Are you tired of being chained to your desk, missing important calls while you're out managing your business? Or maybe you're drowning in administrative tasks, spending too much time on phone-system hassles instead of focusing on what truly matters: growing your business. Finding a business phone system that's both reliable and cost-effective can feel like a tightrope walk. You need to stay connected with customers without breaking the bank. That's where VoIP comes in – but understanding the true VoIP costs is crucial.

VoIP Costs Breakdown: Is Switching Worth It for Your Business?

This guide breaks down everything you need to know about VoIP costs, including one-time fees, monthly expenses, potential hidden fees, and add-ons. We'll help you decide whether switching to VoIP is the right move for your small business and highlight how the right VoIP technology can save you serious time and money.

How Much Does VoIP Really Cost?

A VoIP phone system, also known as a virtual phone system or cloud-based phone system, typically costs between $15 and $40 per month per user, with pricing on the higher side for enterprise and more customized VoIP solutions. The total cost depends on factors like the number of users or phone numbers your business needs and whether your provider charges based on usage, like minutes used for VoIP calls or additional extensions. Pricing can also vary depending on whether you pay monthly or annually, the features included in your plan, and extra hardware you may need, like VoIP headsets or desk phones. Here's a breakdown of how much some of the best VoIP services can cost:

One-Time Costs: Minimizing Upfront Investment

Switching to a VoIP system involves minimal upfront costs compared to traditional phone systems. Here are the main one-time expenses to consider:

• US carrier registration: As of August 2023, any business that calls or sends messages to US numbers through a cloud-based phone provider must register to be approved as a US carrier. This initiative, pushed for by the large US cell carriers, aims to combat fraudulent spam messages and requires a one-time $19 fee.
• Installation costs: Most small business phone services require little to no installation. For example, with M1, you can set up your account and make adjustments directly through an online dashboard — no IT team or complex installation needed. You might only incur costs if you need to upgrade your internet plan or add additional numbers (Each user plan typically includes one US, Canadian, or toll-free number; extra numbers are $5 each with OpenPhone).

Unlike VoIP, traditional landlines come with many upfront expenses, including software, server hardware, desk phones, and associated installation costs. You’ll also end up spending thousands of dollars on maintenance, repair, ongoing IT support, and opening additional offices. Plus, adding more lines requires copper wiring, which can lead to significant extra costs if you expand or relocate.

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Recurring Costs: Predicting Your Monthly Expenses

Switching to VoIP comes with predictable monthly costs, which can vary depending on your provider and the features you need. Here’s what to keep in mind:

• Subscription plans: VoIP providers typically charge a monthly fee per user. M1’s basic plan starts at $19.99/month per user (can be paid annually), offering unlimited calls and texts in the US and Canada, voicemail-to-text transcription, call recordings, and integrations with tools like Slack and Zapier. It even has its own built-in AI phone assistant.
• Monthly messaging fee: If you plan to send SMS/MMS messages to US numbers, be aware that The Campaign Registry assesses a small monthly fee to ensure compliance with carrier regulations. M1 can help you understand these requirements. M1's AI-powered features also help you communicate more efficiently, potentially reducing your reliance on SMS for follow-ups and updates.
• Scaling your team: Adding new users or phone numbers may increase your monthly bill, depending on the provider. OpenPhone makes scaling simple, with extra numbers at just $5 each. In contrast, some providers may require you to upgrade to a higher-tier plan as your team grows.

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Add-ons: Tailoring Your VoIP System

Most VoIP providers offer additional features like international calling, integrations, call forwarding, and premium customer service, which can enhance your service but add to your VoIP phone system costs. When choosing a VoIP provider, consider how much of what you need is included in the base plan. A lower-priced plan may seem appealing but could end up costing more if essential features are only available as add-ons. For example, M1 offers all core necessities for an all-in-one AI phone assistant at $19.99 per month. It gives you a business phone number and everything needed for automated VoIP service assistance. 

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Taxes and other (hidden) fees

Nothing is certain except death and (VoIP) taxes. These can be federal, state, or local taxes, along with government-mandated fees and surcharges. The exact amount you’ll pay will depend on your service location. But according to 2024 data, the average combined tax, fee, and surcharge rate on taxable voice services is 26.8%, ranging from 16.1% in Idaho to 36% in Illinois. Check with your VoIP provider or local tax authorities for the most accurate information.

Finally, some potential hidden costs could impact your overall VoIP expenses: Cancellation fees: Some VoIP providers charge a fee if you cancel your service before the end of your contract. Others may waive the cancellation penalties if you opt for a monthly payment plan, but they're usually more expensive than paying annually. Long-term contracts: Many providers lock you into long-term contracts (think up to 36-month agreements), which can become costly if the service doesn’t meet your expectations or your needs change. Choose a provider with flexible plans or shorter commitments to avoid unnecessary expenses.

Is switching to VoIP worth it for small businesses?

VoIP is a great solution for small businesses because it’s cost-effective, scalable, and packed with advanced features that help teams work smarter. For example, unlike traditional landlines, your team can take calls or messages on the go using any device. And because it’s easy to set up and scale, it grows with your business — whether you’re adding a single line or an entire team. You’ll also have access to advanced features that make work easier. 

