Asia-Pacific Journal of Business (아태비즈니스연구)

KNU The Institute of Management & Economy Research (강원대학교 경영경제연구소)
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Analysis on Factors Influencing the Achievement of Break-even Point among the Creativity and Skill-based Sole Proprietors

1인 창조기업의 손익분기점 도달 영향요인 분석

  • Kim, Sun-Young (Small Business Policy Research Center, Seoul Credit Guarantee Foundation) ;
  • Lee, Byung-heon (Department of Business Administration, Kwangwoon University)
  • 김선영 (서울신용보증재단 소상공인정책연구센터) ;
  • 이병헌 (광운대학교 경영대학)
  • Received : 2021.02.28
  • Accepted : 2021.03.25
  • Published : 2021.03.31
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Abstract

Purpose - The break-even point refers to the point where total profit and total cost coincide, and from this point on, the entrepreneur's decision-making takes a different route. Strategic decisions can be made for more efficient operation and eventually for more likelihood for growth and sustainability if a startup figures out when it recoups the investment and switches to a net profit. Design/methodology/approach - 748 creativity and skill-based sole proprietors in manufacturing industry were examined to demonstrate the effect of the entrepreneur's entrepreneurial experience and education level, the business launch preparation time, or the self-financing on the achievement of break-even point. Findings - While the business launch preparation time lowered the likelihood of reaching a break-even point, self-financing increased the likelihood. As a result of further analysis by subdividing into subgroups according to skill level, only the business launch preparation time was statistically significant in the highly skilled industries. In the low skilled industries, in addition to the business launch preparation time, the CEO's education level and the self-financing were statistically significant. Research implications or Originality - The longer the business launch preparation time, the higher the start-up cost, which increases the burden of initial cost recovery, and the agile response to market changes is thereby delayed, resulting in the business idea losing its appeal. Self-financing not only provides stability and strong motivation for the business operation but also promotes careful spending which contributes to the achievement of break-even point. In particular, it is found that practical experience is more useful than theoretical knowledge in low skilled industries. Due to the limitation of secondary data based on the recollection, the time required to reach a break-even point, percentage of financing sources, etc. may include cognitive errors. In addition, variables are not included that explain the characteristics of creativity and skill-based sole proprietorship, so it is necessary to exercise caution with the actual application.

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