Knowledgebase: Sales & Quoting Tools
Hosted PBX Business Models
Posted by Albert Diaz, Last modified by Albert Diaz on 01 August 2019 06:54 PM
As a provider of Hosted PBX services it's important that you package and price your solution in a way that brings value to your customers and revenue to your organization.
Below we've documented the 2 most common and creative ways that RingLogix White Label VoIP Partners can package, price and sell their Hosted PBX solutions.
Common - The Per User Unlimited Model
Most Hosted PBX providers sell their solution on a cost per User model that includes unlimited domestic calling for the entire PBX. In some cases, it may also include minutes to neighboring areas like Canada.
The “lines”, commonly referred to as “call paths”, are then usually set to about 1.5x the User count.
For example: a 10 User Hosted PBX may be granted around 15 call paths.
This model is very revenue healthy and providers can expect profit margins upwards of 70% or more.
The providers cost-liability (how much their customer can cost them in usage) is then limited to the amount of calls that customer can likely make based on how many active Users they have. This number is approximately 450 domestic minutes per active User.
A 10 User system sold under this model will likely generate $250-300 in revenue.
10 Users * $25 per User = $250 total per month.
All partners using the RingLogix White Label Platform automatically support this model.
Creative - The Shared Minute Bundle Model
While the Per User Unlimited model is by the far the most common, and arguably the easiest to understand and manage for both providers and customers, there are times when this method can prove to be too expensive for some customers and some use cases.
Legacy PBX / key-system customers with a high number of stations (Users) and a low number of lines (call paths) typically fit this description. For example: a warehouse with 20 stations and only 4 lines.
In this example it’s likely that the cost of 20 Users in the unlimited model will be far more expensive than the cost of the 4 lines they have now. The question is how much more, is it worth it to your customer and how good of a salesman are you?
In these cases, selling the customer a PBX with a limited bundle of minutes and a discounted cost per User is usually the way to close the sale.
Let’s use the warehouse example from above...
As you can see, in both models the customer is getting a 20 User system. However, in the first model they have access to unlimited free calling, and you get $500 in monthly revenue. In the second model the customer still gets 20 Users but they are limited to how many minutes they can talk for free, therefore the provider can afford to charge less.
The providers cost-liability (how much their customer can cost them in usage) is then fixed to the number of minutes you provided and billed them for. If they use more minutes than what’s included, then you bill overages. How many “lines” you give them is not important because it does not affect your cost liability. However, you should ALWAYS set the max call paths to a realistic and controlled number for security reasons.
In sum, the shared minute bundle enables Hosted PBX providers to be more cost competitive while limiting their cost liabilities.
RingLogix White Label VoIP Partners that want to support this model should open a ticket with our help desk to spec and create the shared minute bundles and appropriate subscriptions.
In general your system will need a few PBX shared minutes bundles and matching subscriptions to start and a shared User subscription. Our help desk can also offer pricing suggestions you can model from.
**NOTE: Although the shared minute bundle model is most commonly used to help offer more affordable solutions to customers with higher User and lower call path counts, it can also be used in extreme-high-volume scenarios where the unlimited model might be too costly for the provider to support.
For example: Perhaps you have a high volume customer that uses several thousand minutes per User (usually a call center in some way or form). Selling the unlimited model at $25+/- per User might not offer sufficient margins to the provider. In this case, selling the customer a large bundle of minutes (20K, 50K, 100K+) that provides what they need, with cheaper per User fees, usually allows you the provider to still offer an affordable solution with the peace of mind that you have a guaranteed minimum profit margin.
As a new provider, it's very easy to get overly concerned with wanting to support EVERY model and every price point, all the time, in every way. But wanting to implement every minute bundle in every denomination, +, +, will likely only confuse your staff and increase the chances of human error (by accidentally picking the wrong options at the wrong time).
The best advice we can offer is to keep it simple. If you create too many options for your customer and even for yourself, "option fatigue" will set in and decision making will be much slower which will stunt your growth.
There's a reason all the major providers offer the unlimited per User model. Simply put, it's profitable and super easy to manage. It's also very easy for customers to understand. It's just one "unlimited" minute plan and one "unlimited" subscription that you can easily discount should the customer buy a large amount of Users (or if you know they will be very light users).