Big ideas from the conversation with Vitor Torres, Contabilizei; The $10B inefficiencies of Brazilian tax & accounting for SMBs; and how to disrupt a regulated industry

Micro and small businesses comprise ~99% of all companies in Brazil. They contribute to ~55% of total jobs in the formal sector and to ~30% of GDP. However, Brazilian entrepreneurs continue to face big challenges that threaten their businesses i.e. high complexity and costs of running operations due to extensive bureaucracy and oppressive taxation.

The Brazilian tax system is complicated and time-consuming. The World Bank calculates that it takes a typical limited liability company that is domestically owned with 10 to 50 employees nearly 2,600 hours per year to comply with tax regulations in Brazil, compared to 187 hours in the U.S. And the average Brazilian company pays about 69% of its net profits to the government, compared to a total tax rate of 46.8% in the U.S., according to the World Bank. Sounds absolutely wild 🤯

So wild actually, that I decided to jump on a plane and head over to Florianopolis for IRL recording with Vitor Torres, founder and CEO at Contabilizei, an online platform that helps small businesses deal with accounting and tax bureaucracy.

Contabilizei was created in 2013 in the city of Curitiba. Today it employs over 1200 people, services 50k++ customers and has raised $100M in funding from some of the best inclusion Softbank and Goldman Sachs. The accounting services for SMBs represent $10B++ market opportunity just in Brazil.

Vitor’s story of building a company in a highly regulated and prone to corruption industry is nothing short of spectacular. Here are my top five ideas from our conversation 👇🏻

1️⃣ Contabilizei’s main competitive moat is a very strong corporate culture

It has the culture of togetherness and unity, that fosters collaboration, innovation and accountability. The biggest challenge is adhering to company’s values and goals, even if it means sacrificing short-term business performance

2️⃣ The aspect of firing fast is difficult but crucial for startups

A bad fit can poison the rest of the team. The longer they stay around the bigger affect they will have on corporate culture and team morale

3️⃣ The hardest part of leadership is managing your own emotions

Self-awareness is the cornerstone of leadership A leader who doesn’t understand their own emotions, motivations and logic cannot lead the company with efficiency and vision

4️⃣ AI is playing a pivotal role in accounting services

AI enables the process automation and provides insights to help businesses make better decisions

5️⃣ Disrupting regulated industries is very hard. Entrenched interests punch you in the nose when you disrupt them

Dealing with regulators required a mix of patience, in-depth understanding of rules and mental toughness. You need to know how and when to fight back

It also sounds like a $10B market ready to be disrupted

Vitor’s book recommendation is ‘Good to Great’ by Jim Collins.

You can watch the full interview with Vitor on Youtube 👀👇🏻

Or listen / watch the episode on Spotify 🎧

Thanks for reading,

Olga