Starting a VoIP wholesale business

Starting a VoIP wholesale (or retail for that matter) business can be a demanding endeavour. At first it seems straight-forward: you buy (or rent) a softswitch, organize your NOC (Network Operation Center), connect your equipment to your partners and you are ready to start routing voice traffic buying at one price and sell it at a higher price, achieving profit.

Seems simple and, at the end, it is. However, I'd like to share with you my knowledge to give you an impression what starting and running such a business implies. As soon as you start putting things together and start to organise and plan your business operations, you realise that the devil is in the details, be it technical, organisational, financial, legal or other. Your effort heavily depends of your prior knowledge of how everything works in the VoIP wholesale realm.

A fantastic fact in this business is that not a single operational process is physically bound to any geographic location. You can setup a company in, say, Ireland, host your softswitch in a datacenter in Amsterdam, have your NOC staff work from Nigeria, while you, as the owner are a resident of a remote country somewhere in Asia. I know a number of companies that work this way and have no physical office space whatsoever.

Another great fact about VoIP wholesale business that I personally find extremely attractive is that you can start small. That means extremely low initial investments. Actually, if you are familiar with the business operations and have some technical knowledge, you can start a VoIP wholesale business by yourself in no time. This is no joke. I have helped a number of one-man-band VoIP wholesale companies establish their businesses and run them successfully with no permanent staff (i.e. no fixed costs for salaries). They don't have many partners (vendors/customers) but with the few they have it renders a very nice little source of revenue.

So, as I myself like the start-small approach, I'll try to make a coarse review of the business setup process if you are considering starting a small VoIP wholesale business.

Before I begin let me just shortly introduce you to what a minimalistic one-man-band VoIP wholesale business consists of and how it functions.

1. The central and most important technical component that you will need is the so called softswitch. It is actually a computer somewhere on the internet, having reliable network connection, with software that is capable of routing voice traffic between your vendors and your customers (you are the man in the middle, making profit on the price difference, remember?). The softswitch can be bought or rented. It can be cheap (a few hundred bucks/month) or extremely expensive $20k+. Don't worry, you are starting small, so we'll keep the cost at the low side. So let's say, you have a few customers and a few vendors, your softswitch can be a open source Asterisk based appliance hosted on a reliable VPS. Cost of this setup should not exceed $100/month, and should be capable of routing 1M minutes of traffic per month. Depending on your margin, you do the math.
2. If you are not a VoIP expert technical-wise (and we are starting small, so you don't have a NOC yet), you will need someone to do the technical work for you. I have worked for many small VoIP startups on softswitch management and I can tell you from my experience which tasks need to be handled properly for the business to run smoothly (remember, your softswitch is the heart of your business, if it fails, your business fails, so outsourcing softswitch management to a professional is a pretty wise decision). Anyway, this technical guy is responsible for tasks like: 
1. setting up the softswitch, 
2. setting up, monitoring and troubleshooting the interconnections with your partners (both vendors and customers,
3. live traffic monitoring,
4. detecting and resolving interconnection problems (there will be many, that's for sure),
5. handling technical communication with your partners' NOC teams,
6. taking care of the system security,
7. reporting traffic volume to you on a regular basis so you can issue invoices,
8. other technical tasks that you don't want to be bothered with so you can concentrate on sales that will make your business profitable
3. Now that you have your softswitch up and running, you can concentrate on your business which is primarily sales business. You need to find vendors that provide you voice termination services to different destinations (countries, phone networks), and you need to find customers that have traffic for those destinations. You sign contracts with both sides, set the prices, your tech guy sets the interconnections and the traffic flow can start. (OK, for a young company without any reputation it's a little more complicated than that but I'll cover that in another post).
4. As you are starting small, you won't have many invoices at the beginning, so you can calmly issue them manually using traffic reports from your softswitch and filling spreadsheet templates. This implies you have a computer, but that is obvious since you are reading this blog :)
5. Last but not the least, you'll have some administrational house keeping tasks to do like accounting, tax reporting and similar stuff, but that is what every company needs to do. For a small company like yours it should be pretty simple, requiring not more than a few hours of work monthly.

So that is the whole story. I'm aware that this is a somewhat simplified description of a small VoIP wholesale business, but feel free to ask about any details in the comments!

Anyway, let me cover the challenges that you will face before you start to count the revenue ;)

There are some things to consider before your first traffic starts to flow. Let's name some of the more important ones:

• In which country will your business be established? Things to consider:
• business setup process (it can take minutes in some countries to months in others)
• legal obligations to run a VoIP business
• taxation system
• country reputation
• the fixed cost of keeping the company alive (accounting and other fees)
• What kind of infrastructure will you use? Things to consider:
• Will you rent or buy a softswitch?
• How much traffic do you expect? Think about scalability. 
• Who will handle the technical part of your business? Things to consider:
• Do you have technical knowledge to do it yourself?
• Do you even want to mess with technical problems or concentrate on your business?
• Start a business with a partner who is an expert in VoIP systems?
• Outsource the technical part to an expert until you grow enough to establish your own NOC?
• How you will find your partners? Things to consider:
• Create a webpage, nothing fancy, but must emanate reputation. You'll need a company name, logo and a price list. A freelancer can do it for you for a handful of bucks.
• Maybe you already have a potential partner providing termination services for a high traffic destination at a low price? Then you only need to find a customer interested in this destination! (I know several providers that started just like that. They had social connections at telecoms in countries of high interest and could negotiate prices that literally enabled him to close tens of contracts at a VoIP conference, and that just for that one destination).
• A rule of thumb, start with vendors, one vendor is enough to start. You can't sell your customers termination if you don't have a vendor to terminate the traffic. The vendor will give you the price list, you add your margin and negotiate the selling price with potential customers.
• Attend VoIP conferences, there are many, just google it,
• Join LinkedIn (and other social media) VoIP groups, advertise your prices
• Contact other providers by e-mail, skype or other means and offer your services