• Snippets and auto-replies: Respond to customer requests and FAQs faster with pre-written replies and auto-responses.
• CRM features: Track customer interactions and information directly in your phone system to save time and improve follow-ups.
• Call recordings and voicemail transcripts: Review past conversations or skim voicemails to ensure no details are missed.
• Quick setup and intuitive interface: Get your team up and running without needing IT support, costly up-front installations, or hours of training.
• Automations and scheduling: Save time by automating repetitive tasks like sending auto-replies or scheduling payment reminders.

VoIP phone systems are also highly secure, with the best providers encrypting your business communications and data to keep it safe. It’s an extra level of added security you won’t have with standard landlines or cellular networks.

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M1: The AI-Powered VoIP Solution for Modern Businesses

M1 stands out as a game-changing business VoIP solution, especially for those seeking to leverage AI to streamline communication and boost productivity. Here’s how M1 tackles common pain points:

• M1 Business Phone: Stay connected on the go using a mobile app that works as a business phone.
• Voicemail Receptionist: Never miss a call by setting up a system to receive voicemails and call-backs when unavailable.
• Call Summaries and Transcriptions: Save time by getting AI-generated summaries and transcriptions of all your calls.
• Integrations: Connect seamlessly with other tools used to increase productivity by managing all your tools in one place.
• Voice Memos: Capture important information on the fly and share it with team members for easy collaboration.
• AI Assistant: Use built-in AI intelligence to manage follow-ups, note-taking and client needs.

How Does This VoIP Phone System Actually Help?

Let's explore some key features that make M1 a standout choice for your business phone system:

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AI-Powered Call Summaries and Transcriptions: Automatically generate summaries and transcriptions of your calls, saving you time and improving accuracy. No more manual note-taking!

Imagine: After a long sales call, you instantly have a summary of the key points and action items.

Voicemail Receptionist: Never miss another opportunity. Set up a virtual receptionist to greet callers, route calls, and take messages.

Imagine: Even when you're busy, your voicemail receptionist ensures every caller feels valued and gets the information they need.

Seamless Integrations: Connect M1 with your favorite CRM, calendar, and other business tools to streamline your workflow.

Imagine: Customer data automatically synced between M1 and your CRM, giving you a complete view of every interaction.

Voice Memos: Quickly capture ideas, reminders, or important information with voice memos.

Imagine: While driving, you can record a quick memo and share it with your team for immediate action.

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Compared to traditional VoIP phone systems, M1 offers a world of advantages:

• No Hardware Costs: Ditch expensive handsets and hardware. Use your existing devices.
• Easy Setup: Get up and running in minutes without IT support.
• Remote Work Ready: Stay connected from anywhere with the M1 mobile app.
• AI-Powered Efficiency: Leverage AI to automate tasks and improve communication.

What You Need to Know

Switching to VoIP is easier than you might think. Here's a quick overview:

1. Choose a VoIP Provider: Research different VoIP providers and select one that meets your needs and budget.
2. Check Internet Speed: Ensure you have a reliable internet connection. The FCC recommends at least 0.5 Mbps per VoIP call, but for optimal quality, 1 Mbps or more is better.
3. Port Your Number (Optional): If you want to keep your existing phone numbers, initiate the number porting process.
4. Set Up Your Account: Follow your VoIP provider's instructions to set up your account and configure your settings.
5. Download the App: Download the softphone app to your computer or mobile device.
6. Start Making Calls: Start enjoying the benefits of VoIP!

VoIP: Cheaper Phone Calls, Greater ROI

Switching to VoIP offers your business a more efficient way to make calls and offers a solution built for flexibility, scalability, and modern business needs. M1's plans start at $19.99 per month. And you won't be forced to upgrade to a higher-tier plan just because your team expands. Check out M1's website to learn more about how M1 can transform your business communications.

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FAQs: Answering Your VoIP Questions

Does VoIP require an upgraded internet connection?

For most small businesses, an average broadband plan is sufficient for a VoIP phone system. However, if you have a large team or experience slow speeds, you might need to upgrade your internet connection to ensure reliable VoIP calls.

Is VoIP cheaper than a landline?

Yes! VoIP service eliminates many upfront and ongoing costs associated with traditional phone systems, making it a more cost-effective option for businesses. With VoIP, you can enjoy cheaper phone calls and reduce your overall phone service expenses.

How do VoIP providers bill?

Providers typically bill on a monthly or annual basis for their VoIP phone service, with payments automatically deducted from your account. This includes charges for features like call recording and international calling.

What is the disadvantage of using VoIP?

The primary downside of VoIP is its reliance on the internet. However, the benefits of scalability, flexibility, and cost savings far outweigh this disadvantage. Plus, VoIP offers features like virtual phone systems that enhance your business communications.

Can I use desk phones with VoIP?

Yes, most VoIP providers support IP phones or desk phones, allowing you to integrate them into your VoIP phone system.

What type of phone service is VoIP?

VoIP is a cloud-based phone service that transmits voice data over the internet, rather than traditional phone lines. This makes it different from PBX phone systems and other telephony solutions.

Is VoIP the same as a landline?

No, VoIP and landlines are different types of phone systems. VoIP uses the internet for VoIP calls, while landlines use physical wires. This allows VoIP to offer features like toll-free numbers and number porting more easily.

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