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How much does a business phone system cost?

business phone system cost

For a technology as essential to your business operations as a business phone system is, it’s remarkable how difficult it is to find out how much a business phone system costs. 

Last month, my friend Chris was in the market for a business phone. He was able to find out how much different VoIP systems cost, but he struggled to get accurate estimates for on-premise PBX systems and analog PBX systems. Many of the articles he came across gave vague estimates of how much it would cost to set up a PBX system. 

If you’re feeling lost in your search for business phone cost estimates, you’ve come to the right place. We won’t bury the answer for you — here’s how much you should expect to spend: 

  • A starting plan for VoIP phone systems costs as low as $15 to $25 per user per month. Mid-range VoIP phone systems cost between $25 to $50 per user per month
  • Older phone solutions such as on-premise PBX systems can cost up to $1,000 per user
  • Analog PBX phone systems cost up to $2,000 for a two-line desk phone setup

Keep reading to learn more about each of the phone system costs and how they differ.

What determines your business phone system costs?

When you think of a business phone system, you might be thinking of old-school desk phones connected by infinite extensions. While legacy PBX phone systems aren’t far from this image, modern business phone systems like VoIP are far more user-friendly and collaborative to use. The type of business phone system you choose to go with affects all the other factors associated with your costs. 

Here are all the factors that affect the cost of a business phone system:

  • The type of phone system (VoIP, on-premise PBX, or analog PBX)
  • Hardware costs
  • The number of users
  • Installation and maintenance costs

Let’s take a look at these in greater detail.

Type of business phone system

Different phone systems have different hardware and installation costs. The system you choose determines how much you end up spending — as well as how many additional features you can use as your company grows.

There are three major types of business phone systems in use today:

  1. Voice over internet protocol (VoIP)
  2. On-premise private branch exchange (PBX)
  3. Analog private branch exchange (analog PBX)

Let’s break them down.

1. VoIP phone systems

VoIP phone systems, sometimes referred to as softphones, are a type of virtual phone solution you can use to connect with customers through WiFi and any other strong internet connection. All you have to do is sign up for an account and pay an annual or monthly subscription. You can add as many team members as you want to manage your phone calls and text messages at scale.

Keep in mind VoIP isn’t like a traditional phone plan — you’re not paying to access a specific network or data plan. Instead, you’re paying for access to a platform with modernized features that separate your personal calls from business calls.

One huge perk to VoIP is the lack of new hardware needed. Teams can use their existing cell phones and laptops, instead of specialty handsets or landlines, to connect with customers from anywhere with an internet connection. Businesses also don’t have to pay hefty installation and ongoing maintenance costs, resulting in huge cost savings for them.  Since VoIP services are virtual and Internet-connected, they’re packed with plenty of advanced features that set them apart. Examples include SMS messaging, messaging auto-replies, internal threads, and more. Viewed through this lens, VoIP phone systems offer much more value, at a lower cost, than other types of business phone systems.

Pros

  • Low upfront investment cost
  • No new hardware required
  • No installation and maintenance costs
  • No long-term contracts — you can cancel at any time (depending on provider)
  • Lower international calling rates
  • Perfect for remote work — team members can use VoIP systems anywhere

Cons

  • Reliable internet connection required

2. On-premise PBX phone systems

On-premise PBX systems, or private branch exchanges, are phone solutions designed to create a private network of desk phones without relying on telephone wires. These systems operate with an Internet connection, but because they rely on desk phones to function, they don’t come with messaging and internal collaboration capabilities like VoIP phone systems. 

Keep in mind on-premise PBX systems have higher upfront costs than VoIP systems. Not only do you need to install specific hardware, but you also need to constantly maintain it.  This can be a problem for hybrid or distributed teams that don’t have a physical location for their office phone system. Monthly subscription costs for providers that support PBX systems also tend to skew higher than VoIP solutions.

If you don’t want to deal with the hassle of expensive hardware or ongoing maintenance and upgrades, you can turn to VoIP platforms to avoid both at once.

