Starting a VoIP Business: 6 Crucial Questions for Success

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1 Starting a VoIP Business: 6 Crucial Questions for Success IPsmarx Technology, Inc. US Plaza America Drive, Suite 2000 Reston, VA Phone: (703) Website:

2 Starting a VoIP Business: 6 Crucial Questions for Success Each year billions of dollars are spent on VoIP. Hundreds of millions of people are already customers and more are signing up each year as the technology becomes more accessible to more people. The market is growing and there are numerous ways of entering it for business persons at all levels. But before you start your VoIP business, there are a few critical questions you need to ask. By answering the following six questions, this guide will provide you with the knowledge you need to choose the best path forward for you. 1. What Are the Main Market Segments and Solutions? 2. How Can You Attract and Keep Customers? 3. How Can You Improve Business? 4. How Much Technical Knowledge Do You Need? 5. Should You Choose an Open Source or Proprietary Solution? 6. What Should You Look for in a Solutions Provider?

3 1. What Are the Main Market Segments and Solutions? Introduction The VoIP market can be divided into roughly four major segments. Each of these segments can be accessed using various solutions. While these solutions are adapted to different needs and purposes, they must all be able to provide the same essential function: call routing. Call routing refers to the process of establishing a connection between parties which initiate calls and their intended recipients. Platforms that perform call routing are referred to as softswitches, which are by definition software-based systems. There are two main types of softswitches: Class 4 Softswitches and Class 5 Softswitches. This section will discuss both. Another crucial function is that of integrated billing. Integrated billing enables VoIP providers to set their rates, plans and fees and invoice customers for these charges. Please note that while billing is a critical function, not all VoIP solutions provide integrated billing. Similarly, not all VoIP solutions perform call routing independently; instead, these solutions perform certain specialized functions and depend on an integrated softswitch to handle call routing. 1. The Prepaid Market PINless and Calling Card DID Forwarding Direct DID International Mobile Top Up Callback 2. The Postpaid Retail Market: Residential, Mobile and Small Office Class 5 Softswitch Mobile VoIP App/Softphone 3. The Wholesale Market Class 4 Softswitch 4. The Business Market: SMBs and Enterprises Multi-Tenant IP-PBX SIP Trunking

4 The Prepaid Market Prepaid VoIP refers to VoIP-based telecom services that are purchased before they are used. The central attraction of prepaid VoIP is that it provides cost-effective and reliable international and long distance calling. These services are especially popular among people who need to make long distance and international calls frequently. As such, common target demographics for prepaid VoIP include immigrant and diaspora communities, international travelers and tourists. Let s take a look at the various tools that you can use to access this market. Calling Cards & PINless Calling cards are the traditional staple of the prepaid industry. A calling card allows for VoIP calls via an access number and PIN associated with that card. In contrast, PINless calling cards enable customers to make calls without the need of a PIN. Instead, customers accounts are assigned to an access number. VoIP Calling Card and PINless Solutions are typically softswitch-based, which means these solutions provide call routing and, if they have integrated billing, billing functions as well. Click here to learn about the IPsmarx Calling Card and PINless Solution. DID Forwarding DID Forwarding enables your customers to assign local numbers to international destinations. For example, suppose you have a customer that lives in Toronto, but calls friends and family in Vietnam regularly. Using the IPsmarx DID Forwarding Switch (combined with the IPsmarx Calling Card and PINless), this customer can assign Toronto numbers to his friends and family in Vietnam. This allows your customer to avoid the hassle of having to enter a lengthy international number every time he wants to call a family member in Vietnam. Click here to learn about the IPsmarx DID Forwarding Solution. Direct DID Direct DID is similar to DID Forwarding in that it allows your customers to assign international phone numbers to a local destination. But there are two important differences: 1. The Direct DID solution does not rely on the IPsmarx Calling and PINless Solution to work. 2. Direct DID is better suited to business clients who have many associates and contacts overseas. For example, suppose you have a customer that needs to receive incoming calls from people in various parts of the world the UK, India and Taiwan but lives in Canada. Using IPsmarx Direct DIDs, this customer can assign British, Indian and Taiwanese numbers to her mobile phone. This saves her contacts the time, trouble and costs of dialing long international numbers every time they want to call her. Click here to learn about the IPsmarx Direct DID Solution.

