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Types of Phone Systems for Small Businesses

Eduardo Vasconcellos
Eduardo Vasconcellos
business.com Contributing Writer
Updated Nov 17, 2022

When choosing a phone system for your business, you have three main options: KSU, PBX and VoIP. Learn about them to decide which one is best for your business.

Business phone systems provide companies large and small with a way to manage their inbound and outbound calls. Their features differ significantly from residential phone systems. A good business phone system must be designed to handle multiple calls at once and transfer calls within the organization.

Today’s best business phone systems may include the following features:

  • Multiple lines: Permitting multiple lines allows employees to switch between calls to manage times of high call volume better. The size of your business will determine how many lines you need for your business phone. Small businesses usually work well with two to four lines.
  • Auto-attendant: An automated attendant greets callers and routes them to the right team member.
  • Visual voicemail: Voicemail systems for business phones can do more than just store recorded messages. They can transcribe the voicemail and send it directly to the employee by email or text message.
  • Conference calls: Meetings can be scheduled by phone, with multiple callers participating in the conference call. This feature is a must for organizations with remote employees.
  • Call forwarding: Calls can be forwarded to another number, or even to an email address.
  • On-hold messages: You can record a message that lets people on hold know that their call will be answered as soon as possible. You can also play music over the line while the caller waits.
  • Handset support: Modern business phone systems should be compatible with wired and wireless headsets.

TipTip: When choosing a business phone system, look at each feature offered by each provider. Additionally, confirm the company has a solid track record with good client reviews and readily available customer service should a problem with the system arise.

What are the different types of phone systems?

There are three basic types of business telephone systems: KSU, PBX and VoIP. Each of these systems has a hosted (cloud) and a non-hosted (on-premises) version. Here’s how they differ.

Editor’s note: Looking for the right business phone system for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

Key system units

The most basic phone system is one that uses the key system unit (KSU). This type of system is only suitable for small businesses with no more than 40 employees working as phone operators, given the limitations on the number of phone lines it can incorporate. 

It’s an easy-to-use system, comparable to a home telephone. It has all the essential features a business will need; however, it lacks portability and flexibility. It uses a central switching device – the KSU – to manually determine the phone-line selection.

The variation of this system is called KSU-less. It has the same phone capabilities as the basic system, but it is portable and flexible, as it does not use the central switching unit, and is completely wireless.

The KSU-less system has some severe limitations, though. It only allows for approximately 10 phone operators, and it’s not sold commercially – you must specifically request it from a phone system provider. A KSU-less phone system is ideal for a very small business that doesn’t intend to expand its workforce, but it’s not that useful for small businesses looking to grow.

Pros and cons of a KSU

ProsCons

It’s intuitive and easy to use.

It’s limited to 40 phone lines.
It has all the basic telecommunications features a business needs.It’s not portable or flexible.
You can manually determine an appropriate phone line.It doesn’t offer the versatility growing businesses need.

Private branch exchange

A private branch exchange (PBX) is another business phone system option. This is a more advanced system than the KSU and KSU-less systems. It uses programmable switching devices, enabling the automatic routing of incoming calls.

This type of business phone system is suitable for a company with 40-plus employees, as it’s largely automated. Another significant advantage of the PBX system is that it features an uninterruptible power supply, allowing a business to remain functional without electricity for some time.

A modification of this system is the hosted PBX. The only difference with this system is that the programmable switching device is no longer installed on-premises – a telephone provider hosts it. The main advantage is that you’ll avoid some of the installation and maintenance costs involved with the standard PBX system without losing any of its advanced features.

Pros and cons of PBX

ProsCons
It can automatically route incoming calls.A dedicated team is required to manage your PBX configuration.
It can serve companies with a large number of employees.Your business is responsible for all maintenance.
It has a dedicated power source to stay up and running during electrical interruptions.Redundancy issues can occur between worksites.

Voice over Internet Protocol

One of the newer and more popular business innovations is Voice over Internet Protocol (VoIP). This is the most advanced system by far, allowing a potential client and phone operator to communicate even if the two are in different countries. It requires the use of both the internet and a computer. However, it’s also the most expensive system, with the cost determined by the number of employees who need to use it. The main benefit of this system is that all its functions are accessible by computer via your company’s business internet network.

Similar to PBX, the VoIP system can be hosted. The hosted version offers the same advantages as the basic VoIP system, with less installation and maintenance involved for the business using it, since the service provider hosts the central telephone system.

>> Learn More: What Is Non-Fixed VoIP and How Does it Work?

Pros and cons of VoIP

ProsCons
A wide variety of devices allow increased accessibility for communication.A stable internet connection is required, limiting when and where you can use it.
You can use the internet to easily communicate from anywhere around the world.Latency and bandwidth issues could create delayed or frozen communications.
It’s easily scalable to enable communications between more teams.Devices can be targeted for cyberattacks, but there are ways to protect yourself.

Did you know?Did you know? Using a business VPN is a great way to protect your VoIP phone systems from cyberattacks.

What is the average cost of a business phone?

The best business phone systems’ monthly costs start at about $12 to $20 per user. For example, 8×8 has a service plan that charges just $12 per user, per month, while Ooma Office has a plan that starts at $19.99 per user, per month. You can learn more in our review of 8×8 and our Ooma review.

However, any service has varied costs, and business phones are no different. Some factors affect the cost of business phone lines more than others. The biggest factor is the number of lines. For larger businesses, bundled line services are an option. For smaller businesses, each new line multiplies the monthly cost.

>> Learn More: VOIP vs Landline

The type of phone service also matters. Traditional landlines do not run at the same cost as VoIP services. Whether you can hold teleconferences and video conferences, store messages, and access other popular communication mechanisms will impact the price per line (or per user). Special features such as answering services, mobility services and extra support can also drive up the price of a business phone.

TipTip: You can replace your home phone line by using your internet network to connect alternative VoIP devices like a tablet, mobile phone or laptop computer.

How often should you upgrade your phone system?

For mobile phone systems, the general practice is to upgrade every two years. This prevents maintenance problems with mobile phones and ensures that the business operates with up-to-date systems.

This cycle can be pricey, so there are two other ways to determine the time for an upgrade. The first is functionality. In other words, if your phones are working fine, keep them. Don’t upgrade until they start to show consistent problems. This can slow the average upgrade time to every five years for many businesses.

You might also decide to upgrade when a new feature will make a significant difference for your business operations. When cell phones became smartphones, they offered productivity benefits that many businesses ultimately adopted. The migration from 3G to 4G had a similar impact. Right now, 5G is becoming more available, and the increase in capabilities could prove beneficial for many businesses. Any major upgrade that will generate a clear return on investment is worthy of your attention. 

Image Credit: chainarong06/Shutterstock
Eduardo Vasconcellos
Eduardo Vasconcellos
business.com Contributing Writer
Eduardo Vasconcellos is a veteran copywriter, creative content producer and marketing communications specialist with over two decades experience, able to take complex concepts and turn them into something simple and memorable. By focusing on customer psychology and product benefits, his specialty is crafting full marketing campaigns that follow industry best practices while authentically speaking to a customer’s need.