Finding out the cost of switching from landlines to VoIP isn’t straightforward.
It requires digging into various pricing plans and understanding the mix of basic and extra features that meet your business needs.
The cost of a business phone system isn’t just a budget item — it’s an investment to scale your business communication.
Here, we dissect the complex topic of VoIP pricing to help give you a clear idea of what a VoIP phone system might actually cost you. We discuss the main factors affecting the cost and provide tips to ensure you make a financially smart choice for your business.
What Are the Basic Costs of VoIP?
Voice over Internet Protocol (VoIP) is much less expensive than traditional, analog-based phone service. However, it comes with its own set of expenses from a VoIP provider as well as indirect costs like a high-speed internet connection.
On average, a VoIP phone system costs between $25 and $35 per line monthly. Additional features like call recording, toll-free numbers, and equipment rentals cost extra.
Several cost elements come into play when transitioning from a legacy system to a VoIP phone service . These costs can be generally categorized into “recurring” and “one-time” expenses.
The recurring expenses mainly include subscription fees and per-user or per-line costs, while one-time expenses cover setup and equipment costs. Cloud telephony usage is expected to grow by 35% until 2036, suggesting the benefits justify the cost of VoIP.
Let’s take a closer look at each of these expenses.
Monthly or Annual Subscription Fees
The bulk of VoIP phone service costs lie in subscription fees, which will be charged on a monthly or annual basis.
These fees cover the basic VoIP service, which will allow your business to make and receive phone calls over an internet connection. Subscription plans can range from basic packages with standard features to premium plans offering more advanced functionality.
Monthly Plans: A monthly plan offers flexibility and doesn’t lock you into long-term commitments, making it a good option for small businesses. However, they tend to be more expensive in the long run than annual plans.
Annual Plans: An annual plan will reduce your monthly cost significantly when calculated on a per-month basis, making it a good option for established businesses with predictable call volumes — but remember that you’ll have contractual obligations (discussed later).
Many business VoIP providers provide unlimited calling nationwide. However, be sure to confirm the international calling rates . International calls cost up to 90% less than traditional telephone companies but will be added to your invoice if your team dials outside the U.S. or Canada.
Per-User or Per-Line Costs
VoIP providers will structure their pricing based on the number of users or lines needed.
This means the more employees or phone lines you have, the higher the cost. It’s important to accurately assess the number of users or lines your business requires to avoid overpaying.
Per-User Costs: Charges are based on the number of employees using the system. This is a common pricing model for VoIP services and is particularly suited to businesses with a clear headcount.
Per-Line Costs: Alternatively, some providers charge based on the number of phone lines. This model works better for businesses with a higher call volume and a need for multiple lines. Additional costs here also includes extra phone numbers (often called direct-inward-dial numbers).
Related Article
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Specific Features and Functionalities According to Business Requirements
The cost of a VoIP system also varies greatly based on the specific features and functionalities your business requires. Advanced features like virtual meeting capabilities and conference calls, international calling, and auto attendants, among others, can drive up the cost.
Standard Features: Typical VoIP features like call forwarding, voicemail, and domestic calling usually come bundled with the base subscription fee. It’s common to get unlimited outgoing and incoming calls nationwide.
Advanced Features: Powerful features like Customer Relationship Management (CRM) integration , advanced analytics, unlimited calling, international calls, and premium customer support will incur additional costs. It’s crucial to identify the essential features for your business operations and budget accordingly.
How Much Does VoIP Cost? Nextiva VoIP Pricing
Taking monthly or annual subscriptions, number of users, and variations between specific features per plan into account, Nextiva offers the following pricing for prepaid multi-year plans:
Users Essential Professional Enterprise Best for Lighter duty, simple calling . Best choice for small businesses. Great for larger organizations. 1-4 $23.95/user/month $27.95/user/month $37.95/user/month 5-19 $21.95/user/month $25.95/user/month $35.95/user/month 20-99 $18.95/user/month $22.95/user/month $32.95/user/month 100+ $17.95/user/month $21.95/user/month $31.95/user/month
Hidden or Unexpected Costs of VoIP
Switching to a VoIP phone system will save money in the long run, but it will only do so if you’re aware of all hidden or unexpected expenses.
There’s nothing nefarious here — these are just the VoIP costs that depend on your location or your specific business needs.
