PBX system for small business: The full buyer’s guide

SIP trunking, extensions, telephony. Jargon, jargon, jargon. I bet when you looked up “PBX system for small business” today, you weren’t expecting homework.

I wrote this guide because you shouldn’t have to be a telecom expert to find a reliable way to manage calls and make your business sound professional.

Here, you’ll find everything you need to know about PBX to get started. What it is, the different types, and which one is best for small businesses. 

Spoiler: For most small and growing businesses, a cloud PBX is the best, most affordable choice. By the end, you’ll know what to look for in a service provider, how much to budget, and five solutions that can help your team grow.

What is a PBX phone system?

A Private Branch Exchange, or PBX, is a business phone system that manages all your company’s calls. 

Instead of every employee using their own number, customers can dial one main business number. The PBX makes sure the calls go where they need to, whether that’s to you, a teammate, a department, or voicemail.

Traditionally, PBX systems connected to the PSTN, or Public Switched Telephone Network. That’s the system of physical phone lines that makes landline calling possible. In practice, this meant your PBX relied on physical phone lines and on-site equipment to make and receive calls.

Today, some systems still use physical wires. But many can now handle online calls. That’s because of a technology called VoIP, or Voice over Internet Protocol. 

The shift to VoIP has made PBX more affordable, easier to scale, and able to support modern features analog systems never could.

💡Learn more: VoIP vs PBX

What are the different types of PBX systems?

Three main types of PBX systems are in use today: analog, on-premises, and hosted PBX. Analog and on-premises systems require hardware, while hosted PBX runs on the internet.

Here’s how each one works:

Analog PBX

Analog PBX was invented in the 1960s. These phone systems connect your desk phones through physical lines. They use copper wires or, more recently, optic fibers. 

You’ll need technicians or an IT team to connect these wires to public phone wires. They then have to manually link boxes and switches to distribute calls to other members of an office.

Because of this, PBX phone systems cost thousands of dollars to set up, and installation can take anywhere from a few days to several weeks. You’ll also have to pay every time you want to add new lines or upgrade your desk phones to newer models.

Traditional PBX systems also don’t offer many features beyond what a traditional landline provides. For example, you won’t have: 

• Ring groups
• Voicemail-to-email 
• Integrations with third-party tools like Slack, Salesforce, or Zapier

That said, team members can make internal calls for free if they want to reach someone in a different department. Traditional PBX can also be useful in areas with poor internet connectivity.

On-premise PBX

Like traditional PBX, on-premise PBX systems run on hardware and equipment installed in your office. But instead of using copper wires, they connect to the internet using Ethernet cables. 

With on-premise PBX phone systems, you can:

• Manage call routing to another business phone number
• Set up auto-attendants for customers
• Make phone calls with VoIP technology

You’ll still need physical desk phones, or IP phones, though. This usually means relying on an IT provider to maintain the system. They may need to install updated hardware or troubleshoot your tech as time goes on — most of which won’t be free.

You’ll also need professional help when you grow your business and add more users. Because of this, on-premise PBX may lack scalability for growing businesses. Especially if you don’t want to spend thousands of dollars to expand your phone system.

You may also see on-premise PBX called: 

• On-premises PBX
• IP PBX system, or Internet Protocol PBX
• On-site PBX

They all mean the same thing: a phone system that requires hardware but can connect calls over the internet.

Hosted PBX phone systems

Hosted PBX phone systems are the most modern type of PBX. They use VoIP technology to run entirely on the internet. This means that the only equipment you need to get started is the internet-enabled devices you already have. Think, your phone, computer, or tablet.

The “hosted” part just means the system is managed in the cloud by a third-party hosted PBX provider. They handle the servers, updates, and backend work so you don’t have to. This makes the system much faster and simpler to set up compared to on-premises options.

Hosted PBX systems also give you access to modern business features, which can include:

• Calling and texting from anywhere, whether you’re in the office or remote
• Auto-attendants, customized call queues, and call recording, depending on the provider
• Integrations with tools like CRMs, Slack, or email platforms, so your calls and messages stay connected to the rest of your workflow

You’ll also see hosted PBX called:

• VoIP phone system
• VoIP PBX
• Cloud-hosted phone system
• Hosted VoIP
• Cloud PBX
• Virtual PBX

VoIP vs on-premises PBX: Which one’s best for small businesses?