At last, let's analyze a financial aspect of establishing a VoIP wholesale business using start-small approach and keeping it alive for 6 months without any revenue from voice traffic (worst case scenario). Why the 6 months? I assume that this is a reasonable time to assess the profitability of your business endeavour and decide if you will continue and grow your business or shut it down. So the 6 months cost should be considered as a financial risk you are about to take by establishing your small VoIP wholesale business. Another fact to take into consideration, I have not taken your personal time into account.  The amounts that I'll provide are a rough approximation and will depend on several parameters (like country, accounting costs, tax etc.) but I'll try to give you an estimate that should not be far away from reality and resemble the more-or-less the worst case scenario.

Initial expense	Cost (EUR)
Establish a company	500
Setup a softswitch	1000
Create a webpage	100
TOTAL	1600

Monthly operational expense	Cost (EUR)
Accounting services	50
Server for hosting your softswitch	100
Softswitch management (outsourced)	200
TOTAL	350

So if inital cost of setting up the business is 1600 EUR, and monthly operational costs are 350 EUR (that is 2100 EUR for 6 months), we come to the sum of 3700 EUR. This is the approximate amount of money that you'll invest for running your business for the first 6 months, without any revenue from voice traffic.

Please take this with a grain of salt. Establishing a company can cost anywhere from 1 EUR to 2000 EUR depending on the country. Also, the accounting services can be negotiated after the number of invoices. The server can cost (if you start really small) a fraction of the above mentioned 100EUR, and the softswitch management services can cost a fraction of the mentioned 200EUR if there is no or little amount traffic/partners. So the above numbers are, I would say, the worst case scenario.

Now, regarding the revenue you should expect, this I cannot predict at all.

However, if you close a good contract a single customer and a single vendor, it can make your investment return in a single month. That is no overstating. I've personally worked for one-man-band start-small companies that returned their initial investment with a single contract in a matter of weeks, growing their business within the first year so rapidly that they organized whole sales teams and NOC operators as their own employees.

On the other hand, I've worked for quite a few one-man-band start-small companies whose owners weren't greedy at all, keeping everything on a scale managable by the sole company owner managing the sales operations, outsourcing the technical tasks and having a steady income without much hassle. Moreover, many of them run their VoIP business as a side job!

At the end, I'd like to share with you my personal (maybe somewhat philosophical) view on the whole VoIP wholesale business. Within the last decade I have worked for small and medium sized companies, I have worked for one-man-band companies and also ones that had whole sales teams and NOC departments. I'm proud that I have helped them my expertise to resolve challenges enabling them to keep their businesses run smoothly. As any business, VoIP wholesale requires time, effort, nerves, patience, social and technical skills, ask any entrepreneur and he/she will know what I'm talking about. The fact is - all these resources and virtues are limited, we are humans after all. And we are all different. Some of us are greedy, some are humble, some savour heaps of money, some savour peace of mind. I'm the one on the humble, keep-it-small, peace-of-mind side. And I encourage you to take the same path when you start your VoIP business. That way, the whole process can be a really satisfying, peaceful and motivating experience.

Key points for small-starters that I find of most importance:

• Start small - value your time, your health, and your money
• Approach the process pragmatically - make a plan and discuss it with an expert
• Minimize risk - keep the initial investments low, have an exit strategy (which you hopefully won't even need)
• Outsource technical operations - your job is to find vendors and customers, to manage sales, negotiate prices, issue invoices and look at your revenue charts. Let the experts do the technical stuff - properly maintained technical infrastructure is what will keep your business running smoothly.
• Keep your smile, keep your health - starting small enables you to set your own tempo, set your own amount of invested time, effort and money. And those privileges are exactly what will give you the peace of mind in the whole process.
• Allow yourself to dream - as soon as see your first revenue coming, motivation will kick in big time. Give yourself some time to think what do you actually want. Do you like what you do? Do you want to grow the business or keep it small and simple? Are you dreaming about quitting your nine-to-five daily job? This might be exactly the path to fulfill this dream!

At the very end, let me state an essential characteristic of VoIP wholesale business: your income does not depend on your time spent working! I can't stress that enough, so let me make an analogy with a classic nine-to-five job. Classic 9-5 scenario: you work, you get paid by the hour. Your income is limited by your time. On the other hand let's consider the VoIP business. When you close a contract and the traffic starts to flow, your job is pretty much done! How much money you make now doesn't depend on your time spent working! What defines your income is the traffic, the minutes of voice conversations that pass through your equipment! Imagine that for a moment... Your business is making money for you, barely requiring your time and attention. That is the path to freedom. And the limits are defined only by your imagination and creativity.