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Business Plan to Start a VoIP Company: Part II, Equipment and Vendors

Posted by Nick Medina on April 13, 2015 at 10:00 AM

Now that you’ve decided to start a VoIP Company, you must now decide what equipment and vendors you will need. Your overall cost will vary depending on how much time and capital you plan on investing to start your VoIP Company. It will also vary depending on what vertical or verticals you have decided to focus on. The main components to your VoIP Company will include your VoIP carrier(s), switch equipment, and end-user equipment or software.

Business Plan for VoIP company People at DeskThere are several options for both equipment (Switch and End-User) and VoIP Carriers. Finding vendors can involve getting on userboards, internet searches, attending tradeshows, and other methods. I typically recommend talking to other VoIP Companies and learning their experiences when dealing with vendors and equipments. Vendors should also be able to provide a list of referrals for you to contact. Let's go ahead and explore the options for each category.

VoIP Provider

The VoIP Provider is probably your most important vendor as they will be providing your DIDs (Origination), Local and Long Distance (Termination), other ancillary services like E911, CNAM, Caller ID, and other services. These services are typically referred to as Class IV (class four) services. The carrier’s footprint is also an important factor. Some carriers focus on regional while others can provide nationwide and global coverage.  Be sure to get the right carrier for your requirements.

Most startups assume you have to go with a large Tier 1 carrier to buy DIDs and Termination.  This may not be the best course of action as there are a few challenges for a startup. These include high monthly minimums, long term contracts, minimum quantity purchases per rate center, no online portal for ordering, and a few others. However, if you have the capital, the staff, and higher volume, you may choose to go this route. An alternative to selecting a Tier 1 carrier is to go with a hybrid Carrier like VoIP Innovations.  Not only would you have access to most Tier 1 providers but you would also have access to many smaller regional CLEC’s footprints. With this type of carrier, you could also purchase individual DIDs from an online portal and make changes to specific DIDs in real-time. 

You should also consider from whom you will be purchasing ancillary services. If you choose to go with a Tier 1 provider, it is very likely they will only be able to support their own DIDs with ancillary services like E911, CNAM, etc. They may not even be able to provide those ancillary services directly and advise that you would need to purchase them through a third party. However, a hybrid carrier will be able to offer you all the ancillary services and even support off-net DIDs with those services.

Premise-Based or Hosted Switch

The next most important step in starting a VoIP Company is deciding what kind of switch to use. The switch is basically the brains of your operation. It handles the routing, call termination, features like voicemail, call forwarding, auto attendants, etc. These switch features are typically referred to as Class V (class five) services. The feature set will depend on what type of vertical(s) on which you are focusing.

There are specific manufacturers and versions for specific market verticals. For example, if you are looking to resell Hosted PBX, you will need a system that supports auto-attendants, extension dialing, group dialing, voicemail, call parking, and list of other similar features. However, you must also ensure that the switch is a multi-tenant platform that allows you to create an instance or partition for each specific company client. The reason this is important is that you need to make sure that each company client is separate from the other. You don’t want one client to have access to other auto-attendants or extension numbers. Also, the global settings will probably vary from client to client. Most of the multi-tenant PBX switches can be premised-based or hosted.

VoIP_for_small_businessWhen determining whether to buy the equipment and collocate it or buy the hosted version, you should look at overall costs and determine your breakeven point based on customer count. The premise-based option will require upfront capital expenditure as well as monthly fees for collocation. The hosted option will probably require a smaller upfront setup fee and slightly higher monthly hosting fee. Also, the hosted version is most likely fully managed and eliminates the cost of having someone maintain the switch.  Startups typically choose to go the hosted method because of the lower upfront cost and management requirements.

End User Phone/Software

Now that you’ve selected a switch, it's time to determine what end-user phone or software you will be supporting. Most switch vendors will have recommended phone brands and models that are supported.  Although you could probably use any kind of SIP phone, it is recommended you use the supported phones for a variety of reasons.

If your switch vendor determines your end-users' phones are not supported, they may not be able to assist in troubleshooting issues. Software upgrades are sent to the IP phones, if those phones are not the correct type, the update may not work correctly or may work at all. The end user portal typically relays certain programmable information back to the phone, and while this information can probably be manually programmed, you lose the ability to do it in real-time if the phone is not compatible. Check with your switch provider on software as well. A lot of businesses are now switching to using softphones. These allow them to basically ditch the deskphone and use their computer or laptop to make and receive all calls. 

As part of your offering, some VoIP companies provide different model options. While you may limit the brands you offer a client, you can give them the option in perhaps choosing an entry model, standard model and an executive model. By offering the same brand but different models, you are reducing the number of brands your staff is supporting but at the same time offering options to clients.

Once you’ve selected your vendors and equipment. Make sure to test all services, billing systems, and support processes rigorously. You don’t want to test your services on real paying customers. Friends and family typically make good guinea pigs. Next month we’ll discuss how to market and sell your services in this final three part article series. Click the button below to get our Guide to Becoming an Internet Telephony Service Provider!

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Tags: VoIP, Entrepreneurship

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