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Choosing a Business Phone System: A Buyer’s Guide

Updated Sep 22, 2023

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  • Follow the steps below when you’re comparing business phone systems to make sure you get a solution that checks all the boxes your small business needs.
  • Already know what you’re looking for? Check out our picks for the best business phone systems for a list of our recommendations.
  • Don’t know VoIP from PBX? Read our guide on types of business phone systems first to get a breakdown of what it all means.
  • This article is for business owners preparing to shop around for business phone systems and provides tips to help them find the right solution.

If you plan to be in the market for a business phone system in 2023, there are several questions you need to consider first to ensure you get the solution that best fits your needs.

  1. Do you need a full phone system that includes physical desk telephones, or could your business get by with a virtual phone service that relies on mobile devices?
  2. If you do need desk telephones, what kind of service do you want? Are you comfortable using a Voice over Internet Protocol (VoIP) system, which runs over the internet and is available from many providers? Or do you want to use a traditional landline telephone service, which a local or regional phone company provides?
  3. If you choose VoIP, do you want to house the system at your business (on-premises) or have your service provider host it (cloud-based)?

Editor’s note: Looking for information on business phone systems? Use the questionnaire below and our vendor partners will contact you to provide you with the information you need.

If you’re not sure yet, read on. We’ll fill you in on the pros and cons of these types of phone systems: 

  • Virtual phone systems
  • Landlines
  • VoIP
  • Cloud and on-premises systems

Virtual Phone Systems

  • Virtual phone systems connect those who call a main business phone number to remote workers on their mobile or home phones. [Learn more about virtual phone numbers.]
  • These systems work as an extensive call-forwarding solution, transferring calls to an employee’s cell or home phone instead of a desk phone when a customer calls the main phone number.
  • These systems include various features, such as automated receptionists, voicemail, call forwarding, call screening, toll-free numbers and online faxing.

Pros: This type of service allows businesses with offsite employees to present a professional image at all times. It also gives remote workers access to various phone system features that mobile and home phones don’t offer. See our review of Grasshopper, our top-rated virtual phone system for more information. 

Cons: Virtual systems aren’t full-fledged phone systems. Your calls are often 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. Some virtual services allow you to make calls via internet connection when using the provider’s mobile app.

Best for: Small businesses with remote workers or sole proprietorships

Traditional Landline Systems

  • Landlines in this instance, are traditional phone systems, typically supported by a local or regional phone company.
  • Also known as public switched telephone networks (PSTNs), landlines are analog systems that run via the telephone company’s traditional copper wiring.
  • You need on-premises PBX (private branch exchange) hardware to run a landline service. This hardware can create multiple extensions and provide phone system features, such as call transferring and call directories.
  • Some landline systems today are considered hybrids with VoIP systems. A traditional phone line connects to a business’s data network, which it uses to connect each individual phone.
  • Many phone system providers are phasing out landline systems, so it might be not easy to find one that still offers this type of service. 

Pros: Landline systems are a reliable, time-tested solution that many companies are comfortable using.

Cons: Most phone system providers are moving away from landlines, making them more difficult to purchase and repair. It’s only a matter of time before these systems become obsolete.

Best for: Large corporations that have the budget for them and an in-house IT staff to manage and maintain them; necessary for businesses without high-speed internet access

VoIP Phone Systems

  • Instead of the copper wires that landlines run on, VoIP phone systems use the same internet connection that a company already uses.
  • VoIP systems provide a feature set that previously only large corporations using expensive PBX hardware had access to, such as automated attendants, call queues, and computer integration, which allows voicemails to be sent to email inboxes and computers to be turned into softphones.
  • VoIP systems give remote workers access to the business’s phone system from their mobile devices.

Pros: VoIP provides a sophisticated phone system with all the bells and whistles. These systems are easy to set up and configure and are significantly cheaper than landline systems.

Cons: These systems rely on your internet connection. If you’re in a community with spotty internet service, this type of phone system won’t work for you.