Traditional analog PBX systems are largely on their way out. Outside of businesses in areas with poor internet connectivity, very few companies still install them.

So for most growing businesses, the choice is usually between on-premises and cloud PBX.

On-premises PBX still appeals to some because it keeps everything in-house. But for most small businesses, VoIP phone systems are a better fit. 

A VoIP system is easier to get started with. You can sign up online and use the devices you already own. It’s also more cost-effective since you don’t have to buy and maintain hardware.

Cloud PBX solutions also grow with you. Adding new users, numbers, and features takes minutes — about as long as it’d take you to upgrade your Netflix subscription, for example.

Here’s a closer look at how the two compare:

Category	On-premises PBX	Hosted PBX
Hardware requirements	Physical equipment on-premises, plus dedicated server room/closets	Cloud-based, off-site
Setup & installation	Physical wiring and equipment setup require professional installation	Sign up online and download an app
Features	Usually limited to calling, caller ID, voicemail, and basic routing	Texting, advanced call handling, integrations, AI, call recording, summaries, transcripts, automations, and more
Maintenance	IT staff or contractors needed for manual updates	Provider handles all maintenance with automatic updates
Cost structure	High upfront investment and ongoing maintenance costs	Predictable monthly subscriptions
Scalability	Hardware and on-site upgrades needed	Add/remove users and numbers from an admin portal
Mobility	Desk-bound, limited remote options	Access anywhere with an internet connection

PBX cost breakdown: How much can you expect to pay?

Your PBX cost depends on which system you pick.

For an analog PBX system for a team of five, you can expect to pay at least $5,668. This includes installation costs, hardware like new phones, line rental costs, and labor. 

For an on-premises system for a five-person team, you can expect to pay at least $2,605. This includes hardware, installation and maintenance costs, and a support package.

How much does hosted VoIP cost for small businesses? Depending on the small business PBX provider, you could pay between $15 and $40 per user per month. You might also pay extra for enterprise plans, add-ons, upgrades, and third-party integrations.

Let’s say you manage a team of five. For a separate number for each person, a main office number, and free calls and texts to Canada and the US, you’ll pay just $91.50 to $93 per month plus a one-time fee of $19 for US carrier registration. US mobile carriers require carrier registration, and you can’t text US numbers without it.

So why do VoIP providers charge per user instead of offering a flat rate like traditional phone companies? ‌

Because each team member gets their own dedicated phone number, voicemail box, and individual access to all features. They also get to use their own devices to work from anywhere. Something impossible with traditional providers.

Want to compare costs for specific VoIP providers? Use our VoIP cost calculator to crunch the numbers.

What to look for in a cloud PBX system

Your experience with VoIP can vary a lot depending on the virtual phone provider you choose. Not all of them will give you the same flexibility and features.

The right SMB VoIP system should grow with your business. It should work on the devices your team already uses and give you the features you need to stay competitive.

Use these criteria to narrow down your options and find the system that fits your business best:

• SMS and MMS capabilities. Many customers prefer texting over calling for quick updates, confirmations, or questions. Having texting built into your phone system makes it easier to stay responsive and meet customers where they already are.
  
• Third-party integrations. Business phone systems should connect to tools you already use to save time, money, and effort for your team, like your CRM, billing system, and scheduling tool.
  
• Features. These include foundational features like call routing and voicemail, as well as premium features like AI and time-saving automations.
  
• Flexible pricing and lack of long-term contracts. Be careful with long-term contracts. You should be able to access affordable prices on month-to-month or annual payment plans.
  
• User-friendly platform. The best cloud phone systems offer easy VoIP installation and are simple to use on a day-to-day basis.
  
• Multi-device access. This eliminates the need for traditional desk phones. Your team can make business calls from their smartphones, computers, or tablets. Devices they’re already comfortable using and carrying everywhere.
  
• Reliability. What good is a system that’s down when you need it? Look for providers that offer excellent call quality, high uptime, and a history of few bugs. Most providers have a public status page. You can also look into third-party user reviews on sites like G2 and Reddit.

7 Features to look for in the best VoIP service

While you’re comparing cloud phone systems, look for these seven must-have features. They’re what turn a basic phone setup into a tool that helps your business save time, support customers, and grow.

1. Unlimited calling and texting: Reach local customers whenever you need to. Don’t stress over per-minute or per-message pricing.
   