Pros

  • No long-term contracts — runs on your own internet connection
  • Lower international calling rates
  • Can complete emergency 911 calls

Cons

  • Higher monthly costs than VoIP solutions
  • New hardware required
  • Hefty upfront costs for installation and maintenance
  • Not scalable — each user needs their own PBX desk phone
  • Doesn’t enable remote or hybrid work teams

3. Analog PBX phone systems

Analog PBX systems are legacy solutions that don’t utilize an internet connection. Trained professionals must use analog copper wiring to connect your phones to the Public Switched Telephone Network (PSTN), the traditional landline network, which is time-consuming and expensive.

Like on-premise PBX systems (which make calls through an internet connection), analog systems require you to rent or purchase desk phones for each member of your team. You also need a dedicated service provider to install each phone, especially if your business’s location doesn’t already have the right setup.

It’s easy to see why the analog PBX is the least popular phone system on this list — it’s not connected to the internet, doesn’t support texting or instant messaging, and lacks added functionality like shared phone numbers and auto-attendants. Plus, you may run into a slew of other hidden costs like higher international calling rates than more modern business phone solutions like VoIP systems.

Pros

  • Can complete emergency 911 calls

Cons

  • High upfront investment cost
  • New hardware required
  • Hefty installation and maintenance costs
  • Not scalable — each user needs their own PBX desk phone
  • Poor call quality since calls are routed through analog copper wiring
  • No modern features like texting, integrations, or shared numbers
  • Higher international calling rates
  • Long-term contracts, often at a minimum of two years
  • Poor fit for remote work — analog PBX systems force team members to make and receive calls from a single location

Hardware costs

Hardware costs can be an expensive line item in your business phone system costs. For context, these include the servers, handsets, IP phones (also known as desk phones), and other pieces of equipment you need to make and receive calls from your business number.

VoIP systems don’t need new equipment to start calling or texting customers. You can use your phone, laptop, or tablet to connect with customers all over the world.

Analog PBX and on-premise PBX systems require you to install new hardware or infrastructure. Depending on the service provider you choose, you’ll have to rent or purchase specific brands of desk phones to use these phone systems

Number of users

The larger your team grows, the more expensive your phone system becomes.

With cloud-based phone systems like VoIP, you pay a smaller amount per user and can easily scale your business phone system as your team grows. You don’t have to wait for new desk phones to come in the mail — adding team members is as simple as logging into your admin account and inviting them. 

With analog and on-premise PBX systems, however, you need to pay for users and their specific hardware costs. These come on top of any additional service provider fees, such as installations, upgrades, or monthly maintenance costs.

Installation and maintenance costs

Depending on the business phone system you choose, you may also need to pay for installation assistance.

Analog PBX systems are by far the most expensive since they require manual wiring and lots of technical expertise. On-premise PBX systems may be somewhat easier, but you also have to factor in ongoing technical support. Both systems require monthly maintenance, which can start to add up as your hardware ages.

On the other hand, VoIP systems don’t need expensive maintenance or hardware upgrades. A VoIP account can be set up by anyone — you don’t need any technical knowledge to get started. And while PBX requires technical experts to install hardware for your business, VoIP solutions just need a mobile phone, laptop, or tablet, and 15 minutes of your time.

How much does a VoIP phone system cost?

VoIP phone systems are by far the most cost-effective phone solution on this list because you don’t need to buy and install new equipment to get started with them.

The best VoIP providers cost as little as $15 per user per month, with more advanced plans (that include features like VoIP CRM integrations) rising to $25-30 per user per month. Just keep in mind you have to pay additional fees for US carrier registration (if you plan to text US phone numbers due to new regulations pushed for by the large US cell carriers to reduce the amount of spam their customers receive) and international calls.

