According to the latest survey from the Business Map of the Ministry of Development, Industry, Commerce, and Services (2024), Brazil registered more than 3.8 million new companies 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 companies in the country, 23.7% of businesses close within two years, according to Sebrae-SP data.
ToJhonny Martins, accountant, lawyer, and vice-president of theSERACThe main factors leading to early closure are related to poor financial management, lack of tax planning, and uncontrolled operational costs. "The entrepreneur believes they are prospering by selling more, but they do not realize they are diluting margins, generating tax liabilities, and consuming cash flow with inefficiency," warns Martins.
Although the increase in revenue, the acquisition of new clients, 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 of indicators, the company grows outward and implodes from within," he states.
Common financial mistakes and their consequences
Among the most common misconceptions in expanding companies, Jhonny Martins highlights the lack of separation between personal and business finances, the absence of daily cash flow control, and decision-making based solely on revenue, disregarding profitability. "The businessman often confuses cash on hand with profit. This operational myopia compromises planning and the sustainability of the business," he explains.
Another common mistake is expanding the operation without reevaluating the tax burden. Martins observes that many companies maintain tax regimes that are inadequate for the new size of the organization. "The result is higher taxes than necessary and the risk of penalties for tax non-compliance."
To avoid these bottlenecks, the executive recommends implementing a professionalized financial management, even on a small scale. "It is not necessary to start with a CFO, but it is essential to have active accounting, control tools, and periodic reports that indicate contribution margin, average ticket, default rate, and break-even point," he advises.
Tax planning should also be considered part of the growth strategy. "Periodic analyses can generate significant savings and prevent surprises with the Tax Authorities. Each new product, service, or geographic expansion should be accompanied by a specific tax assessment," he emphasizes.
Furthermore, 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 intuition risk sinking just when they seem to be thriving.
Seven mistakes that compromise growing companies — and how to avoid them
According to Jhonny Martins, these are the main misconceptions that lead promising companies to premature closure:
- Mixing personal and business financesHow to avoid:Keep accounts separate and formalize the pro-labore. Avoid informal withdrawals from the cash register.
- Lack of daily cash flow controlHow to avoid:Use management tools to monitor entries and exits in real time.
- Decisions based solely on billingHow to avoid:Analyze contribution margin, fixed costs, and break-even point before expanding operations.
- Negligence in tax planningHow to avoid:Periodically reevaluate the tax regime and adjust it to the size and activity of the company.
- Unreviewed expansion of the tax burdenHow to avoid:Consult specialists for each change in scope, billing, or operating model.
- Disregard financial indicators as a basis for decision-makingHow to avoid:Monitor metrics such as default rate, average ticket, and profitability regularly.
- Lack of minimum financial management structureHow to avoid:Have an active accounting and consistent reports, even in smaller companies.
Companies that adopt a management approach guided by numbers 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 Jhonny Martins.