It’s essential to have a solid understanding of the additional costs involved with VoIP calls that can occur. Here’s a breakdown of some hidden or unexpected costs you might encounter:
Network Upgrades
VoIP systems rely on internet bandwidth to deliver clear, high-quality calls. If your existing bandwidth is insufficient, you’ll need to upgrade your internet package to meet the demands of VoIP technology.
Assess your current bandwidth and make sure it can handle the additional load the VoIP system will bring. Try our free VoIP network test to get a realistic figure of how many phone calls your network can handle.
If an upgrade is necessary, take into account the additional costs, as they will vary depending on your internet service provider and the package you select.
Related Article
How Much Data Does VoIP Use? Tips to Forecast Your VoIP Bandwidth
Taxes and Fees
Just like traditional phone services (and everything else in life), VoIP services are subject to various taxes and fees. These can include federal, state, and local taxes and regulatory fees.
The tax rates and fees vary between geographical locations, making it imperative to understand the applicable taxes in your area. Phone system consultants say paying between 20% and 30% in taxes isn’t unheard of.
Remember that VoIP tax rates vary by location and largely depend on the business location and phone numbers used.
Additional Features or Add-Ons
Many VoIP providers offer a basic package with the option to add extra features or add-ons, such as advanced call analytics, call center functionality, additional lines, or hands-on customer support, for an additional cost.
Before committing to a package, evaluate the features included in the base package and identify any additional features your business requires. Understanding the cost implication of these additional features will help you avoid any unexpected expenses down the line.
Tip: Some of these add-ons can be negotiated with your sales representative, so be sure to mention them if you find them valuable, in addition to your business VoIP package.
Integrations
Integrating with existing business tools like CRM systems or leveraging advanced functions like AI can sometimes necessitate upgrading to a more expensive pricing package.
Assess the costs of integrating your existing business tools with the VoIP system. If your business requires advanced functionalities, be prepared for additional expenses associated with these features and include them in your VoIP phone system cost.
How Long-Term Commitments Affect VoIP Costs
Before signing any VoIP agreement, it’s crucial to understand the VoIP contract terms. This ensures you know exactly what’s expected of you during the contract and also what you can expect from your VoIP provider.
For an independent explainer of common lingo found in a VoIP contract, Prince Rich has you covered.
Important VoIP contract agreement considerations include:
Length of Contract: Month-to-Month vs. Long-Term Commitments
The length of the contract significantly impacts the cost of VoIP services.
Month-to-month contracts provide flexibility and are ideal for businesses not ready for a long-term commitment. However, remember that they come at a higher monthly cost.
Long-term contracts come with discounted rates but can also include penalties for early termination. Consider this based on your business’s long-term outlook before committing to any contract.
Termination Fees
Termination fees are charges for exiting the contract before its agreed-upon end date. These fees can be substantial and must be outlined in the contract agreement.
For example, you could be liable for the balance due if you cancel at month six on a 12-month term.
Service-Level Agreements
Service-level agreements are your quality control assurances in a VoIP contract.
They define the expected service quality, including uptime guarantees. High reliability is essential for business operations, and compensation clauses for service outages provide a financial cushion should your VoIP service drop out for any reason.
Tip: “Five nines” is a common phrase, which refers to 99.999% uptime. This uptime percentage means that five minutes of downtime is anticipated annually.
Limitations or Restrictions on Usage
Some contract agreements might have clauses that limit or restrict certain types of usage constituted as abuse. Examples include automated or predictive dialing — a questionable practice employed by telemarketers.
These restrictions aim to prevent the misuse of the VoIP service and ensure fair usage.
It’s important you’re aware of any limitations of this type to ensure your business operations comply with the contractual agreement.
Auto-Renewal
Contract auto-renewal clauses mean the contract will automatically renew for a similar term and price unless terminated by either party before the renewal date. This also ensures your company’s communications are always working and never interrupted.
Be aware of your VoIP contract’s renewal policy, and it’s also good practice to review the contract terms and explore other options in the market at least three months before your contract renewal date. This allows for negotiating better terms or switching to a more cost-effective provider if necessary.
The High Cost of Multiple Communication Apps
Most modern businesses use many different applications and software to run their company, also known as their tech stack. Using many potentially outdated and standalone apps generally leads to increased expenses.