5 International Mobile Top Up International Mobile Top Up allows you to offer customers the ability to purchase mobile minutes for their friends and family overseas. Suppose your customer has a father in Sri Lanka that he wishes to call. Using the IPsmarx International Top Up Solution, he can pay for his father s mobile minutes so that his father can call him at cost-effective VoIP rates. Here s how it works: 1. Your customer selects the country, mobile network and number of the recipient. 2. This customer then purchases the amount of mobile time they wish to send to the recipient. 3. Funds are added to the recipient s account allowing them to use minutes on their mobile phone. Click here to learn about the IPsmarx International Mobile Top Up Solution. Callback Callback allows you to overcome regulations and restrictions on VoIP, such as in parts of Africa and the Middle East. The solution itself is located securely in North America, which means there is no need to install costly hardware or secure scarce logistical necessities like bandwidth & PTSN lines in the country from which calls are being made. Here s how it works: Say you have a customer in Nigeria where VoIP is restricted and they wish to call a family member in the USA. Normally, they could not use VoIP services. However, using the IPsmarx Callback Solution, they would simply: 1. Dial an access number on their landline or prepaid phone. 2. Receive a busy signal then a call back from the system. 3. Hear a message asking them to enter their PIN. 4. The customer would then dial the number of the person they want to call in the USA. In this way, the IPsmarx Callback Solution transforms customers outbound calls into inbound calls, allowing them to use VoIP services even in regions where it is difficult to deploy. Click here to learn about the IPsmarx Callback Solution.

6 The Postpaid Retail Market: Residential, Mobile and Small Office Residential, small office/home office and mobile users and vendors of VoIP services comprise the postpaid retail VoIP market. Unlike prepaid services where users pay for services before using them, postpaid users pay for services after use, either on pay-as-you go plans or fixed contracts. As such, postpaid retail VoIP services represent an alternative to mainstream telephony both landline and mobile. With $377 billion expected to be spent in the residential VoIP market by 2017 and mobile VoIP set to grow 64% over the next few years (Infonetics), retail VoIP is looking very promising. And no wonder: VoIP provides end-users with all the standard functionality of traditional landline and mobile telephony at better rates. You can offer retail VoIP services using the following solutions. Class 5 Softswitch A Class 5 softswitch is a softswitch which routes calls between end-users. It allows you to provide residential and small home office end-users with VoIP calling to use on their IP-enabled phones and, in conjunction with a mobile dialer softphone app, their smartphones as well. A Class 5 Softswitch with integrated billing will also enable you to set rates, fees and plans and charge customers. A good softswitch should provide you with the intelligence and control you need to understand your costs and income, set rates that work for you as well as select appropriate carriers (as determined by quality, cost or both). It should also provide end-users with attractive features so that you can win their business. Click here to learn to learn about the IPsmarx Class 5 Softswitch. Mobile VoIP Dialer App/Softphone A mobile VoIP app or softphone refers to a software application that runs on mobile devices and enables these devices to use VoIP services. In order for mobile VoIP apps to work, the device which they operate on must support high speed IP communications such as WiFi. While mobile VoIP apps provide end-users access to VoIP services, they don t actually provide VoIP services themselves. For this reason, mobile VoIP apps need to be associated with a softswitch, which handles call routing and billing. Using IPsmarx solutions, you can offer mobile VoIP services in a number of ways: 1. As part of your residential VoIP service 2. As an independent service 3. As part of your PINless offering 4. As part of an IP-PBX service (see Multi-Tenant IP-PBX below) Click here to learn about the IPsmarx Mobile VoIP Solution Breeze.

