VoIP for Small Business: Introduction

The internet has forever changed the way companies do business, and phone calls are no exception. Voice over internet protocol (VoIP) is increasingly used as an alternative to traditional telephony because of the benefits it can bring.

Approximately 31% of all businesses use voice over internet protocol (VoIP) for their telephone services — and with so many capabilities, it’s easy to see why. Lower equipment and operational costs, greater accessibility and scalability, and a host of features that keep workers connected are a few reasons over 41 million commercial VoIP lines were installed by 2018.

But what is VoIP, and how does it work? In this article, we’ll take a look at the ins and outs of VoIP, how it stacks up to traditional phone service, and how to decide if VoIP could help your business.

What is VoIP?

The Pros and Cons of VoIP for Small Buisness

Why more small businesses are using VoIP

Next steps

What is VoIP?

Short for Voice over Internet Protocol, VoIP makes phone calls through an internet connection rather than a phone line. Other names for VoIP are IP telephony, internet telephony, broadband telephony, or broadband phone service.

How it works

While conventional telephones convert your voice into analog signals and transmit them through a phone connection, VoIP converts sound into digital packets, similar to an electronic envelope. These packets are sent to a VoIP provider via an internet connection, and the provider relays them to a standard publicly switched telephone network (PSTN). From there, the signal goes to the recipient and is converted back into sound waves.

Depending on the provider, VoIP calls may be made only to other subscribers within the service or any telephone number — local, long-distance, and even international. And no worries if the person on the other line only has a traditional phone; they don’t need special equipment to receive your call.


One of the most important differences between VoIP and conventional telephony is the equipment. Traditional phone calls use an analog device, but VoIP allows users to make phone calls with their computers, tablets, laptops, or specialized phones. Some devices come with built-in VoIP capability, but those that don’t can be connected to a router or fitted with an adapter to make them VoIP compatible. Outside of that, all you need is a stable internet connection with enough bandwidth for calls — although a Power over Ethernet cable (preferably a Cat-5E) is helpful too.

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The Pros and Cons of VoIP for Small Business

Every communication solution comes with a tradeoff. The fact that small-to-midsize business (SMB) VoIP use is expected to grow by 15% by 2025 indicates that VoIP has far more pros than cons, but here’s an honest look at the benefits and drawbacks of each.


The benefits of a VoIP system are:

  • Greater functionality. Because users can make VoIP calls on many devices, they can do more with their phones than analogs ever could. Conference calls, business messaging, visual voicemails, emails, and even faxes can be handled from a wide array of apps, and some VoIP providers also offer unlimited calls.
  • A flexible workforce. A VoIP network lets employees make calls wherever they have an internet connection. This allows them to become more mobile and facilitates the growing remote work trend.
  • Automated assistance. SMBs looking to automate their processes can use VoIP functions. For example, swapping secretaries for digital attendants can reduce labor costs, and call-queuing places callers in line until the next available agent can help.
  • A clearer call. Features like jitter buffering enable greater call quality, and silence suppression reduces the amount of data consumed. The result is a clearer call than conventional phone lines can offer.
  • Less equipment. By removing the need for copper wiring, physical hardware, and storage space that comes with private branch exchange (PBX) equipment, VoIP can reduce the physical resources and costs required for businesses to make calls.
  • Easier scalability. Conventional telephone systems require new hardware and wiring every time businesses add a line, but that’s not the case with VoIP. As long as they have a device and connection, employers may add a line without extra equipment.


There are some drawbacks to VoIP for small business. The most common are:

  • Connection dependence. Because they’re delivered through the internet, VoIP calls are only as stable as their connection. Crowded bandwidth and a low upload speed (typically <100 kbps) can hinder call quality, and calls can’t be made if the power goes out.
  • Jitter and Latency. Jitter is variance in network signal speed, and latency is the time it takes for data to make its digital round trip. Both become lower quality when there’s too much, so a quality VoIP provider should keep them below 15–20 ms.
  • Emergency contact. VoIP calls allow for greater mobility but are harder to route. That makes emergency contacts like 911 more difficult. Even though protocols are in place to route VoIP calls, stating your exact location is still necessary.

It’s important to understand the potential disadvantages of adopting a VoIP system before deciding if it would be right for your business, but note that each of these drawbacks can easily be addressed. A high-speed internet connection ensures that making a call will be possible, and a simple bandwidth test will determine how many calls can be made at once. A quality VoIP provider will keep upstream latency and jitter to a minimum, and a VoIP phone will still route the users’ most recent location to the appropriate public safety answering point (PSAP) to keep callers safe.

Why more small businesses are using VoIP

Now that we’ve covered the general benefits of a VoIP phone system, here are some specific reasons that more businesses are making the switch — especially small businesses.

Cost reduction

A VoIP phone system can reduce costs in several ways. First, less hardware lowers overhead and equipment costs, as VoIP services usually cost around $20-$30 per line to install — a significant drop from the average $50+ spent on traditional landlines. Businesses looking to reduce labor costs may also switch to digital assistants to replace secretaries, freeing them up for other tasks or eliminating the position. Finally, a quality managed service provider (MSP) will offer unlimited calls to at least the U.S. and Canada to make calls as affordable as possible.

Taken together, the savings opportunities offered by VoIP can save the average business 30-50% on their telephony services — a savings many SMBs would be eager to see.

Higher Productivity

The many capabilities of VoIP services enable employees to accomplish more than they could with traditional landlines. For example, call recording can help workers improve quality and compliance, and collaboration is made easier by business messaging and visual voicemail, which lets employees manage past calls from a single screen.

But VoIP phone systems don’t just offer more functionality; they cut back on downtime too. One study found that the added features coupled with greater availability enable companies to reduce their daily call time by an average of 32 minutes per employee per day. With over a half-hour each day to get more done, employees can be more productive, improving the bottom line.

Remote Work

Because a VoIP phone system allows employees to work from any device — with the same phone number — they can work from anywhere. This will enable employers to offer remote work, which many employees prefer, and studies have shown that it can further cut costs. Your IT support provider or in-house IT department can easily implement VoIP services for remote workers.

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We're big believers in culture fit. Contact Tier 3 Technology Solutions for a commitment-free conversation about your business's IT Support needs.

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Next steps

A VoIP phone service brings many benefits to businesses of nearly every size, from greater functionality that facilitates employee productivity to the cost savings of a simpler system. The system does have its drawbacks, but a stable internet connection can overcome many of these. A quality managed IT support provider will have the technology to ensure a quality call on their end and help you decide if a VoIP phone system is right for you. Contact one today to see what your business stands to gain.