Voice over IP (VoIP) is a relatively new type of small business phone system that works on your internet connection instead of traditional phone lines. There are major advantages to VoIP over traditional small business phone systems including:
- Lower Costs (save as much as $1,200 per phone line over 2 years)
- Minimal setup/installation
- Less maintenance
- Advanced features like an auto-attendant and call transferring
VoIP call quality is similar to traditional phone service, provided you have the appropriate internet connection. If you are looking for a high quality VoIP service provider we recommend Nextiva, and you can read our full VoIP provider comparison guide here.
What Is A VoIP Small Business Phone System?
If you have used Vonage or Skype you have already used VoIP (stands for Voice Over Internet Protocol) to make a phone call. While Vonage and Skype are generally for personal use, there are many companies, like RingCentral and Nextiva, that specialize in providing VoIP phone systems for businesses.
In this guide we give you a full overview of the ins and outs of VoIP so you can make an informed decision as to whether using VoIP is right for your business.
Cost of Service
The total cost of service for 5 phone lines, including taxes and fees, would be $467.20/month for Verizon and $232.92/month for Nextiva. Verizon also has a one-time setup fee of $385.
Monthly Price for
1 line (with taxes
and fees, using
New York, NY as
an example, no
Monthly Price for
5 lines (with taxes
and fees, no
Fee (5 lines)
Installation (5 lines)
$0 - $700, depending
on number of phone
jacks that need
to be installed
per line for
handsets (5 lines)
$250 to $1,500,
$250 to $1,500,
All business phone
Upgrade for call
recording & admin
$7 per line
$13.35 per line
$8.48 per line
$9.50 per line
Can you transfer
No, this requires
a PBX devices
which is not
offered by Verizon
(5 lines no
for setup fees,
VoIP Phone Systems
There are two primary costs with VoIP, the ongoing cost of the service itself, and the one-time cost of the handsets. Most VoIP providers price their service on a subscription basis, based on the number of lines you use. Generally the cost is around $30 to $60 per line per month after taxes and fees have been added. With this you get a wide range of features, including free local and long distance calling, the ability to transfer and queue calls with music on hold, have calls ring multiple lines simultaneously, and an auto-attendant for callers to direct themselves using their keypad.
Generally speaking you can use a VoIP phone with any provider. The cost of the VoIP handset (the physical phone) can run from around $50 on the low end to several hundred dollars if you want additional features such as a screen for video calls. Since the VoIP phone system is hosted on the internet, there are no installation or maintenance costs.
Traditional Business Phone Systems
With a traditional business phone system you will either have individual phone lines or a Private Branch Exchange (PBX) system. The PBX system is what brings functionality like call transfer, intercom, call Q’ing, group ringing, phone directory etc. to a traditional phone system.
Traditional phone lines average around $50 to $100 per month per line, after taxes and fees, and the cost for handsets is similar to that of VoIP handsets. If you want the additional features mentioned above, then the PBX system hardware can run into the thousands of dollars, especially when you factor in the cost of having an expert install and maintain that system. Also note that not all landline service providers offer PBX hardware, as is the case with Verizon.
Traditional small business phone systems have historically had a large advantage over VoIP phones from a call quality standpoint. However, due to increases in internet speeds and technology innovation among VoIP service providers, this is no longer the case.
The quality of VoIP calls is dependant upon the speed and stability of your internet connection. A typical cable broadband connection can support up to 131 high quality calls simultaneously. A typical DSL connection can support up to 6. To find how many your internet connection can support, check out our VoIP Speed Test.
This assumes, of course, that the same connection is not being used for other bandwidth consuming activities, like browsing the internet. But it’s safe to say that small businesses with a cable broadband connection should be well under the limit, even with a lot of internet browsing activity.
The VoIP phone system is reliant on both your internet connection and electricity. Whereas a traditional phone systems can often continue to operate during a power or internet outage, this is not the case with VoIP. However, many VoIP service providers can automatically route calls to a cellphone or other backup number in the case of an internet or power outage.
Business Phone System Features
Business VoIP and PBX Systems generally provide the following:
- Call Forwarding And Internal Transferring
- Conference Calling
- Office Intercom
Business VoIP systems have several features that are not available with traditional PBX phone systems including:
- Mobility: (Great for sales people and traveling professionals) The ability to use your smartphone as an extension of the office phone system, including the ability to have business calls automatically directed to your cell phone and make outbound calls from your smartphone as your office number.
- Portability: The ability to use any computer or office phone, as your personal extension.
- Flexibility: The ability to redesign your phone system (how calls are routed and handled) on the fly by simply logging into your VoIP provider’s dashboard.
- Just Cool: Having voicemails sent to your email as text messages, find me/follow-me which rings your mobile and home phones as well, video calling, integration with third party applications like CRM, and an e-fax.
Switching from a Landline to VoIP
Switching to a VoIP phone system usually means buying new phones. You can technically use your old phones paired with an adapter, a softphone on your computer, or an app on your cell phone. But to get the most functionality you’ll want to purchase new VoIP handsets. These range in price from $30 for a basic device to several hundred dollars for phones that support HD video conferencing.
When you switch to VoIP you can keep your current phone number. The process is called “porting” and it involves transferring your phone number to the new provider. For Nextiva, it can take 2 to 4 weeks. In order to continue receiving calls during that time, you’ll need to be signed up for both services (your landline and VoIP) until porting is complete.
The Bottom Line
VoIP technology has advanced to the point that it’s no longer merely an alternative to landlines. A VoIP system can provide a business features they were never able to achieve with a landline, while also saving money and improving productivity.