According to the latest survey from the Business Map of the Ministry of Development, Industry, Trade, and Services (2024), Brazil recorded over 3.8 million new businesses opened between January and December. However, the mortality rate remains high: about 1.4 million were closed in the same period.
In São Paulo, the state with the highest number of active businesses in the country, 23.7% of businesses cease operations within two years, according to data from Sebrae-SP.
For Jhonny Martins, 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 uncontrolled operational costs. ‘The entrepreneur believes they are thriving by selling more, but they don’t realize they are diluting margins, generating tax liabilities, and consuming cash inefficiently,’ warns Martins.
Although increased revenue, gaining new customers, and territorial expansion are celebrated as signs of success, the expert warns of the invisible risks that accompany this growth. ‘Without cash flow control, tax planning, and reading indicators, the company grows outwardly and implodes inwardly,’ he states.
Common financial mistakes and their consequences
Among the most recurring mistakes in expanding businesses, Jhonny Martins highlights the lack of separation between personal and business finances, the absence of daily cash flow control, and making decisions based solely on revenue, disregarding profitability. ‘Business owners often confuse cash on hand with profit. This operational myopia compromises planning and business sustainability,’ he explains.
Another frequent mistake is expanding operations without reassessing the tax burden. Martins notes that many companies maintain tax regimes unsuitable for their new size. ‘The result is higher taxes than necessary and the risk of penalties for tax misclassification.’
To avoid these bottlenecks, the executive recommends implementing professionalized financial management, even on a small scale. ‘You don’t need to start with a CFO, but it’s essential to have active accounting, control tools, and periodic reports that highlight contribution margin, average ticket, delinquency, and break-even 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 tax authorities. Each new product, service, or geographic expansion should come with a specific tax assessment,’ he points out.
Additionally, Martins emphasizes that financial indicators should not only serve for monitoring but must also underpin strategic decisions. ‘There is no sustainable growth without data. Businesses that scale based on gut feeling risk sinking precisely when they seem to prosper.’
Seven mistakes that jeopardize growing businesses — and how to avoid them
According to Jhonny Martins, these are the main mistakes that lead promising businesses to premature closure:
- Mixing personal and business financesHow to avoid: Keep separate accounts and formalize the pro-labore. Avoid informal cash withdrawals.
- Lack of daily cash flow controlHow to avoid: Use management tools to track inflows and outflows in real time.
- Decisions based solely on revenueHow to avoid: Analyze contribution margin, fixed costs, and break-even point before expanding operations.
- Negligence in tax planningHow to avoid: Periodically reassess the tax regime and adapt it to the company’s size and activity.
- Expansion without reviewing the tax burdenHow to avoid: Consult specialists with every change in scope, revenue, or operational model.
- Disregarding financial indicators as decision-making basisHow to avoid: Regularly monitor metrics like delinquency, average ticket, and profitability.
- Lack of minimum financial management structureHow to avoid: Have active accounting and consistent reports, even for smaller businesses.
Businesses that adopt data-driven management and maintain financial predictability have greater bargaining 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 market value. In a highly competitive environment, it’s an invisible but decisive asset,’ concludes Jhonny Martins.
