Cutting costs is a great business practice — until it actually costs you money in the end. That's the principal risk with a small business phone system: Buy too little, and expansion is pricey or just plain impossible.

Spend too much on a small business phone system, and you waste money if your employees don't really use all the cutting-edge features. (They won't.) A small business phone system for companies with more than 10 employees, or those that expect to expand soon, is a matter of budgeting over the medium term and looking for the best fit from a variety of small business phone system technologies.

Covered in this guide:
1. Basic small business phone system with key service unit
2. Moving your small business phone system to full-fledged PBX
3. Hosted or virtual PBX offerings for a small business phone system
4. The Web-based small business phones system

Action Steps
The best contacts and resources to help you get it done

A decent small business phone system for most companies

What you probably expect from a small business phone system is voicemail, a receptionist station, call transfer capabilities and expandability. For those level needs, you'll need what's called a key service unit or KSU small business phone system.

I recommend: The KSU is actually a small box on the wall and you'll need your phone vendor to install it and the software to run the small business phone system. See KSU small business phone system vendors Toshiba, Nortel, AT&T and Vertical (Comdial). More on small business phone system selection at the Business.com small business phone system page.

When to look at a PBX small business phone system

From 10 users to 40, small business phone system KSU units for are probably rich enough in features. After 40 or when connecting multiple offices, a private branch exchange (PBX) system begins to make more sense as a small business phone system.

I recommend: The PBX small business phone system replicates the level of service once provided by operators at switchboards. They can can handle a lot of incoming calls, route connections accurately and quickly and provide many additional features, like automated directories of employee extensions, call parking, complex conference calling and highly configurable voicemail services. Small business phone system PBX vendors include Fonality, TalkSwitch, Nortel, Cisco Systems, Avaya and 3Com. See more at the PBX small business phone system directory at Business.com.

A middle-ground PBX small business phone system solution

Thanks to the Web, it is now possible to buy much of the usability of a private branch exchange small business phone system over the Web. Rather than invest upfront in hardware, you pay a monthly fee for small business phone system features via the Internet.

I recommend: Some vendors of hosted, virtual or IP PBX include RingCentral, VirtualPBX, GotVmail, Freedom800, and VoiceNation. See more choices at the Business.com directory on buying a virtual PBX service small business phone system.

Consder a Web-based phone system for small business

Got Internet? Then you've got a small business phone system, assuming your office is properly wired for voice and data through the same lines. (Most new buildings are.)

I recommend: Known as VoIP, for Voice-over-Internet-Protocol, the small business phone system phones themselves look the same, but the savings on calls -- especially long distance -- can be significant. And these systems can mimic the kinds of features common to expensive PBX systems as well. Major vendors of small business phone system VoIP include Cisco, Avaya and Nortel. Take a look, too, at the VoIP small business phone systems page at Business.com.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Prices are dropping like mad, in large part due to competition from Web-based small business phone system technology. However, that doesn't mean a small business phone system via the Web is better. If you can, talk with a colleague who has used a virtual small business phone system for a while.
• •  There is a market for buying a used small business phone system. Assuming you can take the risks inherent in used equipment, you can slash startup costs by investigating a used small business phone system first.
• •  Always run costs for a small business phone system out over five years, 10 years better. Your cheap upfront cost on a small business phone system won't be so cheap if your company expands dramatically or you can finance or lease a PBX small business phone system cheaply.