Six of 10 self-employed businesses die before age five, says tax service

Published: 29 Apr. 2025, 19:21 Updated: 29 Apr. 2025, 19:47

A passerby walks across a street full of small-business restaurants in a neighborhood in Magok in Gangseo District, western Seoul on March 11. [YONHAP]

Six out of ten self-employed businesses in Korea close within five years of opening, with survival rates varying widely depending on the type of business, according to data from the National Tax Service (NTS).

The one-year survival rate for the 100 most common consumer-facing businesses dropped to 77.9 percent in 2023, after steadily rising from 77.8 percent in 2019 to 79.8 percent in 2022, according to the NTS on Tuesday.

The analysis was based on national tax statistics from the past five years, from 2019 to 2023. The 100 common consumer-facing businesses refer to retail, food, lodging and other sectors closely tied to daily life.

The data showed that the longer a business operates, the lower its survival rate becomes. As of 2023, the three-year survival rate among those that opened in 2020 and remained active through 2023 was 53.8 percent.

Out of 548,200 newly established businesses in 2020, only 295,034 were still in operation in 2023. The five-year survival rate dropped to 39.6 percent, indicating that six out of ten businesses either closed or changed sectors within five years of opening.

In 2023, the largest number of new businesses were in online retail, hansik (Korean food) restaurants, and coffee and beverage shops. Among the top 20 sectors with the most new businesses, hair salons had a one-year survival rate of 91.1 percent, followed by guesthouses and pensions at 90.8 percent, and convenience stores at 90.3 percent.

A shop with a notice that its is doing a clearance sale is seen at a basement mall in Jongno District, central Seoul on April 28. [NEWS1]

“Online retail businesses, such as those running shopping malls, showed relatively low survival rates at 69.9 percent,” said an official from the NTS. "Comestic stores and grocery stores also had lower-than-average figures, with 74.2 percent and 77.3 percent 1-year survival rates, respectively."

Among the top 20 sectors, the three-year survival rate was highest for hair salons at 73.4 percent, followed by guesthouses and pensions at 73.1 percent and private academies at 70.1 percent. These were significantly higher than the overall three-year survival rate of 53.8 percent.

On the other hand, online retail had a 45.7 percent three-year survival rate, followed by snack bars at 46.6 percent and fast food chains at 46.8 percent, indicating they all failed to surpass the halfway mark.

An ad for fast loans is seen posted near a downtown area of Seoul full of small-business restaurants on April 25. [NEWS1]

Looking at age groups, snack bars had the lowest survival rate among business owners under 40 at 41.9 percent, while pubs had the lowest survival rate among those aged 40 to 60 at 46.7 percent.

There were also noticeable differences in survival rates within similar sectors. For example, convenience stores showed a survival rate of 69.1 percent, while independent grocery stores without brand affiliation had a much lower rate of 54.3 percent.

Among popular dining options, bakeries had a three-year survival rate of 58.5 percent, followed by coffee and beverage shops at 53.2 percent, pizza and hamburger outlets at 51.0 percent, and fried chicken restaurants at 45.4 percent.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY JANG WON-SEOK [[email protected]]