7 Wholesale VoIP Wholesale VoIP providers act as intermediaries between other VoIP providers. Just as retail VoIP providers provide calling services between individuals, wholesale VoIP providers provide calling services between retail service providers. As you might expect, wholesale VoIP providers handle larger traffic volumes than their retail counterparts. This allows them to get better rates from carriers and thereby widen their margins. However, in order to become a wholesale VoIP service provider, there are a few requirements that must first be met. In order to run a wholesale VoIP business, you ll need to have wholesale traffic volumes, which usually assumes preexisting relationships with established carriers. In turn, you ll need a routing and billing softswitch that can support large volumes of traffic. This type of softswitch is called a Class 4 softswitch. Class 4 Softswitch The most basic function of a Class 4 softswitch is call routing. Good Class 4 softswitches also provide integrated billing. The difference between a Class 5 softswitch and a Class 4 softswitch is that while a Class 5 softswitch routes calls between individuals, a Class 4 softswitch routes calls between Class 5 softswitches. This means that Class 4 softswitches necessarily handle much larger traffic loads than their retail equivalents. Also, because Class 4 softswitches route calls between networks across the world, they operate over multiple IP networks. Naturally, a Class 4 softswitch must be able to deliver reliable service under high traffic loads. A highly effective method of ensuring reliability is to make use of distributed and redundant architecture, as this ensures there is no single point of failure. A good Class 4 softswitch should be able to route calls intelligently so that traffic is directed to the most appropriate carriers as defined by quality, cost or both depending on your particular priorities. As with a Class 5 softswitch, it should have integrated billing and call monitoring features so that you can understand your business and set rates that work for you. Furthermore, the user-interface should be intuitive and easy to use. Click here to learn about the IPsmarx Class 4 Softswitch.

8 The Business Market SMBs and enterprises typically rely on what are called PBX (private branch exchange) systems to meet their telephony needs. PBXs provide internal connections between the telephones of an organization and connect the system as a whole to the public switched telephone network (PSTN). Telephones, fax machines and other such devices are referred to as extensions in the context of a PBX system. Traditionally, PBXs were physical systems comprised of copper wire lines. In recent years, however, VoIP-based technology has made its way onto the scene. VoIP technology provides SMBs and enterprises with numerous advantages over traditional telephony. VoIP is more cost-effective. VoIP is effectively future-proof as systems can be updated and upgraded through software configurations rather than through costly and complicated hardware installations. VoIP is much more scalable and can even support multiple offices from a single system. VoIP also provides enhanced functionality over traditional business phone systems such as find-me/follow-me numbers and DID assignment. In order to deliver these benefits to business clients, certain solutions are required. Multi-tenant IP-PBX An IP-PBX is a PBX that uses data instead of copper-wire lines to connect internal telephones to one another. A multi-tenant IP-PBX refers to an IP-PBX that can provide service over multiple locations or tenants from a single system. While cost-effectiveness is a major draw for businesses, functionality is too. Therefore, a good IP-PBX should provide the features and functions that a business needs to carry on its operations. Some of the more essential of these features include call transfer, call forwarding and conference calling, for instance. Additionally, a good IP-PBX should also be able to provide advanced features that traditional PBXs aren t usually able to deploy, such as find-me/follow-me numbers. A highly capable IP-PBX should also be able to integrate with a mobile VoIP softphone in order to provide BYOD mobile VoIP services to companies. As with other VoIP systems, your IP-PBX should be able to deliver service reliably and provide integrated billing and intelligence. Click here to learn about the IPsmarx Cloud Based Multi-Tenant IP-PBX. SIP Trunking Solution SIP Trunking enables VoIP service providers to connect IP-PBXs to the public switched telephone network (PSTN) through the internet, thereby expanding the functionality of the IP-PBX system and reducing costs by eliminating costly phone lines. SIP Trunking provides benefits for service providers as well. IP-PBX installers can unlock additional recurring revenue streams by providing VoIP minutes and DIDs to their clients and DID resellers can expand their service offering by providing additional DIDs. Click here to learn about the IPsmarx SIP Trunking Solution.

