Key Systems vs. PBX: Breaking Down Small Business Phone Options

The first in step in selecting the ideal phone system for your small business is to consider what phone capabilities your company needs and wants.

You’ll also have to give some thought to want functions and features your business might need as it grows. Cost might drive your decision making process, but keep in mind that saving money on your phone system today may mean losing money in the long run.

The bottom line is investing in a phone system for your small business or startup is an important move, but choosing which phone system best suits your company’s priorities is a time consuming and confusing task. That’s why we’ve put together this quick tutorial. Read on and we’ll give you the scoop on two of the most popular phone system solutions, Key and PBX.

What is a Key Phone System?

A Key System is a traditional and basic type of business phone system that works well for companies with a few dozen employees or less. A Key System is controlled and supported by a Key System Unit (KSU) that offers multiple lines.

Key System telephones have multiple buttons that represent individual lines. When you want to make a call, you pick up the receiver and press a button to access a phone line. The button then lights up to indicate that the phone line is in use. When compared to a PBX system, Key Systems aren’t as customizable, but they do offer an array of features a traditional phone system can’t. In fact, a Key System offers every basic calling feature most small businesses need, such as hold buttons, speakerphone, paging, intercom, memory dialing, timers and long-distance restriction capabilities. With a Key System you can also call extensions within your office.

You can expect that largest initial cost associated with a Key System is the purchase of new handsets. A Key System may be compatible with your current phone wiring, which can save you substantial money. The KSU must be installed and maintained by a professional and all external phone lines will need to be connected to it.

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What is a PBX Phone System?

A PBX system connects the telephones within a company to one another and also connects them to the public switched telephone network (PSTN). It’s a private telephone network where employees share a limited number of outside lines (often referred to as trunk lines) to make and receive calls outside of the business. In essence, you can think of PBX as functioning like a mini version of the phone company’s central office (CO).

Modems, fax machines and other communication devices can be connected to a PBX. Because lines are shared, not dedicated to each user, a PBX phone system is a cost effective communication solution for most small business. A PBX system offers the same features a Key System does, plus dozens more. In fact, one of the main benefits of a PBX system over a Key System is it flexibility and wealth of automated features that can be configured to meet the unique needs of your small business. Plus, individual lines can have different functions to serve each employ best.

Compared to a Key System, PBX is much more scalable. As you develop and grow your small business, PBX can be reconfigured to meet its changing needs. In fact, a PBX system can accommodate hundreds of phone lines. Similar to a Key System only larger, a PBX system demands a cabinet of electronic equipment. Just like a Key System, a technician must install your PBX system and all internal and external phone lines must be connected to it.

A PBX system will be higher in cost than a Key System, but the flexibility and options you gain with PBX could be well worth the added expense. PBX systems can be on-premise or hosted. Using a hosted or virtual PBX configuration has its pros and cons, but generally you’ll enjoy a cost savings by using hosted PBX because you don’t purchase the phone equipment.

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Once you break down all the pros and cons, you’ll discover that neither system is truly “better” than the other. The truth is, both Key Systems and PBX systems have something to offer small businesses. It’s up to you select the one that best fulfills your company’s needs.


At, our research is meant to offer general product and service recommendations. We don't guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.

Micah Pratt
Written by
Micah Pratt
In her seven years working in digital marketing, Micah Pratt has worked with several start-up websites providing SEO, content strategy, and content marketing support. Currently in her role as the online marketing manager for, Micah focuses mainly on helping small business owners make financially smart business decisions.
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