How to Start or Buy a Telephone Answering Service: Using a VoIP Hosted System

By Steve and Chris Michaels

Updated January, 2007

Hosted VoIP platforms are systems being hosted by a vendor or a Telephone Answering Service (TAS) that enables others to get into the answering service business or restructure their existing operation without the cost of equipment. This allows the answering service and telephone agents to process calls over the Internet eliminating the need for a site-based telephone switch.

How to Start a Telephone Answering Service, by Peter Lyle DeHaan
Get the latest info in the book How to Start a Telephone Answering Service.

This hardware/software development combined with VoIP technology make it possible for a start-up or existing service to expand its Teleservices/Call Center operations seamlessly. This model provides for limitless expansion without the costs associated with equipment and facilities. It also removes geographic barriers enabling the answering service to expand the work force in any location in the U.S. or offshore.

Once upon a time. there were 5 gentlemen who owned newspapers. These men all lived in small towns within a particular region. They all had their own printing presses and would print their weekly newspaper for their own town. One day, a salesman came through the region selling a new, improved printing press that was much faster, printed in color and was easier to use. But there was only one problem – it was very, very expensive.

Each of the newspapermen looked at the new press in awe but none could afford it until one of the men thought to himself – why can’t we join forces and buy this press as a group. The men all agreed.

Each printer got to use the press one day a week. They shared the reduced expense of the new press while benefiting from all the features; thus the inception of an alliance for the betterment of the entire group… and they all lived happily ever after.

Does this idea sound familiar?

Who are Candidates for the Hosted VoIP Program?

  1. Medium to large sized businesses that need to upgrade their equipment.
  2. The 10% – 20% of the forward thinking individuals in the industry who want to change to the VoIP platform.
  3. Businesses located in the gulf coast and on the eastern seaboard that are concerned about hurricanes and natural disasters destroying their equipment and businesses.
  4. Business owners who are interested in rolling up their operations that are located throughout the U.S. into a central location or utilizing the virtual phone answering service office idea.
  5. Current answering service owners who have vendors that will no longer support their outdated equipment.
  6. New Start-up businesses that don’t have the capital to start a new venture. Now they can offer the same type of services as their large competitor for a fraction of the price.

Features of a Hosted VoIP System

  • Pay as your grow
  • Disaster Recovery Options Available
  • No expense for equipment. Operators buy their own PC’s and DSL hook-up
  • More money available to spend on sales & marketing
  • Better reliability with redundancy by the service provider
  • Share overflow traffic and midnight operators with other hosted members
  • Go Virtual. No office needed with additional savings
  • Market worldwide with new features
  • Substantially reduce telco costs
  • Makes it easier to buy the competition or acquire accounts on the same platform

Another benefit of the hosted VoIP system over the premise based telephone switch is that it continues to evolve and doesn’t become obsolete as equipment often does within three to five years. With premise based telephone switches there is a hard cost to add more seats and oft times the equipment is limited to the number of seats that can be supported without buying more equipment. The virtual network can grow to an unlimited size and the expansion costs are borne, for the most part, by the agents who agree to provide their own equipment, telephone lines, and Internet connections so they can enjoy the benefits of working from a home office.

Collaboration – A New Alliance

And the small shall act big…

Up until now telephone answering call center owners had to turn away business because of their size limitation. If they had 20 seats and a potentially large client required 100 seats for a sales project, a marketing campaign or TV commercial, the service had to turn them away because of their size and the impact it would have on the entire service. Although the money was tempting, the owner had to analyze the impact on his present client base.

One solution to this problem is to put everyone on a large switch housed by either a vendor or answering service that has the capacity. Each subscriber has their own domain where their customers reside. When needed, the subscribers of the hosted system may share their overload traffic with whomever they choose in the system thus making them seem bigger to an outsider looking for a solution to their problem… thus the inception of an Alliance.

The most requested piece of information we are asked, is how do we make more money! Period. The hosted VoIP business solution offers its Alliance members not only the ability to save money on equipment, rent and labor but also to expand their customer base by outsourcing their high volume customers to other Alliance Members.

From his latest book, The World is Flat by Thomas L. Friedman, he states that “one way small companies flourish in a flat, ever expanding world is by learning to act really big. And the key to being small and acting big is being quick to take advantage of all the new tools for collaboration to reach farther, faster, wider and deeper”.

Hosted Systems – Pay as you grow: During the recent disaster of hurricane Katrina, the business owners not only lost their buildings, equipment and staff but the most important part of their business…their customers. These customers were not dissatisfied with their answering service but they were literally gone. They too had their businesses lost to looting, flooding and their customer base was also gone.

An important aspect to understanding the hosted concept is that customers don’t have to be in any certain geographic location. Your doors are now open to the world and you are only paying for as many seats as you want to on a monthly basis. If your customer base drops, your requirement for seats also drops and your monthly bill goes down. You only pay for what you need and use. Currently, business owners with large telephone answering service systems have to pay the monthly lease payment whether they need those seats or not.

On the flip side of this story, if a new customer comes on board with a larger requirement than what you can handle, the owner does not need to purchase extra operator positions and licenses, line cards and software that could easily run $5,000 to $10,000 per seat. If by chance that business then went away through lack of sales or brings the call center portion of their business in house, than you have an overabundance of equipment and labor, which can literally bankrupt your business.