9 2. How Can You Attract and Keep Customers? Getting Prepaid and Postpaid Retail Customers We ve discussed the various segments of VoIP the market and corresponding solutions. Now, let s look at how you can reach customers. Your VoIP service has a few major selling points that virtually any customer will find appealing: Competitive Rates Good Quality Advanced Functionality (i.e. Voic to ) Ease of Use/Convenience (i.e. Online Payments, Integrated Services) As is true of any business with an in-demand service or product, the challenge of getting started is reaching potential customers and communicating the benefits of your service to them. As many of our clients found when starting their business, the most practicable go-to-market strategy is usually to target a niche market you have some familiarity with and then branch out in different areas. For example, you may target a particular geographic area a city or part of a city, for instance or a particular immigrant community the Sri Lankan community, for example. You can read a case study about how a client of ours did just that here. Alternatively, you could target a niche market with a single service, then up-sell additional services to them. For example, you could start out selling calling cards or PINless and then begin to offer callback and mobile top up to your customers. Read about how a client of ours followed this method to expand from prepaid to residential VoIP here. In either case, you should tailor your service offering to your target market. If your customers make a lot of calls to Bangladesh, for example, you could offer discounted rates to that country while increasing fees to other areas. But how do you connect with customers? One way is through advertising. Of course, by advertising, we don t mean running a 30 second commercial on prime time TV. Instead, you can find local publications that your target demographic is likely to spend some time reading, watching or listening to. These can be ethnic publications, community newspapers and websites or airtime on community TV, for example. Still, the best form of advertising is often word of mouth. If you run a focused ad in relevant media and give people good reasons to use your service, you ll likely see results. But if those same people hear those same good reasons from their friends and family, the impact is likely to be much more significant. So how do you encourage word of mouth advertising? If you provide your customers with quality service, they re likely to tell their friends and family about it. But a more proactive and probably effective approach is to offer promotional discounts and goodies (i.e. free minutes) to customers who refer new business to you. IPsmarx solutions and add-on modules provide a number of tools to create and run such promotional programs such as the Marketing Tools Module for the Class 5 Softswitch.

10 Getting Customers as a Wholesale VoIP Provider VoIP providers look for two essential elements when selecting their wholesale carriers: cost and quality. Therefore, you must be able to provide retail and prepaid VoIP providers with the quality they want at the price they want. This doesn t necessarily mean you must provide the highest quality routes at the lowest price. Rather, you must be able to provide a range of routes at varying qualities and price points. Unsurprisingly, lower quality routes tend to cost less and higher quality routes tend to cost more. However, VoIP retailers and prepaid providers will still look for the best deal they can get. Therefore, you in turn must be able to get good deals from the carriers you work with. A tried and true method of getting deals is through leverage: If you send your carriers a large amount of traffic, they will be more inclined to do so at a lower cost because they can make up the difference in volume. Another effective strategy is to focus on routes to certain regions as this will allow you to concentrate traffic, gain a better understanding of that market s behaviour and establish relationships with carriers in the region. Getting Business Customers Businesses have certain priorities that align nicely with the benefits that a good multi-tenant IP-PBX provides. They want to cut costs and reduce unnecessary overhead. They need PBX calling functions to facilitate their operations and improve productivity. They want scalable solutions that can grow with their business. They want solutions that are easily upgradeable in a relatively cost-effective manner. These are the points you should emphasize when communicating your service to such clients. However, with that being said, you need to be strategic about how you approach potential business customers. The first step to getting customers is identifying potential leads. A company with multiple extensions and two offices stands to benefit from a single access point (as provided by a multi-tenant IP-PBX) more so than does a company with only a few extensions in a single small office. Between two such companies, it s likely the former will be more interested in your services. Similarly, a company nearing the end of a contract or in need of extensive upgrades to legacy systems is likely to be more receptive to your offers than a company that recently acquired an IP-PBX or renewed a contract. Another point to remember when marketing your services is that you are also marketing yourself. Companies want service providers they can rely on. Presentation and credibility are therefore key. You have to demonstrate that you can deliver all the numerous benefits you claim your service provides. Client testimonials are invaluable in this regard. However, if you re just starting out and don t yet have client testimonials, you can compensate by demonstrating expertise of your product and service. But how do you do this? By creating an effective online presence. Research from the B2B marketing agency Bredin has found that SMBs, unsurprisingly perhaps, prefer to gain information about products and services from a company s website. According to this research, 68% of SMBs use the internet often or very often to learn about services and products. The study also found that SMB s preferred content formats are guides (61%), articles (60%) and newsletters (59%). These points suggest that you should get a presentable website up and running, keep a blog and prepare content for service brochures and guides. If the notion of running a website is off-putting to you, fret not: these days, there are numerous content management systems