Best for: Small businesses wanting 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. See our review of Ooma Office for the best phone system for remote teams. 

If you decide that a VoIP system is best for you, your next decision is how you want it hosted. While landline systems require you to house the 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, who hosts it in the cloud. 

On-Premises VoIP Systems

  • With on-premises systems, all the equipment, including the PBX hardware to keep the phone system running, is housed within your business.
  • On-premises systems require a large capital expenditure, as you purchase the equipment upfront.
  • While you pay one-time fees for all the hardware with a self-hosted system, with an on-premises system, you pay monthly fees for your SIP trunking, or PRI circuit, which is what allows you to make and receive calls.
  • Your IT staff is responsible for maintenance, repairs and upgrades of the system.

Pros: You are always in control of your service. You and your IT team ensure it is up and running and configured how you like.

Cons: There is a significant upfront cost since you have to buy all the 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 the equipment at all times; businesses with an in-house IT team that can set up and maintain a VoIP system; businesses with regulatory or compliance requirements that may be difficult to meet in the cloud

Cloud-Based VoIP Systems

  • With cloud-based systems, there is no maintenance or hardware other than phones to worry about. The service provider houses, maintains and upgrades the PBX technology for you. Check out our review of RingCentral, a robust cloud-hosted VoIP solution.
  • The cloud allows growing businesses to add new lines easily and provides quick access to new features.
  • Businesses typically pay a monthly fee on a per-user basis.

Pros: There is no PBX hardware or dial-tone service to purchase and maintain. Your provider takes care of all that for you. You can set up and configure the system for your business from your computer. 

Cons: You aren’t in control of the hardware. If the system goes down, you must rely on your provider to fix it as quickly as possible. 

Best for: Growing businesses on a fixed budget with no IT staff to operate and maintain PBX hardware; businesses that want quick access to new phone system features or have multiple locations and want their system all on one platform.

Business Phone System FAQs 

Still not sure if you even need a business phone system, or if VoIP fits you? No problem. Here are some questions and answers that may help you decide. 

Q: Do I need a phone system for my business?

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

It is critical for businesses to always present themselves professionally. Letting customers and clients reach you on a business line that an automated attendant often answers is an excellent way to achieve that. Businesses that don’t want to spend money on a full-fledged phone system can still present the image they want by using a virtual system. 

Q: Can’t my employees and I just use our mobile phones for business purposes?

A: It is definitely possible if you invest in a virtual phone system. This system allows you to use your mobile device while presenting a professional image.

Using just your mobile line, without a virtual system, presents a few issues. First, it doesn’t convey a professional image to your customers. Second, mobile lines don’t provide the features and tools that small businesses find most valuable, such as voicemail to email, call forwarding, call screening, music on hold and online faxing.

Q: I’ve always had a traditional landline system. Will I be at a disadvantage if I continue using this type of system in the future?

A: The problem with landline systems isn’t their functionality; they still operate at a high level. The biggest issue you will run into with traditional landline phone systems is that new options are no longer being built. This means no new technology is being developed for landline systems. 

No new software upgrades are available for landlines either. This means you won’t have access to many new features and capabilities.

Finally, finding experts to provide customer service and support for these systems, and the parts to keep landline systems up and running, is increasingly difficult.

At some point, likely in the near future, new features for VoIP systems won’t be compatible with landline systems. Depending on the feature, that could very well put your business behind the eight ball.

Q: How do I know which phone system and provider are right for my business?

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

When choosing a phone provider for your small business, it is important to find a service that has the features and tools you want in a phone system and offers the level of customer support you expect from a vendor partner. Check out our review of 8×8, our top choice for the best phone system for small businesses. 

If you are considering a cloud-hosted system, one factor you want to give serious thought is uptime. This is how often the system is operational. When the system is down, you won’t have access to your telephone services. The best providers have numerous data centers around the world to minimize downtime with the service. When speaking with different providers, ask about their uptime stats and whether they have any guarantees to give you money back should the service be down for longer than the guaranteed time each month. 

