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5 February 2020


How Much Does a Phone System Cost for Small Business?

Business Phone Service by Tom Collins

Though email, instant messaging, tweeting and other social media communication have been adopted for business purposes, telephone calling is still among the most significant and personal forms of business communication. Still, despite it's maturing, everyone has experienced the frustration of navigating a phone menu while just wanting to "talk to a real person." Communicating by telephone remains the most personal, and often convenient, way for companies to communicate with their customers leading to the conclusion that investing in voice phone lines isn't optional for modern businesses.

While they're a necessity, telephony can represent a significant financial investment for small businesses. Whether you're looking for an initial installation or replacement, it is useful to know the average company replaces their phone system every seven years. The right selection can meet your needs for years to come.

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Small Business Phone System Costs and Pricing Factors

If you're wondering how much a new phone system will cost your company, factors can vary widely according to your businesses' needs. In this blog post, you'll learn about some of the factors that will affect your small business phone system's final costs, and about some add-on services that can change pricing. You'll emerge with an understanding of roughly how much you can expect to spend on low, medium and high-end small business phone systems, depending on your company's unique needs.

1. Number of Users

How many phone lines does your company require? Analyzing your businesses' user needs can be focused on the total phone lines required. Certain components of your business, such as reception, accounting, or the mail room, may only need a single line for multiple employees. When performing user planning, it's important to understand not only your client's need to reach various areas of your company but employees' possible need to communicate internally.

2. Number of Sites

Is your company concentrated at a single location, or do you have multiple locations that require phone lines? A company with 20 users at a single site's installation costs will be ultimately lower than the cost of installing phone lines at multiple sites. Each location that requires installation can increase the final cost of your small business phone system.

3. Phone Model

It may come as a surprise to some small business owners and information technology specialists, but not all business phone models are the same. Costs can vary drastically depending on whether you select a generic phone model, a medium-range name brand model, or a top-of-the-line name brand model.

Phone features that may or may not be included, depending on your phone model, can include:

  • 3-Way Calling
  • Intercom
  • Automatic Callback
  • Call Transfer
  • Call Forwarding
  • Call Hold
  • Speed Dial
  • Call Waiting
  • Inside/Outside Ringing

Depending on your small business structure, some or all of your business users may require phones with many optional features fully included.

4. Add-On Phone Services

Basic phone service packages provide businesses with the ability to place and receive local and long-distance calls. However, many companies are finding that choosing add-on phone services can significantly improve productivity and collaboration. Commonly requested add-on services can include:

  • Conferencing
  • Mobility
  • Call center
  • Interactive Voice Response (IVR)
  • Enhanced 911 services
  • Integration with CRM, ERP or other internal systems

While these add-on services can significantly increase client and employee satisfaction with your new phone system, they will increase your costs above more basic phone service packages. Depending on your vendor, these services could be bundled for cost savings.

5. Layer of Redundancy

Redundancy, in technical terms, can be used interchangeably with the business euphemism of having "Plan B." Your company's redundancy needs can vary according to just how critical voice services are to your business's operations. If you're completely unable to function without voice services, you may require redundancy that can quickly restore your phone service in the event of an outage with minimal interruptions.

6. Type of System Selected

The phone system you select can affect the costs of your hardware, maintenance, and installation. It can also dictate the pricing of any add-on services you're hoping to include.

Many small businesses are opting for Voice over IP (VoIP) services, which can save significant money over traditional phone systems while maintaining the high voice quality your customers expect. Whether you ultimately select traditional voice providers or VoIP, your system selection should include attention to the following factors:

  • Cost
  • Level of Service
  • Reliability/Uptime
  • Vendor Customer Support
  • Mobility
  • Calling Features
  • Integration with CRM, ERP, or other internal systems

7. Required Training

All employees who will be using phone lines on a regular or occasional basis will require training on how to effectively operate these new technologies. Training costs can vary according to your number of employees and sites, but you may be able to reduce training costs by managing this process internally. Regardless, it's critical to account for this factor when budgeting for a new phone system.

8. Annual Maintenance Requirements

The annual maintenance costs of your phone system can vary according to a number of factors, including your internal IT resources. If your internal talent is qualified to perform basic troubleshooting and training, your need for external maintenance assistance could be diminished. Provider offerings can vary, but many small businesses opt for maintenance assistance on an annual (contract) or as-needed basis. Contracts typically cover a dedicated amount of hours on-site each year and may include some necessary replacements or modifications to equipment.

Total Estimated Costs of a Small Business Phone System

Depending on the number of add-on services you select, a low-end system may cost your company approximately $200 per handset. A name-brand system will have pricing in the range of $400-$600 per handset. A fully-loaded, top-of-the-line name brand system could equate to approximately $1,000 per handset.

  Low-End System     Mid-Range System     High-End System
Per Handset           $200       $400-600        $1,000

Per handset is a convenient measure of estimated costs. If you know your company will need 20 phones in your office, your handset needs are 20. A high-end system would cost approximately $20,000, which is calculated by multiplying estimated cost by total number of handsets:

20 * $1,000 = $20,000

While a phone system can represent a significant financial commitment for small businesses, annual maintenance costs and training will be far lower than the initial installation. To better understand whether your company's needs are best met with a low, medium, or high-end phone system, consultation with a business telephony expert can provide additional insight into your company's unique needs.

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About the author:

Tom Collins (Twitter, LinkedIn) - is the Director of Enterprise Sales & Marketing for Atlantech Online. He has over 20 years of professional experience in the Internet Service Provider industry and is known for translating technology into positive results for business. A native of Washington, DC, a graduate from University of Maryland (degrees in Government & Politics and Secondary Education), Tom is also a five-time Ironman finisher.