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The #1 Reason Small Businesses Fail to Grow

According to Small Business Trends, over 50% of small businesses fail in the first year, and 95% fail within the first five years. Here are some additional stats that may surprise you:

  • 40% of small businesses are profitable
  • 30% break even
  • 30% are constantly losing money
  • 9% have a chance of surviving 10 years

Businesses, no matter the size, are constantly challenged with finding ways to capture new customers, increase sales, improve upsell and cross sell opportunities and keep existing customers happy so that they will come back time and time again.

small business trends

Small businesses, however, can experience added challenges that inhibit them from growing.  Jay Goltz, a writer for the New York Times, shared the top 10 reasons that small businesses fail to grow.   Among these reasons are varying themes around issues such as leadership, management, personality and cash flow, which sometimes can or cannot be changed.

But, the main reason that really sticks out in my mind as to why a small business can fail is that that the company doesn’t care about customer serviceThis was a surprise based on the fact that providing good customer service is something all businesses, no matter the size, can do something about.  I mean, seriously, we all know the difference between good and bad customer service.

The Cost of Bad Customer Service

When the market is as competitive as it is today and where social media is the channel for airing our discontent, as well as our satisfaction, the cost of not providing good customer service is high.

To put this into perspective, let’s take a look at some facts from a few in-depth customer research surveys:

  • 78% of consumers have bailed on a transaction or did not make an intended purchase because of a poor service experience
  • It takes 12 positive experiences to make up for one negative experience
  • News of bad customer service reaches more than twice as many ears as praise for a good service experience
  • For every customer who bothers to complain, there are 26 others who remain silent
  • A typical business hears from 4% of its dissatisfied customers.  I don’t even want to think about what happens to the rest.

The Cost of Bad Customer Service for small businesses


Do Unto Others As You Would Have Others Do Unto You

I think that people like to be heard, acknowledged and made to feel special which means that they want a level of engagement from companies with which they do business.

You can call me shallow and misguided, but I really like to be treated special and I like to know that my business means something.  I like to be called by my name when I contact a company that I’ve been doing long-term business with.  I like it even more if the business has all my information on file and I don’t have to repeat myself over and over again.

I love it when I walk into one of my favorite stores or restaurants and the staff know me by name, know what I like, where I want to sit and what I like to eat.  It makes me feel special.

Those are just a few ordinary examples of everyday life.  What about when a business goes the extra mile to make you feel special?

Consider the story from an experience that Christina McMenemy  had with Gaylord Opryland hotel where she stayed three years in a row at the annual BlissDom conference.  Christina became enamored with an alarm clock that the hotel supplied in the rooms.  The alarm clock played very soft music and offered the kind of experience that you could experience in a high-end spa. For three years, she tried to find that clock because she said that she had never slept better than when she was using that clock.

Then, one day, she tweeted on the company’s Twitter page the following:

Do Unto Others As You Would Have Others Do Unto You


And , they responded back with:

Twitter customer service


And she responded with:

Twitter response

She didn’t receive a response after that and so continued with the conference with the subject no longer on her mind. When she got back to her room that evening, she found herself face-to-face with not one, but two clocks on her nightstand, along with a handwritten card which said, ““Christina, Thank you for following us on Twitter. We hope you enjoy these spa sounds at home. If you need anything, please let us know. Sincerely, Elizabeth, Nick & Tori.”.

small business customer service happiness

Chirstina said to the hotel, “You reaffirmed that there are still companies out there focused on great service, and you’ve made a lifelong fan out of me. And you’re now helping me get some of the best sleep possible, year-round, which any mother will tell you is a feat worthy of high praise.

CRM Is One of the Secrets to Making Customers Feel Special

70% of buying experiences are based on how customers feel they are being treated.  At the same time, it’s surprising to read that 80% of companies say they deliver “superior” customer service, while only 8% of people think these same companies deliver “superior” customer service.

