He currently keeps all his contacts in Excel, makes notes in Outlook, has only 20 to 30 customers and therefore feels that the use of a CRM system would be wasted. He does however admit that sometimes he forgets things.
To answer the question posed by the title of this post, a lot depends on the type of small business and the customer engagement model, as you should remember that the origin of contact management systems such as Goldmine and ACT were aimed at the solo insurance agent and were very successful in the early 1990s, even though the software had to be installed locally.
There certainly is scope for him to make use of a more formalised system. With the advent of online CRM software, for a relatively small monthly outlay he can gain access to a robust system which will easily handle the contact management fundamentals of his business. This is also ideal to have a process where long term follow ups are recorded, as well as a history of every meeting with the customer. One needs to take a longer term view and be in a position to re-engage with customers sometime in the future and at least have a reference point as to the last discussion, previous orders etc. If you only look at a CRM implementation in the “here and now” you may not see the longer term benefits.
Excel can over time become very unstructured and messy, with the resultant capability to lose or overwrite data and even just miss things that are essentially in lists.
My advice for him is to consider just using out of the box functionality, there is no real need or justification to customise the system in any way, and to just start using some of the really great functionality that is available from day one.
Good record keeping is always good.