Rules, Regulations and Transaction Costs in Transition Bulgaria

III.B.4 Costs of office maintenance and costs of marketing the products, goods or services
The total office maintenance costs include items, such as rentals, telephone expenses, electricity and heating
expenses. For 75% of the firms interviewed, these costs amount to between 5 and 25% of the total revenues.
However, 8.3% of the firms claim that the office maintenance costs amount to somewhere between 50 and
100%. This could mean either of the following two things:
— either these firms are extremely inefficient and it is impossible to explain how they avoid going bankrupt,
or
— which is in fact more probable, the entrepreneurs interviewed are not fully aware of the amount of these
costs. Most small and medium-sized businesses in Bulgaria are simply unaware of the concept of
financial management. Many owners, managers and chief accountants are not familiar with the
percentage share of various firm expenses. This is due, inter alia, to the lack of understanding about the
importance of this information and to the huge number of reports, statements, declarations and
registrations which are required by the State 35 and are extremely time-consuming for the entrepreneurs.
The largest percentage of such firms is present in the sector of trade, and in Sofia (See Table 22).
Table 22: Responses to the question “What percentage share of your total revenues do you spend on
office maintenance costs (rentals, telephone etc.)?”
Percentage Total
1996
Total
2000
Production Trade Service
s
Sofia Large
district
centre
Smaller
town
Up to 5% 45.4 18.3 31.3 14.3 11.1 9.5 19.4 20.6
5 - 15% 21.3 32.5 21.9 35.7 38.9 38.1 27.8 33.3
15 - 25% 13.9 24.2 31.3 18.6 33.3 19.0 27.8 23.8
25 - 50% 15.7 15.0 9.4 20.0 5.6 9.5 16.7 15.9
50 - 100% 8.3 3.1 11.4 5.6 23.8 8.3 3.2
Over 100% 3.7 0 0 0 0 0 0 0
n/r 1.7 3.1 0 5.6 0 0 3.2
The above data reveals a significant increase in the office maintenance costs since 1996. In 1996, nearly half the
firms maintained their offices against more or less 5% of their total turnover. In 2000, however, the majority of
firms maintain the offices against 5 to 25% of the turnover. The fact that the office maintenance costs of 3.7% of
the interviewees exceed 100% clearly shows that the financial management problems are far from being new.
Quite like in 1996, the costs of marketing a product in 2000 amount to 20% of its selling price on average (See
Table 23).
Table 23: Responses to the question “What percentage of the total selling price of your goods/services
do you spend on marketing?”
35 See below, Audits / Inspections and Reporting.
34