How should a small business manage online reviews?

Reviews, regardless of whether they’re good or bad, should always* be answered. I asterisk always because sometimes, you can’t “hug your haters” without inflaming more upset. But in general, you should never leave a bad review alone. When you do, it gives the impression that the company doesn’t care about problems or complaints from customers. When you reply to positive reviews it often encourages more people to leave reviews and prompts interactions with the brand, knowing that they are going to be heard.

To remedy a bad review I suggest a response following some guidelines: 
 
If negative, choose whether the post needs sympathy or an apology. Not every complaint is valid, not every error requires an apology. Whichever you choose, always be authentic, but be professional and polite. If you can, without causing harm to the business, offer to help or to mend things. (Customers will notice that you strive to provide great service.) Keep your response short and clear. Say just enough to provide closure.
 
When it comes to fake reviews, these are typically from people who are upset with a business or person - sometimes they give themselves away in the details. You can reach out to them personally if you have their contact information, and ask them how you can help adjust their experience so that they may reconsider their statements. But the bad news is that sometimes vendors (like Yelp) like the drama, and will elevate negatives (which are fake or duplicates) over positives (which are valid) in hopes you’ll purchase advertising from them. It’s crummy but true.
 
In all cases, you’ll want to try to use your best manners, try to accept responsibility where necessary, and think "How would my grandmother feel receiving this response?".

At the end of the day, we’re all emotional people and we all have our biases and goals. Sometimes they get stunted inadvertently or on purpose by other businesses, we just have to take the high road and aim to deliver the best customer experiences to avoid these problems if at all possible.