11 and hosting platforms that make website and content creation easy and affordable chief among these is WordPress. Keeping Customers After you ve identified and grown a customer base, you should make sure to keep it. You do this by pleasing your customers. This point may seem obvious, but as you run your business you may find yourself losing sight of customer satisfaction. For instance, you may be tempted to increase fees or rates in order to increase your profit percentages. While there is always room for adjustment, such choices need to be weighed with how they will affect customer satisfaction. Research by Gartner Group has found that 80% of companies business comes from just 20% of their customers. It follows that you should treat those customers well. Beyond offering quality services at competitive rates, you can also offer these customers loyalty programs to boost customer retention research from Bain and Co suggests that a small 5% increase in customer retention is associated with a 75% increase in profit. IPsmarx solutions come with an array of features that give you the intelligence you need to understand your business. With call detail reports (CDR), call monitoring and integrated billing you can identify your most loyal and profitable customers and create plans appropriate to them. For instance, you could offer free minutes to your best customers, thereby encouraging their continued business. Beyond rewarding your most loyal customers, you can also offer promotional discounts to your general customers during various times of the year. These discounts can coincide with holidays Diwali, Ramadan and Ede, Christmas, Chinese New Year, Cinqo De Mayo and so on. The advantages of offering discounts during holidays are twofold: 1) It promotes a good customer-provider relationship and 2) since people are making many calls at this time, you can make up the difference of your discounts in volume. In fact, IPsmarx clients were recently found to experience up to a 75% increase in traffic volume during the holidays to learn how service providers can capitalize on peak traffic seasons, watch our webinar here.

12 3. What Are Some Ways to Improve Business? Now that we ve looked at the various the market segments, solutions and marketing techniques involved in VoIP, let s take a look at how you can hone your business and improve your ROI. As you know, to earn revenue as a service provider, you bill customers for minutes. One way to increase your margins is through minute rounding. Minute rounding lets you round minutes up so that customers go through minutes quicker and, in doing so, pay you for more of them. Again, such techniques must be weighed against considerations such as customer satisfaction. With calling cards or PINless, you can also set maintenance fees to make up for you re the otherwise very low-rates that you advertise. Another area that you should pay attention to is distribution. Instead of selling directly to customers, you can sell to agents and resellers. This will allow you to tap into their customer-bases, which can help you boost your volume of sales considerably. Alternatively, you could sell directly to customers. Although this may be more expensive upfront and may not produce same volume of sales, this method may still be more beneficial to your bottom-line since you will have more control over your margins you will not need to account for agent and reseller markups, in other words. We ve already touched on this in previous sections, but recall that you can also offer bundled services to improve your selling proposition. For instance, with your landline or IP-PBX service, you could offer mobile VoIP. With your PINless service, you could offer Callback and mobile PINless. You can offer such services as free value-added services in order to improve your competitive standing and promote customer loyalty or you could charge extra for such services in order to directly increase your revenue. IPsmarx clients have found success using a variety of tactics and models. Whatever route you decide to take will depend on your particular challenges and opportunities. If you choose to work with IPsmarx, our experienced staff will provide you with the support and knowledge you need every step of the way.