2. Shared numbers for teams: Dedicated numbers are useful when a single person manages a relationship, like a sales rep or project lead. Shared numbers let you split responsibility for calls and texts. Share context and ensure customers always get a response, even when a team member is away.
   
3. Call management features: Look for call forwarding, routing, and IVR. These help direct callers to the right person, reduce missed calls, and keep customers from getting bounced around.
   
4. CRM and app integrations: Connect with the tools you’re already using to automate repetitive tasks — like logging calls in your CRM.
   
5. Messaging automations: Save time by scheduling texts, using templates, and setting up auto-replies.
   
6. Call recording and transcriptions: Store audio recordings and their transcripts in one place. This lets you go back for context, coach your team, and keep a paper trail.
   
7. Free trials: The best business phone systems offer 100% free trials so you can test them with your team without getting locked into a plan.

5 best cloud PBX systems for small businesses 

Your next small business phone system is looking for a home. Here are five of the best cloud PBX providers to consider. Each has its strengths, so you can find the one that matches your budget, team, and goals.

1. Quo: Best VoIP PBX for growing businesses 

Pros

• Unlimited calls and texts to the US and Canada
• One free new local or toll-free number per user
• Team collaboration features like internal threads and shared numbers
• Auto-attendant functions or IVR for inbound calls
• Messaging automations, including auto-replies, templated messages, and scheduled texts
• AI features, like AI voice agent, call tags, and call transcripts and summaries
• Integrations with 7,000+ apps, including Slack, Salesforce, and HubSpot

Cons

• No verification through two-factor authentication*

*Nearly all virtual phone numbers share this problem. Companies like Facebook, Uber, and Google rarely let you authenticate accounts through a virtual phone number.

Quo, formerly OpenPhone, is a business phone solution made for growing teams. It’s built to help you close more sales, support customers, and grow your business.

With Quo, you get unlimited calling and texting in the US and Canada. Each new user also comes with a local US, Canadian, or toll-free number. Want to split responsibility for calls and texts? You can make any number shared. Everyone on the same shared number has visibility into conversations, so they always have context. 

Keep in touch in the office, on the road, or at the job site using devices you already have. This includes your PC and phone, both Android and iOS. 

You can also easily set up a custom call flow using our built-in, drag-and-drop call flow builder. This means you have full control over how every call is handled. Route incoming calls to a ring group or specific teammate, set up auto-attendants, and use our AI voice agent, Sona, to handle overflow calls. 

Getting calls after business hours? Easily forward them to an external emergency number, voicemail, or Sona, so you never miss a customer. Every Sona call comes with detailed transcripts and summaries, so you still have oversight.

You also get call recordings, along with AI-powered transcripts and summaries for easier follow-ups. You’ll find all your communications with a contact in their conversation history. Get the information you need so you can move quickly.

Of course, I’m biased. Test out Quo for yourself by signing up for our seven-day free trial today.

Once you confirm it’s the right fit, you can easily port any existing US, Canadian, or North American toll-free number straight from the web or desktop app.

Key features of Quo

• One free local US, Canadian, or North American toll-free number per user
• Free SMS and MMS support to the US and Canada
• Free calls to the US and Canada
• Shared numbers
• Call forwarding to phones and computers
• IVR or phone menus
• Text messaging automations, like snippets, auto-replies, and scheduled messages
• Quo AI voice agent, Sona
• Call recording, both on-demand and automatic
• Voicemail-to-text transcriptions
• Integrations with Slack, Zapier, Make, Google Contacts, Jobber, HubSpot, and Salesforce
• Quo API to unlock more integrations

Quo pricing

You can choose between three Quo pricing plans:

• Starter: $15 per user per month for free calls and texts to the US and Canada, texting automations, AI voice agent Sona, on-demand call recording, voicemail transcription, and more
• Business: $23 per user per month for phone menus, call transfers, analytics and reporting, integrations with CRMs like HubSpot and Salesforce, and more
• Scale: $35 per user per month for AI call tags, dedicated onboarding, and priority chat and email support

2. Dialpad: Best for sales teams with advanced AI needs

Pros

• Unlimited calling in the US and Canada
• AI features are available on the base plan
• Multi-level IVR on the base plan

Cons

• Additional numbers are not available on the base plan
• Minimum user requirements can hike up costs
• Slack and Zapier integrations require an upgrade

Dialpad is built to help teams handle calls, texts, and video conferencing all in one place. All plans come with unlimited calling in the US, Canada, and your home country. 

