Setting Up a Business Phone System: Everything You Need to Know in One Article / Technology / Last Modified: February 22, 2017

Everything you need to know about setting up a business phone system.

Starting a small business is packed with headaches, so today we're offering a little virtual aspirin for at least one problem: setting up a business phone system.

Below you'll get an overview for everything you need to consider.

How's it different from a home phone?

While many home phone lines now offer features that business phones have long relied on -- voicemail, caller-id and three-way calling, to name a few -- chances are you don't need advanced features like call transferring, multiple extensions or conferencing at home.

If you are the sole employee of a home-based business that you don't expect to grow, adding a second phone line will probably be sufficient for managing business vs. personal calls and making you seem more professional. However, if you have several employees working out of the same office, you'll need more than two lines to manage calls.

What to consider

When trying to decide which type of phone system would suit your business best, there are several questions to ask, including:

  • How many employees will be using the phone system?
  • What types of business phone systems are available in your area?
  • How large you expect your company to grow?
  • What is your budget?

Types of systems

After you've figured out the basics -- like your budget and the number of employees who will need to be connected -- its time to consider the type of system you should get. Your options include:

KSU-less System This is well-suited for businesses with 10 or fewer employees (and with little plans for future growth). Call-routing software is contained within each phone, which offers most features a business would require and is easy to relocate if necessary. While this system is inexpensive, installation, setup and maintenance is up to the business owner because it is not supported by a telecom or phone system vendor. Cost: $30-$400+ per phone

Key System This is well-suited for businesses with 10-40 employees. Call-routing software is contained in a phone cabinet and phones use a landline to make calls. Key systems use a telephone company that serves other businesses and the general public, whereas a PBX system (described below) only serves a particular business. Cost: $300-$1,000+ per extension

PBX (Private Branch Exchange) System Well suited for mid- to large-sized companies, this system can accommodate thousands of users and is easily scalable. While more expensive, this type of system offers the best long-term value for a company that expects to expand in the future. At a basic level, it connects two users and maintains that connection for the duration of the call. It notifies users if a call is unable to go through or is disconnected, and calls can be metered for accounting purposes. PBX systems also offer a variety of other services, including voicemail and call-forwarding. Types of PBX systems include:

  • Hosted PBX: Users purchase both the equipment and service from a telephone provider.
  • IP PBX: Using the internet to make and receive calls, requiring less maintenance then traditional PBX.
  • Mobile PBX: Calls can be forwarded to mobile devices.

Cost: $1,000 per extension

VoIP (Voice Over IP) System 

Instead of a traditional landline, these systems use the internet -- or a combination of the internet and a landline -- to connect callers. They can offer much of the same functionality as a PBX system (in fact, they can also be called IP-PBX or Virtual PBX), but at a significantly lower cost than standard PBX systems -- especially when it comes to long-distance or international calls. The main drawback is their reliance on an internet connection and high bandwidth for consistent, high-quality service. Cost: $175-$200; when combined with PBX $1,000-$4,000+


The equipment you'll need varies based on the type of service you choose, but generally includes:

  • Desktop handset (aka the phone)
  • Headset
  • Adapters (to convert a traditional phone signal to one VoIP recognizes)
  • Routers

Most providers will offer to bundle equipment -- including phones -- into their service package. But if you are able to, it's wise to shop around to make sure you're getting the best deal. Used and/or refurbished equipment is often available from third-party vendors. You'll just need to make sure it's compatible with the system you're using.

Extra features

There are a variety of different features that phone services offer business customers. But you might have to pay extra for them, so think about your office's needs before you buy.

Additional services can include:

  • Voicemail
  • Caller-id
  • One-touch dialing
  • On-hold music
  • Conferencing
  • Speakerphone
  • Auto attendants
  • Automatic ring back
  • Call waiting
  • Call transfer

Learn more about setting up your business phone service on

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