1. Business Ideas
  2. Business Plans
  3. Startup Basics
  4. Startup Funding
  5. Franchising
  6. Success Stories
  7. Entrepreneurs
  1. Sales & Marketing
  2. Finances
  3. Your Team
  4. Technology
  5. Social Media
  6. Security
  1. Get the Job
  2. Get Ahead
  3. Office Life
  4. Work-Life Balance
  5. Home Office
  1. Leadership
  2. Women in Business
  3. Managing
  4. Strategy
  5. Personal Growth
  1. HR Solutions
  2. Financial Solutions
  3. Marketing Solutions
  4. Security Solutions
  5. Retail Solutions
  6. SMB Solutions
Product and service reviews are conducted independently by our editorial team, but we sometimes make money when you click on links. Learn more.
Find a Solution Small Business Solutions

Choosing a Business Phone System: 2016 Buyer's Guide

Choosing a Business Phone System: 2016 Buyer's Guide Credit: Lane V. Erickson/Shutterstock

If you're looking to buy a business phone system, there are three important things you need to figure out first:

1. Do you need a full phone system that includes physical office telephones, or could your business get by with a virtual phone service that relies solely on cellphones instead of traditional office phones?

2. If you do need office telephones, what kind of service do you want? You need to choose between a traditional landline telephone service provided by a local or regional phone company and a Voice over Internet Protocol (VoIP)system, which runs over the Internet.

Editor's note: Looking for a phone system for your business? If you're looking for information to help you choose the one that's right for you, use the questionnaire below to have our sister site BuyerZone provide you with information from a variety of vendors for free:

buyerzone widget

3. If you choose VoIP, do you want to house the VoIP system at your business location (self-hosted) or have it hosted by your service provider (cloud-based)?

We will help you answer those questions, but if you already know what you need and just want to see our recommendations for the best business phone systems, visit our best picks page.

If you're not sure yet, read on. We'll fill you in on the benefits and costs of each of the following types of phone systems:

  • Virtual phone systems
  • Landlines
  • VoIP systems
  • Self-hosted VoIP systems
  • Cloud-based VoIP systems
  • Virtual phone systems work by connecting a business phone line to remote workers on their cellphones or home phones.
  • These types of systems work as an extensive call-forwarding solution, wherein calls are transferred to each employee's designated phone (cell or home) when a customer or client calls the main business number.
  • These systems include a variety of features, such as automated receptionists, voicemail, call forwarding, call screening and online faxing.

Pros and cons: This type of service allows businesses with employees working from locations other than the company's office to present a professional face at all times for a low price. It also gives remote workers access to a variety of phone system features that mobile and home phones don't offer. The downside is that virtual systems aren't a full-fledged phone system. Your calls are still processed on your mobile or home phone network. This means you are charged for the call on the virtual system and use up your mobile or home phone minutes.

Best for: Businesses made entirely of remote workers, or sole-proprietor businesses

  • This is the traditional phone system, typically supported by your local or regional phone company.
  • Landlines, also known as public switched telephone networks (PSTNs), are analog systems that run via the telephone company's traditional copper wiring.
  • To run landline service, you need on-premises PBX hardware. This is the hardware that's used to create multiple extensions and allow for phone system features, such as call transferring and call directories.

Pros and cons: Landline systems are a reliable, time-tested solution that many companies are comfortable using. However, many small businesses are moving away from these systems because they can be costly and require maintenance.

Best for: Large corporations that have the budget to pay for them and an in-house IT staff to run and maintain them. Also necessary for businesses without high-speed Internet access.

  • Rather than using the traditional copper wires that landlines employ, VoIP phone systems use the same Internet connection that a company is already using to get online.
  • VoIP systems provide features that previously only large corporations using expensive PBX hardware had access to, such as automated attendants, call queues and computer integration that allows voicemails to be sent to email inboxes and laptops, or desktop computers to be turned into "softphones."
  • VoIP systems provide mobile options that give remote workers access to a business's phone system from their mobile device.