You’ll also get multiple AI-powered tools on the basic plan, including real-time call transcriptions and speech coaching for your support team.

That said, Dialpad has some fundamental features that are paywalled. For example: 

• You only get three ring groups or departments on the base plan, so for more, you have to upgrade
• You can’t get additional numbers for your team without upgrading to the Pro plan, which costs $10 more per user per month
• You can’t send international text messages unless you upgrade
• You’re locked out of every third-party integration except Google Workspace unless you upgrade 

Upgrading plans? Just know that Dialpad’s Pro plan — the middle tier — has a three-person minimum limit. The Enterprise plan requires at least 100 people.

So if you want essential features that are only available with an upgrade, you might have to pay for a lot more users than you need.

Key features of Dialpad

• Unlimited calls in the US and Canada
• Unlimited SMS and MMS to the US and Canada for US and Canadian customers
• Multi-level IVR 
• Limited ring groups on the Standard and Pro plans
• Live speech coaching
• Automated post-call summaries
• Real-time call transcriptions

Dialpad pricing

Here’s a quick breakdown of Dialpad pricing:

• Standard: $15 per user per month for unlimited calling, multi-level IVR, toll-free number support, call recording, and voicemail greetings
• Pro: $25 per user per month for international texting support, additional numbers, third-party integrations, and 25 ring groups
• Enterprise: Custom pricing for unlimited ring groups, additional integrations, and a 100% uptime guarantee

3. Nextiva: Best for teams that need Microsoft Teams integration

Pros

• Unlimited calls and video meetings in the US and Canada
• Microsoft Teams integration is available as an add-on or upgrade
• Offers priority and skills-based routing
• Can connect multiple social media accounts into one dashboard

Cons

• SMS and MMS require upgrades and are limited
• Call recording requires an upgrade
• Limited toll-free minutes are available on each plan

Nextiva is a customer experience tool designed for enterprises. But they also offer some basic plans for small and medium-sized businesses. You can use Nextiva to call, text, and make video calls. You can also add your social media, review sites, and teams all in one dashboard. 

Need to integrate with Microsoft products? Nextiva offers a native integration, provided you’re willing to upgrade. 

That said, Nextiva locks some basic features behind more expensive tiers. For example, you only get 100 text messages per user per month on the Core plan. If you do the math, that’s only ~three messages each of your team members can send a day. I don’t know about you, but I send at least five messages a day just to my partner.

Want to record incoming phone calls? It’s only included on the second pricing tier, Engage. This is nearly twice the cost of Nextiva’s base plan and comes with features your business might not need, like 30 linked social media accounts.

Key features of Nextiva

• Free unlimited video calls and voice calls in the US and Canada
• Virtual fax
• Smart call routing with an upgrade
• Microsoft Teams integration with an add-on or upgrade
• Integrations with email, social media, web forms, and other business apps

Nextiva pricing

There are three tiers of Nextiva pricing:

• Core: $15 per user per month for voice calls, 100 text messages, team chat, voicemail transcriptions, and access to the mobile app
• Engage: $25 per user per month for the Microsoft Teams integration, 500 text messages, digital fax, voice analytics, 2,000 toll-free minutes, and call recording
• Power Suite: $75 per user per month for up to 100 agents for skills-based routing, IVR, call transcriptions and summaries, and API integrations

4. Cisco Webex: Best for video meetings

Pros

• AI assistant is included on the base plan
• Integrates with Cisco IP phones
• Unlimited local and domestic long-distance calling

Cons

• Call recording is only available on the Enterprise plan
• SMS/MMS requires installing a third-party app
• Steep learning curve

Cisco Webex offers a suite of products that lets you host online meetings, send team messages, share files, and more. Even on the calling plans, you get video calls with interactive whiteboards, screen sharing, and breakout rooms. Just know that on the base plan, you can’t have calls that last longer than 40 minutes. 

You also get unlimited local and domestic long-distance calls, plus basic call handling features like phone menus, call forwarding, group calling, and transfers. And if you still rely on desk phones, you can integrate Webex with IP phones.