It’s not too difficult or time-consuming to close this gap and make customers feel special.  It’s all about centralizing your customer data and using the centralized information in smart ways to improve relationships and build your business.

Every small business needs a CRM software. A CRM is a key tool in helping you to centralize your customer information. If you don’t already have CRM software, it’s a good time to consider getting it.  With today’s software-as-a-service solutions, small business CRM is completely affordable and the benefits are priceless.

Here are 4 benefits that your small business can look forward to by using CRM software:

1. Gives you control of all your information in one central place

A lot of small businesses keep their customer information in various places.  It can be through Microsoft Outlook or Gmail, in a Rolodex in an Excel spreadsheet.  At the time the information was captured, you remember the customer and the information and their entire case. Two months down the road, you won’t remember where you kept that piece of information of why you even wrote that note about the customer in the first place.

Since the information is probably kept on your personal PC, others in your company will not have access to the communication trail and this eventually creates problems.  You and others in your business will spend hours trying to find the information and piece together what happened.  A CRM system can help you to forgo all that pain.

It gives you the ability to store, in a central place, various communications with customers such as meetings, calls, emails, etc. and everyone in the business instantly retrieve the customer information.   This creates not only a better experience for the customer, but your business will also save a lot of time and headaches.

2.  Helps you to be more “in sync” with the customer

I or we, for that matter, like immediate gratification.  So when I call a business to have an issue resolved, I expect to tell my story one time and then I expect that the person on the phone gets what I am asking.

There’s nothing more annoying than having to repeat my story over and over again as I get passed to different departments. The more I get passed around and am forced to tell my story again and again, the more annoyed I get.

It’s always such a great pleasure when I come in contact with a business which can immediately help me without hassle.  A CRM software actually helps you to become more “in sync” with your customers because it combines all sales, marketing and customer service data into one database.  It improves the quality of customer communication and responsiveness and the different departments are much tighter connected through the use of the software.

3. Helps you to improve your trustworthiness  in the eyes of the customer

If a sales rep or customer service rep were to tell me that they would call in a week or so to follow up on something, I expect that it will be done.  If it doesn’t, sorry to say, my belief of that person’s word goes down a notch.  If it happens continuously, then my perception of that business goes down a whole lot.  You don’t want this to happen to your business.

I know that people get busy and they forget things.  Especially sales reps and customer service reps.  But, in today’s business, your word should be your bond.  This creates a solid foundation for customer relationships.  A CRM solution can be a valuable tool in helping you to forge trustworthy relationships.  Follow-up activities can be easily created on your customers, you can monitor the various stages that your open sales are at, and you can also be warned if you have a customer that is about to become a lost customer due to lack of attention. No more yellow stickies.  No more customers feeling that they are neglected.

4. Allows you to easily offer relevant products to your customers

Generic messages and generic offers don’t make customers feel like they’re special. But, personalized and targeted content does.

Think about your last car purchase.  If the car dealership was good at building the customer relationship, I wouldn’t be surprised if you periodically received special offers in the mail with regards to new tires, or a reminder of when your next oil change would be and even an invitation to the showing of next year’s model.   All of these messages and offers are relevant to you and your purchase.  This not only keeps the dealership at top of mind, but this also shows you that they do care about your business.

CRM lets you slice and dice your customer data in all sorts of ways so that you can create specific messages targeted towards specific customers and their needs. What better way to show you care?


There are many reasons why a small business can either make it or break it.  Some reasons are out of our control and others, like providing great customer service, is something that can be easily controlled and improved.

So although the number 1 reason that small businesses fail is due to poor customer service, this doesn’t mean that this has to be all small businesses.  The business success criterion is simple – make the customer the center of everything that you do and everything will fall into place from there.

As Zappos, CEO, Tony Hsieh says, “Customer Service shouldn’t be a department. It should be an entire company.” CRM is a key tool to help you do that.

Small business CRM doesn't have to be expensive. If you're on a tight budget, download this white paper to learn more.

What tools does your business use to improve customer service?


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