Expert: Recession-Squeezed Small Businesses Should Hang Up on Expensive Contract-Based Cell Phones and Save Hundreds of Dollars a Year by Using Prepaid Wireless

PR Newswire — August 12, 2010

Consumers Already Dumping Pricy Contract-Based Wireless Plans, But Most Small Businesses Haven’t Yet Picked Up on Trend; Wireless Bills Can be Cut in Half With $45-60 a Month for Unlimited Minutes, Text and Web Prepaid Plans

SAN FRANCISCO, Aug. 12 /PRNewswire-USNewswire/ –Small business owners looking to cut overhead as a way of dealing with recession-related pressure on their bottom lines should follow the lead of their own customers and get rid of expensive contract-based cell phone service in favor of much cheaper unlimited wireless plans, according to small business expert Liz Franklin.

With unlimited minutes, text and Web access for as little as $45-60 a month from prepaid wireless companies, a small business could save $250-$800 per year for each wireless phone that it either owns outright or subsidizes through reimbursed expenses. Interestingly, few small businesses appear so far to have made the switch to prepaid wireless, even though the number of consumers who buy such cheaper wireless service now outnumbers those who are still paying through the nose for contract-based cell phones with often painful early termination fees.

Liz Franklin said: “Prepaid wireless is rapidly becoming a no-brainer for small businesses. As the recession grinds on, small businesses are cutting away more and more overhead in order to keep their doors open. My advice here is simple: Before you start firing people or introducing morale-killing cuts in health insurance and other benefits, why not first put the squeeze on your wireless phone bill? With telecommunication costs being the third or fourth largest expense overall for a business, this is a big waste target for many small companies. And if you can save $250-$800 per wireless phone each year, why in the world wouldn’t you take a hard look at the prepaid option?”

She added: “Anyone who has actually rolled up their sleeves and helped a small company control its costs will understand that the potential savings from prepaid are even bigger than they first appear. Small businesses have obvious costs they can sidestep by switching to prepaid and then there are considerable hidden costs that can be avoided at the same time. Among the administrative costs that are not visible when you review your phone bills are the following: costs to cut reimbursement checks to employees for their phone bills; payroll time when you’re paying staff to chase down cell phone contracts, expiration dates, etc.; talented financial people’s time spent chasing down lost phones, terminating agreements, and even arguing with contract-based cell phone companies. And we haven’t even talked about billing errors, which occur in as many as 7 percent of phone bills!”


Franklin suggested these tips for small businesses:

1. Keep a prepaid phone or two on hand for outbound long-distance calling. Smart small business operators now have one or two unlimited prepaid phones handy in the office that can be used when someone is sent across town for a meeting or on a business trip. If your firm does a lot of outbound calling of existing clients or prospects, an unlimited prepaid phone is a great way to keep down expenses. 2. Control costs by capping your wireless phone reimbursement at prepaid levels.Among the small businesses that could save hundreds of dollars per year per employee by making the switch to prepaid are firms that now pay $90-$120 a month to reimburse employees who use their personal contract-based cell phones for business purposes. Consider capping your reimbursement level at $45-$60. (Make sure you talk to your accountant about the related IRS rules on how this is handled for income purposes.) 3. Employees who are unhappy about “eating” $25 or more dollars every month in wireless phone charges that go unreimbursed should switch to unlimited prepaid. No longer will you have to pay out of your own pocket for what are actually company calls. No more going over the minutes-limit of your contract-based plan. And if small businesses wise up and cap reimbursements at unlimited prepaid levels (see above), you will still not pay more for company calls. 4. If you are a solo proprietor, consider cutting the cord altogether. With the new generation of low-cost unlimited prepaid plans and increasingly sophisticated prepaid handsets many small businesses may even elect to “cut the cord” and go totally wireless. The smaller your business, the more likely it is that you can cut your costs significantly by shifting everything to prepaid phone service for as little as $45 a month. It’s not for everyone, but it is an option worth exploring to see if the fit is right for you. 5. Stop buying more phone than you need. Do you really need an iPhone? Do you really need a Blackberry with all the latest bells and whistles? If you can afford to pay an extra $60-$80 a month just for the privilege of owning (and probably underutilizing) a smartphone, then you probably don’t need to be reading a list of tips about how to cut your small business overhead! However, it is also the case that prepaid wireless phones are now much more advanced than they used to be – including such phones as the Samsung R451C and the LG Rumor touch – and provide for full access to email, business-style texting, the mobile Web, and so on. If you are looking to control costs, don’t pay up to $800 extra a year on a nosebleed-priced contract wireless cell phone packed with features that you either don’t use or can get the gist of elsewhere for a lot less.


Just as small businesses are only now waking up to the cost-cutting potential offered by prepaid phones, so, too, are prepaid wireless companies starting to reach out to small businesses. Even though Liz Franklin does not endorse (and is not endorsed) by any prepaid phone provider, she highlighted three examples of plans that recession-squeezed companies may wish to consider:

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