Through a hosted environment, you can either put more seats on if you have the trained operators to handle the extra load or overflow your traffic to another hosted member. The important points are:

  • You only pay for what you need
  • You don’t have to turn away that large customer

Advantages of the virtual telephone answering service network: Home Based Agents

  • Answering Services experience very low turnover among telecommuting employees. The high cost of typical answering service turnover is greatly reduced in this model
  • Telecommuters provide their own equipment and Internet service, further eliminating overhead expense and reducing the cost for the service business
  • The reduction in cost associated with facilities and turnover, enables hosted subscribers to price services more competitively and compete more effectively with other providers.
  • Hosted subscribers are able to recruit agents in any geographical area in the United States or the world. This creates the ability to hire agents in areas where there is an opportunity to take advantage of specialized skills, language skills or affordable labor rates.

Summary of the Hosted VoIP Business Model: Hosted hardware/software systems supplied by either a vendor or host enabled answering service, provides an in-house or virtual contact center platform for the teleservices industry. The business model embodies the use of VoIP technology to provide the distribution of telephone calls, agent management, and customized reporting for both site-based telephone answering service/call centers located nationwide and their associated telecommuting employees. Teleservice clients will have the option to network together to provide telephone answering services to their customer base and to outsource overflow traffic to other hosted providers on the same system. They will also have the options to provide a number of telephone support services including inbound customer service, sales support, product support, emergency dispatch, help desk services and order processing to both large and small companies. These services are delivered utilizing an Internet based VoIP call distribution system. These virtual systems and network are capable of hosting and supporting an unlimited number of subscribers throughout the world.

[For more information, see VoIP in the Call Center by Wayne Scaggs.]

Business Strategy

The telephone answering service industry has three major problems today; a labor problem with difficulty in finding and keeping trained staff to answer calls, the exorbitant cost of purchasing and maintaining the equipment necessary to remain competitive and the lack of marketing and technology tools necessary to attract a new customer base.

Labor in the answering service industry is by far the biggest problem. Costing an average of 40% of revenue, good help is hard to find, difficult to train and in some cases they only stay with the service until they are offered a better paying job at Wal*Mart for twenty five cents more per hour.

The cost of phone answering equipment has gone through the roof. Answering Service owners are expected to spend from $100,000 – $200,000 every three to five years to merely remain competitive. With that horrendous price also comes the additional costs or software upgrades, monthly service agreement, spare parts kit and a back-up power system to maintain this huge switch should there be a power blackout. In most cases, an in-house tech person is also required to maintain and service this large switch.

Competitive Edge

Labor: To solve this industry wide problem, simply have to look at where the problem begins and that is with the employee. Surveys show that hard working, consciousness employees that have learned to take responsibility for their jobs are people who prefer to work from home. These self-motivated people understand that it is their responsibility to purchase and maintain their computer equipment along with a DSL or cable hook-up to remain employed. This benefit saves the employee the cost of a car payment, gas, parking and the time it takes to drive to work. It also provides the employer with the ability to call this person at a moment’s notice to help with the occasional spike in call traffic that goes unresolved in a conventional call center setting. This home based concept also allows the employer to schedule someone for a 3 to 4 hour shift which would be unheard of in the typical 8am – 5pm setting of a conventional telephone answering service since the employee is not going to come in for that short amount of time.

This idea has already been implemented in many telephone answering services with much success and is also incorporated in multi-billion dollar companies such as Jet Blue and Home Depot. One of the biggest perks about utilizing agents who are working out of their home is that there is a waiting list of good, qualified people wanting to go to work…something that never happens with a traditional answering service business.

If you wish to keep your operation in house, the same equipment and features apply with the outsourcing ability enabled for overflow traffic for the midnight shift and disaster recovery.

Hosted Equipment: This hosted system approach holds the answering services customer base in a totally private sector of a computer switch. This privatization process allows the new service to feel that their valuable customer base is totally secure while also providing them with the assurance that there will be no down time due to hurricanes, ice storms, power outages, earthquakes, floods or whatever mother earth fires our way.

Alliance: By having all of the hosted customers on one system allows overflow traffic between its partners. Now if one service on the system is going through a natural disaster or has a client that is too large to handle, they can offload some of that traffic to another hosted system user.

Marketing: Build a better mousetrap and they will come. When you are selling to a customer, what do you have that your competition doesn’t?

  • Price Competitive — when you have to pass on the price of a $150,000 switch, you have to charge a lot for your service. By hosting your service, you pay only one monthly fee that is suited for your business size but are able to offer all the bells and whistles.
  • Customizable Features — Your system can be customized, offering you expanded service capabilities to your clients.
  • Overflow Capacity — Many VoIP hosted systems have build in overflow features that allow you to handle more calls with less busy signals thus giving your customers better service. You can now share large accounts or even the midnight shift.
  • Disaster Recovery — If you decide to utilize an answering service to host your accounts, you still have the ability to back-up those accounts with the vendor in case of a disaster.

Pricing: Depends upon the system size and features you choose. Figure out how to downsize or eliminate your office and expenses. Other businesses are getting the job done with less expense so why not you? Jump into the VoIP pool, even if it is the shallow end, get your feet wet, and embrace the future of your business. VoIP is here and working. When will you start collecting your share of the profits?

“Change is inevitable…those who make the change easily and seamlessly are those who are more apt to survive” author – Unknown

Read the complete series:

Steve and Chris Michaels operate TAS Marketing, a business brokering company focusing on assisting clients buying and selling telephone answering services and outsourcing call centers. Contact them at 800-369-6126 or

Get the latest info in the book How to Start a Telephone Answering Service.

Learn more about the Telephone Answering Service Industry.

How to Start a Telephone Answering Service, by Peter Lyle DeHaan, PdH
Get the latest info in the book How to Start a Telephone Answering Service.
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