Encryption primarily involves mixing up text to make it unreadable. This prevents unauthorized people from getting meaningful content from a message, file, folder, USB drive, or even an entire hard drive. The main benefit of using encryption is that data is protected during storage and/or transmission.
The main reason it is important for a small business is liability. Almost all businesses collect, store, and transmit sensitive data like birthdates, social insurance numbers, financial information, and more. A company can actually be sued if sensitive information of this sort is accidentally leaked, shared or used.
Encryption may indeed save a small business from failure.