Now, let’s look at a breakdown of costs associated with a VoIP phone system (using OpenPhone’s Standard Plan as an example):

Expense Cost
Plan pricing$15 per user per month (billed annually)
Messaging registration fees (for A2P 10DLC guidelines)$19 (one-time)
Campaign fees$1.50 – $3 per month
International calling and messaging ratesSee rates
Hardware costs$0
Installation costs$0
Maintenance costs$0

For a team of five people, here’s how the VoIP phone system costs shake out:

Expense Cost
Plan pricing$900 per year ($15 x 5 users x 12 months)
Messaging registration fees (for A2P 10DLC guidelines)$19 (one-time)
Campaign fees$18 per year ($1.50 per month to register a company x 12 months)
International calling and messaging ratesSee rates
Hardware costs$0
Installation costs$0
Maintenance costs$0
Estimated total $900 per year + $19 (one-time)

VoIP phone systems have different pricing tiers based on the features offered in each plan, so if you choose a higher pricing tier, you should expect your costs to increase as well. 

Curious what your options are for VoIP providers? Check out our comprehensive guide to the best business phone systems for VoIP.

How much does an on-premise PBX system cost?

On-premise PBX systems are more than twice as expensive as VoIP systems. They require physical installation of equipment like a PBX server, which sends and receives calls to phones in the network, and ongoing maintenance. 

According to Cady Business Technologies, a telecom solutions provider, the upfront investment for an on-premise PBX system is $400 to $1,000 per user. This estimate is echoed by the team at CostOwl, which estimates an on-premise PBX system costs approximately $1,000 per user.

Here’s a detailed estimate of how those costs break down:

Expense Cost
PBX server*$645 (one-time)
Support package$75/year
PBX desk phone✞$140 per user (one-time)
Extended warranty$52 (one-time)
Installation costs✧$400 (one-time)
Equipment maintenance costs$63 (for one user, yearly)
Labor maintenance costsˣ$400/visit
Estimated total costs (for 5 users) $1872 (one-time) + $981 per year✵

*Using the Sangoma PBXact Appliance 25 for comparison

Using the Sangoma P320 4-Line Phone for comparison

ZipRecruiter estimates the national hourly wage average for PBX technicians to be $26/hour. We estimate the installation cost to be a full day’s worth of work (10 hours), plus a 50% markup since installing a PBX system is highly specialized.

xSimilar to the installation cost estimate, we estimated labor maintenance costs to be a full day’s worth of work (10 hours), plus a 50% markup since maintaining a PBX system is highly specialized. 

Yearly costs are calculated by adding equipment maintenance costs for five desk phones, 1 PBX server, and two PBX technician visits, likely a conservative estimate.

How much does an analog PBX system cost?

As the oldest type of phone system in the market, analog PBX systems are more expensive and technically challenging to set up compared to on-premise PBX systems. Not only do you need custom equipment to set up an analog PBX system, but you also need a PBX technician to set up your system for you.

This includes:

PBX server costs

PBX servers compatible with analog telephone lines are more expensive than an on-premise (internet-based) PBX server.

The model we used in the previous example, the Sangoma PBXact Appliance 25, doesn’t support analog lines. The next model in the lineup, the Sangoma PBXact UC Appliance 60, does support analog telephony for a price of $995.

PBX analog telephony card cost

For PBX servers to work with analog telephone lines, you need to install an analog telephony card.

Unfortunately, analog telephony cards often cost over $1,000. The Sangoma A20004DE Analog Telephony Card, for example, costs $1,162.

Line rental costs

You also need to purchase phone lines from a traditional carrier so you can make and receive phone calls as a team.

As an example, Verizon’s Preferred Voice service costs $59 per month (plus taxes and fees) for a two-year contract. Any additional lines are $20 per month.

Hardware costs

Now it’s time to purchase the desk phones you want to use.

The price depends on the number of lines (aka extensions) you want:

Keep in mind not all desk phones come with the same list of features. Some don’t support call forwarding at all, while others can’t support long-distance conference calling. It’s a good idea to consider your needs before making an expensive decision.

Installation costs

Unless you have experience setting up analog PBX systems, you need to hire a professional team to get the job done.

