Do I really need a CRM, or are spreadsheets enough?

If you're just starting out, there's nothing wrong with using spreadsheets until you've made some money and built up your client base. There's definitely nothing wrong with that.

The trouble shows up as you grow. A spreadsheet relies on someone understanding the formulas. Follow-ups slip, because nothing reminds you. You end up re-entering data from the spreadsheet into something else, like your invoicing. Macros are very easy to break. It's hard to see the different revisions, what changed and who changed it. And you can't tell who's editing what at the same time, so there are multiple versions of the file floating around.

You do get some options in between. You can use a tool that turns your spreadsheet into an app, so the sheet you already have gets a proper front end. You can use an off-the-shelf CRM. Or you can go custom.

Off-the-shelf CRM is where most people go first. It's worth knowing what you're buying, and question 7 covers what to look for and when one stops fitting.

As with anything, look at the cost against the value. If the problems above are costing you more than moving would, it's time to move.