According to the latest survey from the Ministry of Development, Industry, Trade and Services Business Map (2024), Brazil has registered over 3.8 million new companies opened between January and December. However, the mortality rate remains high: around 1.4 million were closed in the same period.
In São Paulo, the state with the highest number of active companies in the country, 23.7% of businesses cease activities within two years, according to data from Sebrae-SP.
According to Jhonny Martins, an accountant, lawyer, and vice-president of SERAC, the main factors leading to early closure are linked to poor financial management, lack of tax planning, and out-of-control operational costs. “The entrepreneur believes they are thriving by selling more, but does not realize they are diluting margin, generating tax liabilities, and consuming cash due to inefficiency,” warns Martins.
Although revenue growth, gaining new customers, and territorial expansion are celebrated as signs of success, the specialist warns about the invisible risks that come with this growth. “Without cash flow control, tax planning, and reading indicators, the company grows outwardly and implodes from within,” he states.
Common financial mistakes and their consequences
Among the most common misconceptions in companies in the expansion phase, Jhonny Martins highlights the lack of separation between personal and business finances, the lack of daily cash flow control, and decision-making based solely on revenue, disregarding profitability. “The entrepreneur often confuses cash on hand with profit. This operational myopia compromises business planning and sustainability,” he explains.
Another common mistake is expanding operations without reassessing the tax burden. Martins notes that many companies maintain inadequate tax regimes for the new size of the organization. “The result is higher taxes than necessary and the risk of fines for tax misclassification,” he says.
To avoid these bottlenecks, the executive recommends implementing professional financial management, even on a small scale. “You don’t have to start with a CFO, but it’s essential to have active accounting, control tools, and regular reports that indicate contribution margin, average ticket, default rate, and breakeven point,” he advises.
Tax planning should also be treated as part of the growth strategy. “Periodic analyses can generate significant savings and prevent surprises with the tax authorities. Each new product, service, or geographical expansion should be accompanied by a specific tax evaluation,” he points out.
In addition, Martins emphasizes that financial indicators should not only serve for monitoring but must support strategic decisions. “There is no sustainable growth without data. Businesses that scale based on intuition run the risk of sinking just when they seem to be thriving,” he explains.
Seven mistakes that compromise growing companies — and how to avoid them
According to Jhonny Martins, these are the main mistakes that lead promising companies to premature closure:
- Mixing personal finances with businessHow to avoid: Keep accounts separate and formalize pro-labor. Avoid informal cash withdrawals.
- Absence of daily cash flow controlHow to avoid: Use management tools to track entries and exits in real-time.
- Decisions based solely on revenueHow to avoid: Analyze contribution margin, fixed costs, and breakeven point before expanding operations.
- Neglecting tax planningHow to avoid: Periodically reassess the tax regime and adjust it to the size and activity of the company.
- Expansion without reviewing the tax burdenHow to avoid: Consult specialists for each change in scope, revenue, or operating model.
- Ignoring financial indicators as a decision basisHow to avoid: Regularly monitor metrics such as delinquency, average ticket, and profitability.
- Lack of a basic financial management structureHow to avoid: Have an active accounting and consistent reports, even in smaller companies.
Companies that adopt a number-driven management and maintain financial predictability have greater negotiating power with suppliers, access to more competitive credit, and are more attractive to investors. “Financial organization not only protects the business in times of crisis but also enhances the company’s value in the market. In a highly competitive environment, it is an invisible but decisive asset,” concludes Johnny Martins.