Unfortunately, this isn’t cheap — the average estimated cost of analog PBX installation is $414, according to HomeAdvisor.com.

Total analog PBX system costs

Here’s a breakdown of costs when buying an analog PBX system for a five-user team:

Expense Cost
PBX server$995
PBX analog telephony card$1162
PBX server support$75 per year
Line rental costs*$1668 per year
Desk phone costs✞$625
Installation costs$414
Equipment maintenance costs$50 per year
Labor maintenance costsˣ$400 per visit
Estimated total costs (for 5 users)$3271 (one-time) + $2593 per year✵

*Line rental costs were calculated by multiplying Verizon’s plan for five users across 24 months.

Average of $125 per phone multiplied by five users.

xSimilar ZipRecruiter calculation as above.

Yearly costs are calculated by adding line rental costs, equipment maintenance costs, and two PBX technician visits, likely a conservative estimate.

Modern business phones are built with VoIP

Openphone mobile and desktop apps

Legacy phone systems like on-premise and analog PBX solutions are expensive to set up, clunky to use, and outdated for modern business needs. In a world that runs on tools like Slack, Zoom, and HubSpot, it makes no sense for your business phone system to require special equipment and physical desk phones that run on traditional analog landlines. As we made abundantly clear, VoIP phone systems like OpenPhone are the way to go for modern businesses.

There’s good reason why thousands of customers rank OpenPhone as the #1 business solution on G2. Not only does our platform come with more features than any PBX system, but we also help you build better relationships with your customers by providing:

If you want a business phone system with no surprise, hidden fees, check out our pricing page for a clear breakdown of each plan.

Business phone system cost FAQs

Still have questions about the cost of a business phone system? We answer them for you here:

How much does a phone system cost for a small business?

A VoIP phone system like OpenPhone starts at $15 per user per month (billed annually). 

On-premise PBX systems cost $1,000 per user or more. 

Older analog PBX systems can cost up to $2,000 for a two-line desk phone setup, although it may be more expensive, depending on other hardware costs.

How much should a business phone service cost?

The acceptable cost of a business phone service depends on your business needs. The new phone system you choose should be affordable, effective, and easy to scale to your existing number of employees. It should also come with great value for the monthly fee (including integrations with the tools you’re already using).

For many small business owners, the right phone service is VoIP — which costs an average of $15 to $50 per user per month depending on the features you want.

How much does installing a phone system cost? 

For VoIP phone systems, on-site installation costs are typically $0 as the best cloud VoIP solutions require zero set up beyond installing the app and customizing your phone’s settings.

For on-premise PBX phone systems, installation costs are estimated at $400.

For analog PBX telephone systems, installation costs are estimated at $414 on average.

How do I set up a small business phone system myself?

Thanks to the complicated installation process of expensive or outdated equipment, it’s rarely (if ever) possible to set up an analog PBX phone system by yourself.

You also can’t install on-premise PBX systems without outside help since you may need a trained professional to assist with upgrades or monthly maintenance.

This doesn’t apply to virtual phone systems, however. With OpenPhone, you can sign up for a seven-day free trial and set up a business phone system in 15 minutes or less. All you need to do is select a number, install our desktop and mobile apps, and adjust your settings to start sending calls and texts right away.

Ready to try out our business phone system? Here’s a simple 10-step guide to get you started with OpenPhone.

What are the key considerations when choosing commercial phone systems for my business?

When selecting a commercial phone system for your business, consider the initial setup costs, ongoing operational expenses, and the system’s compatibility with modern communication tools. Opt for a solution that offers ease of use, scalability, and integration with the software your team already uses, like VoIP systems, which are not only cost-effective but also equipped with advanced features to enhance customer relationships.

Can I use a multiline business phone system with VoIP technology?

Yes, VoIP technology supports multiline business phone systems. This means you can have multiple lines for different departments or employees, all operating through the same VoIP system. It’s a flexible, scalable solution that grows with your business needs.

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