The true cost of a business phone system

Add four things and then read the contract. Recurring charges, one-time charges, tax, and the length of the commitment, which decides how much of the first two you owe whether or not you stay. Most phone quotes answer the first and are vague about the rest, and that vagueness is where the money is.

Two suppliers quote you. One is twenty-four dollars a seat, the other thirty-two. The second one costs less over three years. This article is about why that happens often enough to be the normal case rather than a trick, and what to write down so you can see it before you sign rather than after.

Recurring, every month or every year:

• Seat licences, at a rate that may step at a seat count you might cross.
• Numbers. Every published number, every direct line, and the fax or alarm line still connected in the back room.
• Calling beyond what is included, at the rate past the allowance, with long distance, toll-free inbound and calls to mobiles often priced separately.
• Paid add-ons: recording, storage past the retention window, integrations, analytics, extra concurrent calls. Each one billed per seat, per number or per company, and it matters which.

One-time, usually in the first month:

• Desk phones, headsets, adapters, and any network work a technician has to attend for.
• Setup, onboarding, professional services and training.
• Number transfer.
• The cost of leaving your current supplier early. This one is on neither new quote and belongs in the comparison anyway.

Tax, which is either on top of those prices or already inside them, and the two are not the same quote.

And the commitment, which is the multiplier on everything above.

Eight seats, three years, tax at Quebec's combined rate. Quote A is twenty-four dollars a seat with two numbers at three dollars, some calling beyond the allowance, a hundred and eighty dollars a handset and twenty-five hundred to migrate. Quote B is thirty-two dollars a seat with slightly dearer numbers and calling, no hardware and no migration fee.

Quote A's licences are twenty-five percent cheaper. Quote A costs about seventeen hundred dollars more.

The seat rate is the number everybody negotiates because it is the number on the front page. It is also, in that example, a little over half of what leaves the bank account. The rest is hardware you may not need, a migration fee that is a one-off and a negotiating position, and tax, which nobody negotiates but which is real money on the total.

None of this makes Quote A a bad quote. It makes the seat rate a bad summary.

A seat is a thing you buy. A person is a person, and the two counts almost never match.

Two part-timers who cover the same desk on different days are one seat if the supplier lets a licence be shared, and two if it does not. A phone on a counter that anyone walking past can answer is a seat belonging to nobody. The bookkeeper who has never picked up the main line is a person and not a seat. On a team of twelve, the honest licence count is often nine, and occasionally fourteen once you count the reception phone, the workshop phone and the one in the van.

This is worth an explicit question to each supplier, in writing, because the answers genuinely differ and the difference compounds over three years. Ask: may one licence be used by more than one person, and what exactly happens when two of them are logged in at once.

An annual commitment buys a lower rate in exchange for the right to stop. Dividing it by twelve produces a number that describes neither offer: it is lower than the monthly price, so it looks like a win, and it is not something you could stop paying next month, so it is not comparable to one.

Compare annual against annual, and monthly against monthly. When you do need a per-month figure for a budget, label it as an average over the term. Then ask the two questions that usually go unasked: what the rate becomes at renewal, and what it costs to leave early.

There is also the arithmetic nobody does. A two-year contract compared over a three-year planning window is not two-thirds of a second term; it is a whole second term, because you cannot buy twelve months of a twenty-four month contract. Comparing three years of that quote against three years of a monthly one means comparing four years of commitment against three.

This is the one that surprises people, and it is documented rather than folkloric. Zoom's own support documentation on purchasing and assigning Zoom Phone licenses sets out that a licence reduction takes effect at the end of the subscription period rather than immediately, while a licence you add is available and billable straight away.

Read that asymmetry against a real year. Somebody leaves in March and their licence is billed to December. Two people start in April and both are billed from April. In a business whose headcount moves with the season, that is a structural extra cost that never appears in the rate you negotiated, and it is completely invisible in a comparison that assumes seats can go down as easily as up.

Every supplier handles this differently and most will tell you if you ask. Ask.

The most common way a phone comparison goes wrong has nothing to do with arithmetic. One quote itemises number transfer at four hundred dollars. The other does not mention number transfer. In a spreadsheet the second one is four hundred dollars cheaper, because an empty cell adds nothing.

An unpriced line is not a free line. It is an unknown, and it should stay visibly unknown until somebody produces a number, because otherwise the vaguest quote wins by exactly the amount nobody looked up. The same goes for tax stated as applying without a rate, for "network readiness assessment, if required", and for anything described as "subject to survey".

Keep a list beside the totals. Ask for a figure for each item on it. Some of them will come back as zero, which is a fine answer once somebody has said it.

The business phone cost calculator does the arithmetic above in your browser. Enter two or three quotes line by line, choose the period, set the commitment and the tax treatment for each, and it reports recurring, one-time, tax, total, and the items nobody has priced yet as four separate things. Leave a price blank and it stays blank all the way to the total.

There are no supplier prices in it, deliberately. A comparison tool that ships with other companies' rate cards is making a claim about their products on the day somebody last looked, and prices move without anything breaking. The one price it knows is ours, which goes in as an ordinary column you can edit or delete, and which loses to a cheaper quote like any other.

If your usage is the part you are least sure about, the minutes and where they actually go is the other half of this, and the thing that actually decides how many people need a licence at all is who is expected to answer the phone.

Then negotiate the total, not the seat rate.