Pros and cons: VoIP systems provide a sophisticated phone system complete with all the bells and whistles imaginable. These systems are easily set up and configured, and are significantly cheaper than landline systems. The downside, however, is that these systems rely on your Internet connection. So, if you're in a community with spotty Internet service, this type of phone system wouldn't work for you. [See Related Story: VoIP for Business: Why It Makes Sense]

Best for: Small businesses that want the functionality of a sophisticated phone system at a reasonable price, and businesses that want their remote employees to have access to the phone system.

Ready to choose a business phone system? Here's a breakdown of our complete coverage:

If you decide that a VoIP system will fit your needs, you now have another decision to make. While landline systems force you to house all of the necessary equipment inside your business, VoIP systems give you the option to buy your equipment outright and self-host, or to rent the equipment from your service provider and have the provider house it in the cloud.

  • A self-hosted, or premises-based, system means that the business pays for and owns the equipment — most notably, the private branch exchange (PBX) hardware that is needed to keep phone systems running. 
  • A PBX system is the hardware that allows circuit switching within an organization's phone system.

Pros and cons: The benefit of a self-hosted system is that you are always in control of your service. You are only relying on yourself to ensure it is up and running and configured how you like it. The flip side, however, is that there is a significant upfront cost, since you have to buy all of your equipment. Additionally, you need someone on staff who can service and maintain the system.

Best for: Businesses that don't feel comfortable using the cloud and want total control over their system and access to equipment at all times. Also good for businesses with an in-house IT team that can set up and maintain a VoIP system.

  • With cloud-based systems, there is no maintenance or hardware, other than IP phones, to worry about. The service provider houses and maintains all of the PBX technology.
  • The cloud offers growing businesses the opportunity to easily add new lines.
  • Businesses typically pay a monthly fee on a per-user basis.

Pros and cons: With cloud-based systems, there is no PBX hardware to purchase and maintain. Your provider takes care all of that for you. You can set up and configure the system for your business, all from your computer. The downside of a cloud-based system is that you aren't in control of the hardware. If the system goes down, you have to rely on your provider to get it fixed as quickly as possible.

Best for: Growing businesses on a fixed budget that don't have an IT staff to operate and maintain PBX hardware.

Now that you know the basics, you might be ready to make some decisions. If so, check out our best picks for business phone systems.

Still not sure if you even need a business phone system or if VoIP is a fit for you? No problem. Here are some questions and answers that may help you come to a decision.

Q: Do I need a phone system?

A: The simple answer to this question is yes. Because so much of a business's success depends on how it presents itself, all businesses can benefit from some sort of business phone system.

"We believe that no matter the size or type, every business should have the tools and solutions needed to present themselves in a professional manner while maximizing their ability to work efficiently and stay connected to customers and co-workers," Jim Gustke, vice president of marketing at Ooma, a provider of business phone systems, told Business News Daily.

Q: Can't my employees and I just use our smartphones for business purposes?

A: While a one-person operation may be able to get away with using just a smartphone, not having a business phone system makes it much more difficult to present a professional image.

"While it may be intuitive, mobile phone plans are simply not set up to offer the same business features that specifically designed business phone systems offer," Gustke said. "For example, mobile phones can't offer a virtual receptionist to answer calls and quickly and easily connect customers with the proper company contacts, or provide important business information like hours and directions."

If you are intent on using your mobile phone for business purposes, you would be better served by using a virtual phone system that gives you the ability to present a professional image while still relying on your mobile devices.

Q: How do I know which phone system is right for my business?

A: The decision really comes down to the resources you have available. You need to consider your budget, whether you are growing business, whether you have an IT staff that is capable of running and maintaining an in-house phone system and whether you have access to a high-speed Internet connection.

