More than a third of small businesses do not have a formal procedure for dealing with customer complaints, a survey has revealed.
The UK Business Barometer, run by the University of Nottingham Institute of Enterprise and Innovation, found that 39 per cent of small companies have no system laid down for dealing with unhappy clients - leaving their reputation vulnerable within their industry.
The UKBB warned that such a failing leaves the business wide open to negative fallout from complaints, as customers spread their dissatisfaction through word of mouth. It is estimated that for every one unhappy customer, 25 others hear of the complaint.
Thirty per cent of respondents had no established procedure for addressing complaints.
This is despite warnings from management experts that customers can be saved if complaints are dealt with swiftly by staff who have guidance to help them deal with disgruntled clients.
But a spokesman for the Federation of Small Businesses said a lack of formality in dealing with complaints is often a positive thing and can be beneficial for firms who rely on customer loyalty to survive.
Matthew Knowles said that often complaints can be dealt with more effectively on a personal level in smaller companies, without the need for corporate red tape. "The success of most small businesses is based upon knowing their clients and serving their individual needs," said Mr Knowles.
"Because small firms know the people they sell to very well, they can respond to complaints more quickly and more effectively through informal discussions rather than ask for forms to be filled in.
"Instead of leaving their reputation at risk, this more open way of working is a clear advantage for dealing with small businesses over larger ones."