Q: With cloud systems, is there only a monthly fee, or are there other costs I should be aware of?

A: There are some upfront costs with cloud-hosted phone systems. You most likely will pay for IP phones, which range from $50 to $600 each. Some providers also charge setup and training fees.

Q: With a cloud-hosted system, am I sharing a server with other businesses, or is there a server just for my business?

A: Many cloud phone system providers offer businesses the option to use a shared server or pay extra for a dedicated server. This decision depends on if you want the system solely devoted to you, or if you want to buy it as a service on the same platform the provider offers to everyone else.

Smaller businesses without many special requirements and customizations are typically comfortable using a shared service. Large organizations with complex needs likely prefer a dedicated server that provides the high-quality service and privacy they want.  

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

A: While some users might be concerned about the sound quality of a VoIP system, the technology has come so far that it’s virtually impossible to tell the difference between landline and internet-based calls.

To ensure call quality is clear and strong, your business has to be conscientious about how you set up your data network. You need to ensure you have enough capacity to handle your call volume and that your network is set up to prioritize voice calls over other types of internet traffic.

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 calling and collaboration features you may find most beneficial:

  • Voicemail
  • Voicemail to email
  • Voicemail to text
  • Voicemail transcription
  • Call forwarding
  • Call recording
  • Call queues
  • The option of both local and toll-free numbers
  • Interactive voice response (IVR)
  • Conference calling
  • Automated attendants
  • Extension dialing
  • Ring groups
  • Directory assistance
  • Call transferring
  • Internet faxing
  • Call reports
  • Call monitoring
  • Missed-call notifications
  • Video conferencing
  • Online meetings
  • Instant messaging
  • Text messaging
  • Integrations with popular programs, such as Microsoft Outlook, Salesforce and G Suite
  • International calls

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 cell phone. Business VoIP systems offer smartphone applications and mobility features that give employees the full functionality of their desk phones anytime, anywhere.

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

A: In today’s age of remote workers and flexible work arrangements, it’s critical that employees can be reached at all times, regardless of where they are. You don’t want your customers to have to hunt down your employees when they need them or, worse, not be able to reach them at all.

Mobility ensures that your employees are always reachable. It also allows them to be connected without sharing their personal phone numbers.

Q: I keep seeing references to unified communications systems. How are those different from a phone system?

A: Many of today’s phone systems are unified communications systems. These systems combine voice calling, messaging, and video or online meetings into one service. They also offer audio conferencing and online faxing. Many of today’s phone system providers offer these services on their platforms.

Solutions that aren’t unified communications systems are those that only offer voice calling and related features.

Q: If my business has multiple locations, does it matter if I have an on-premises or a cloud-based system?

A: While both on-premises and hosted systems can support organizations with multiple locations, a cloud-hosted solution can simplify things.

Cloud-hosted systems don’t require you to install complex PBX equipment inside each of your locations. This not only allows easier setup but can also save you money. These cloud-hosted systems can be managed from one online platform, making using them easy.

Q: What options are available for the number of phone lines a small business phone system can offer?

A: That is one of the beauties of today’s cloud-hosted VoIP systems – there aren’t many limitations to the number of phone lines your business can access. Typically, the more lines you have, the cheaper your per-user cost is. Moreover, adding new lines is a simple process. With on-premises systems, you have to do actual work on your equipment to install new lines. With cloud-hosted systems, you can add a new line in seconds straight from your computer. [Read more about multiline phone systems.]

Chad Brooks
Staff Writer at
Chad Brooks is a writer and editor with more than 20 years of media of experience. He has been with Business News Daily and for the past decade, having written and edited content focused specifically on small businesses and entrepreneurship. Chad spearheads coverage of small business communication services, including business phone systems, video conferencing services and conference call solutions. His work has appeared on The Huffington Post,,, Live Science, IT Tech News Daily, Tech News Daily, Security News Daily and Laptop Mag. Chad's first book, How to Start a Home-Based App Development Business, was published in 2014.
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