Top 5 risks in starting a VoIP Business that an Entrepreneur needs to take care of

VoIP (Voice Over Internet Protocol) is one emerging area of business that helps young and ambitious entrepreneurs to prove their mettle and get you rolling in no time. These entrepreneurs enter with a vision to create their name and of course a bag full of money.
Unfortunately most of them fail – According to Bloomberg, “8 out of 10 entrepreneurs fail within the first 18 months”, VoIP has got even higher failure ratio because of the shrinking margins and increasing competition. The primary reasons for falling face down are inadequate knowledge and somewhere in the excitement of being an entrepreneur, they fail to analyze the risk and underestimate the importance of key elements that are critical to a VoIP business. The top 5 such elements are:

1. Network

Network is the heart of any VoIP business be it wholesale or retail. It is essential that the Network is robust and flexible to adapt to growing business needs and at the same time secure against frauds. Listed below are few issues that business tend to oversee and as a result fail:

• a. Selecting cheap and insecure network elements
• b. Unplanned network capacity
• c. Network Security threat
• d. Network Redundancy

2. Clients

Clients are your business partners either selling or buying services from you, comprising of vendors & customers. Choosing the right customer and vendor is key.

• a. Vendors – Vendors are the clients offering you either complete A to Z destination or specific destination for call termination. Every destination will have rates and calls that are terminated to these destination are billed accordingly. There are plenty of Vendors available in the market however, only the vendors offering best quality and rates should be selected, to be the preferred choice for customers, to minimize potential impact to business.

• b. Customers – Customers are the clients who are using your service and sending you the call traffic for various destination. Each destination should have enough margin to cover the operational and overhead expenses. It is crucial that customer’s requirements are met to maintain continuous business. Offerings to customer should be made after analyzing the market, not too high not too low, and winning the customer based on quality of service is the key.

3. Human Resource

Choosing the right set of people is important to lead your business to success. Selecting proficient Sales, NOC, Rates & Routing, Legal and Accounts team members and supporting them with right tools increases productivity and business efficiency. Data theft is one of the most commonly seen risk in the industry, and it is crucial to have the right process and privileges in place for the access to data.
Hiring resources without planning leads to dent in margins and slows down growth. Companies should consider partnering with 3^rd party service provider for O&M and Support to cut down on their operation expenses and let experts handle those vital matters.

4. Cash flow

Companies often spend most of their money building robust network, procuring best in the market billing and switching tool and having best work force but still fail, due to not having adequate cash flow to run the business. Most of the vendors offer preferred rates in prepayment, missing out on such opportunity may harm business growth.
Maintaining credit limit at customer’s/reseller’s end is equally important and there are many instances where the credit offered piles up and at the end leads to bad debt.

5. Switching and Billing Solution

Billing and switching solution are the brain of VoIP business. Service provider habitually look out for cheaper solution which miss out of key aspects like:

• a. Robust and Secure Solution
• b. Easy to use and scalable
• c. Smooth integration with 3rd party billing / Switching
• d. Codec support
• e. Advance Rating and Routing to minimize day to day task
• f. Customize reporting

Absence of above listed key elements lead to hassles in day to day operations and in worst case major downtime, resulting in business loss.
Entrepreneurs must consider above listed key elements and play their cards right to achieve success in the volatile market. There are enough reference material available for free on internet for start-ups like, VoIP Info that can guide and suggest the know-how about the business.
These are the few of the key elements that I could derive after spending 6 years with Panamax Inc, a leading technology company developing Class 4 & 5 Switch and MFS solution. Please feel free to reach out to me for more details.