Q. What types of businesses are best suited for self-hosted systems?

A: Most likely, large companies are the ones that will use some form of self-hosted system, whether it is a landline or a VoIP system.

"Very large enterprises are likely to continue using the more traditional on-premises approach because they have the existing personnel and infrastructure that make the maintenance of the necessary hardware and system economically feasible," said Aaron Charlesworth, vice president of marketing and product management for VoIP service provider Vonage Business Solutions.

Q. What types of businesses are best suited for cloud-based systems?

A: Cloud-hosted business VoIP systems are ideal for almost any small to midsize business (SMB) with high-speed connectivity and an interest in more business features at a better price.

"With the lower cost structure and the abundance of business-class features, VoIP systems can provide a boost for aspiring SMBs," Charlesworth said.

Q: Is the connection on a VoIP system as good as on a landline?

A: While some users might be concerned about the quality of a VoIP system and how it sounds, the technology has come so far that it's nearly impossible to tell the difference between landline and Internet-based calls.

"It's highly comparable, if not better," David Lee, vice president of platform products for RingCentral, said of VoIP connections. "A lot of carriers have switched to VoIP-based systems, and most folks can't tell the difference."

Q: With a VoIP system, will I have access to my phones if my Internet connection goes down?

A: Many VoIP systems are now implementing steps to ensure you can still receive calls even if your Internet goes down or your power goes out. Vonage Business Solutions system offers a "Call Continuity" feature that automatically reroutes calls to an alternate number, such as a cellphone, in the event of a power outage or loss of Internet.

Q: What types of features are available in a VoIP phone system?

A: While feature-rich phone systems were previously used only by large corporations, today's VoIP options give small businesses the same benefits. Here are some of the features you may find most beneficial:

  • Voicemail
  • Voicemail-to-email
  • Voicemail transcription
  • Call forwarding
  • Call recording
  • Call queues
  • The option of both local and toll-free numbers
  • Interactive Voice Response
  • Interoffice instant messaging
  • Conference calling
  • Automated attendants
  • Extension dialing
  • Ring groups
  • Directory assistance
  • Call transferring
  • Internet faxing
  • Call reports
  • Call monitoring
  • Missed call notifications
  • Integrations with popular programs, such as Microsoft Outlook, Salesforce and Google's services.

Q: Can remote employees access a business phone system?

A: VoIP technology gives employees the freedom to take and make business calls from anywhere, without the need for a business-dedicated cellphone. Business VoIP systems offer smartphone applications and mobility features that give employees the full functionality of their desk phones anytime, anywhere.

"Mobility tools sync them seamlessly to the main office, with caller ID registering each outbound call as originating from the main office," Charlesworth said.

Q: Why should I care if my employees can access the phone system when they're out of the office?

A: These mobility features are helping employers show that their employees are always there to take care of their customers' needs. Whereas previously, employees could use their personal cellphones to speak with clients when they were away from their desk, business phone system mobility tools allow workers to be reached without having to give out their private numbers when they want to be contacted outside the office, according to Lee.

"It allows you to represent yourself with your business identity," he said.

Now that you know the types of phone systems available and what each offers, you need to determine which provider is best for you. To help you narrow down your choices, we would encourage you to check out our best picks for various types of businesses, as well as our complete vendor list, if our suggestions don't fit your needs. A roundup of our best picks, our reasoning for choosing each one and our thorough business phone system provider list can be found here, as well as on our sister site, Tom's IT Pro.

Editor's note: Looking for a phone system for your business? If you're looking for information to help you choose the one that's right for you, use the questionnaire below to have our sister site BuyerZone provide you with information from a variety of vendors for free:

buyerzone widget
Chad Brooks

Chad Brooks is a Chicago-based freelance writer who has nearly 15 years experience in the media business. A graduate of Indiana University, he spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including, local and state government, crime, the legal system and education. Following his years at the newspaper Chad worked in public relations, helping promote small businesses throughout the U.S. Follow him on Twitter.