That said, Webex only offers call recording on the Enterprise plan. If you’re not ready to spend a lot, you can’t track customer calls for training, quality checks, or compliance purposes.

You also don’t get texting with Webex. To send SMS and MMS messages, you have to integrate with third-party apps. This might be why some users report a steep learning curve. One user says they dislike that the tool: “Need[s] more technical knowledge, which could result in additional expenses.”

Key features of Webex

• Unlimited local and domestic long-distance calls
• Auto-attendant 
• Call hold and transfers
• Visual voicemail
• Call queues are available on the Enterprise plan
• Call via phone, PC, or IP phones
• Video calls 
• Team messaging and message threads
•  HIPAA/BAA compliance
• AI meeting summary, message rewrite, and message translation

Webex pricing

Webex Calling offers the following three pricing options:

• Webex Call: $15.30 per user per month for unlimited domestic and long-distance calls, call forwarding, call hold and transfers, phone menus, extensions, and limited AI features
• Webex Suite: $22.50 per user per month for AI assistant and meeting summaries, video meetings of up to 24 hours long, video calls with 200 participants, and post-meeting transcripts
• Webex Enterprise: Contact for pricing for call recordings, call queues and barging, voicemail-to-email, higher security, and a dedicated account executive

5. Grasshopper: Best for solopreneurs

Pros

• Unlimited calling to the US and Canada
• Desktop and mobile app
• Auto-attendant with extensions

Cons

• Only integrates with Google Voice
• Only one number per account
• Call recording requires an upgrade
• No international texting
• Expensive international calling

Grasshopper offers a stripped-down business communication solution for solopreneurs. You get the basics, like call routing, forwarding, and unlimited calling and texting. 

That said, I wouldn’t recommend Grasshopper to businesses that are planning to scale. For one, you don’t get any integrations besides Google Voice. So you risk out-of-sync data across your tools. 

Your team members might also struggle to collaborate on solving customer issues. One reason is that you don’t get shared numbers, so you can’t split responsibility for calls and texts. You also don’t have any context about who said what, so you risk missing a message or double-texting a customer.

In the words of one reviewer, “[The] downside was that we grew rather quickly and needed to switch to another company to meet our needs.”

Finally, the base plan only supports one user and one extension. You can upgrade your plan to get unlimited users, but you still only get one number per account. Additional numbers cost $9 per number.

Key features of Grasshopper

• Local and toll-free numbers, with additional numbers for $9 per month each
• Phone number extensions, and additional extensions for $3 per month each with an upgrade
• Call forwarding
• Call transfers with an upgrade
• Free unlimited calls and texts in the US and Canada
• Voicemail transcriptions
• 24/7 customer support
• Call recording with an upgrade
• Mobile and desktop apps

Grasshopper pricing

Grasshopper offers three pricing plans to customers:

• True Solo: $14 per month for one user, one phone number, and one extension
• Solo Plus: $25 per month for unlimited users, one number, and three extensions
• Small Business: $55 per month for unlimited users, four numbers, and unlimited extensions

How to get started with a small business VoIP provider

Compared to traditional phone systems, getting started with VoIP is faster, simpler, and cheaper. You can get started in 15 minutes — at least with Quo — and don’t need any equipment besides what you already own, like your PC, tablet, or cell phone. Here’s how:

1. You sign up online with a provider like Quo.
2. You pay a monthly subscription, usually per user per month.
3. You choose a local, toll-free, or vanity number. 
4. If you want to keep your existing phone number, you can port it in. On Quo, you start the porting process by filling in a two-minute form, in-app.
5. You download your provider’s desktop or mobile app, called a softphone, or use the browser version.
6. If you want to send texts to US numbers, you’ll also have to complete carrier registration. On Quo, you can complete this process through the app using our easy, step-by-step guide.

Quo: The best cloud PBX system for small businesses

Cloud PBX systems give small businesses the flexibility, features, and affordability that older phone systems can’t match. They’re easier to set up, work on the devices you already use, and scale as your team grows.

Quo brings all of that together in one platform built for growing businesses. Support customers with unlimited calling and texting in the US and Canada. Close more sales, thanks to shared numbers and advanced call management. Plus, keep your team in sync with AI features like Sona, call summaries, and transcripts. 

Sign up for a free trial of Quo today. Welcome to the future of how businesses talk to their customers.

FAQs