13 4. How Much Technical Knowledge Do You Need? You don t need to be a programmer or technical person to run your VoIP business with IPsmarx. As your technology solutions provider, we ll take care of the technical side of things. This means that beyond developing the solution itself to be intuitive and user-friendly, our team will set up your solution and provide you with one-on-one training. However, if you decide to go with open source software instead of IPsmarx, you might need quite a bit of technical knowledge, or at least be willing to pay technicians and programmers to handle any issues you may have. This brings us to the next point...

14 5. Should You Choose an Open Source or Proprietary Solution? If you re considering getting into the VoIP business, you re probably looking at various solutions. And like any product you consider purchasing, you need to balance different concerns against one another, namely price, quality and reliability. So let s look at these factors. If you ve been shopping around for solutions, you ve probably come across open source softswitches (sometimes called freeswitches). It s true that in terms of upfront costs, you can t beat a freeswitch. They re free! But like most things in life, you get what you pay for. Open source softswitches are notoriously unreliable and problematic remember we re not talking about a pirated word processor here: a softswitch must be able to route and bill thousands of calls 24 hours a day, 7 days a week at an acceptable quality. If and when your freeswitch breaks down, you ll need to scramble to find (and pay) technicians and programmers before your customers leave to find more reliable providers. The first time this happens, you may actually still have saved money with your freeswitch. But after the second, third, fourth time and so on, you ll understand why most profitable VoIP and prepaid providers don t use freeswitches. So while your needs will vary with the particular market your targeting, you should look for a solution that is reliable and proven to be so.

15 6. What Should You Look for in a Solutions Provider? 1. Longevity How long has the company been around? Is it a fly-by night operation that is going to sell you a product then disappear in two years when you need upgrades or technical support? If a company has been around for a while demonstrating that it can anticipate and adapt to the market chances are that it is going to be around in the future. When you start your VoIP company you should partner with a solutions provider that you ll be able to count on over the long term. 2. Experience In addition to how much experience a company has, you should ask what kind of experience they have. There are a lot of small technology companies out there with great technical teams, but when it comes to human support training, customer service, advice, etc they may be lacking. They may be adept at creating certain pieces of software, but have they helped their clients succeed? Do they know what advice to give clients in various sectors of VoIP? Do they understand the market as well as the technology? Client relations experience, market experience, training experience: these are all factor you should pay attention to when choosing a solutions provider. 3. Training and Resources Will your prospective solutions provider train you on how to use their product(s)? Do they provide ongoing access to webinars, whitepapers and other helpful materials to help you stay ahead of the competition, spot new opportunities, improve your ROI and increase your revenue? 4. Proven Customer Base If the solutions provider you re considering is offering you a softswitch at a cheap price, but only has a few dozen customers, there is probably a reason why that switch is so cheap. Although price is certainly important, you should make sure that you get what you pay for. Look for a solutions provider with a large and established customer base. Moreover, make sure that your prospective solutions provider s customers are actually successful. Read the case studies. Study their businesses. 5. Technology The VoIP market is large and multifaceted. The ideal solutions provider will have a solution for virtually any opportunity available to you. Their technology should also be of proven quality see if the solutions have garnered industry awards, try their demos.

16 About IPsmarx Technology, Inc. Supporting VoIP Service Providers in over 68 countries, IPsmarx Technology has been providing feature rich VoIP solutions since Their Class 4 & 5 Softswitch Solutions, SIP Based Calling Card Platform, and Multi-Tenant IP-PBX Platform with integrated billing have earned them worldwide acclaim. Systems from IPsmarx are modular, scalable and flexible. This gives clients the opportunity to customize solutions to their needs. IPsmarx helps service providers minimize the risks of entering a new market by providing you security, technical training, support and a reliable billing platform. Awards & Recognition How to Get Started Contact us today for a complimentary, no-obligation consultation. IPsmarx Technology, Inc. Reston, VA Plaza America Drive, Suite 2000 Reston, Virginia USA Tel: Fax: Toronto, ON 40 University Avenue, Suite 400 Toronto, Ontario M5J 1T1 Tel: Fax:

Contact Info. Canadian office: IPsmarx Technology Inc. Toronto, Ontario M5C 1Y2 USA. Canada Tel: +1.703.8 71.

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