Microsoft 365 comes in three plans for small businesses: Business Basic for browser-only users, Business Standard for teams that need desktop apps and Business Premium for advanced security needs. Most small businesses need Business Standard.
Microsoft 365 licensing is one of those things that should be simple but somehow is not. There are multiple plans with overlapping features, confusing names and enough fine print to make anyone's eyes glaze over.
The good news is that for most small businesses, the choice is actually straightforward once you understand what each plan includes and what your team actually needs.
The three plans that matter for small businesses
Microsoft offers a range of plans but the three that are relevant to most small businesses are Business Basic, Business Standard and Business Premium. Each one builds on the last.
Business Basic gives you cloud-only access to Outlook, Word, Excel, PowerPoint, Teams and OneDrive. Everything runs in a web browser or mobile app. You do not get the desktop applications installed on your computer. This plan works for teams that do all their work in a browser and do not need offline access to Office apps.
Business Standard includes everything in Basic plus the full desktop versions of Word, Excel, PowerPoint and Outlook installed on your computer. This is the plan most small businesses end up on because staff want the familiar desktop apps rather than the browser versions. It also includes additional tools like Bookings and Microsoft Forms.
Business Premium includes everything in Standard plus advanced security features. This is where you get more robust device management, advanced threat protection for email, conditional access policies and information protection tools. For businesses that handle sensitive client data or operate in regulated industries, Premium is worth the additional cost.
What every plan includes
All three plans include business email through Outlook with your own domain name, 1 TB of OneDrive cloud storage per user, Microsoft Teams for calls, chat and video meetings, and SharePoint for shared file storage and collaboration. These are the core tools most businesses use every day and they are included at every tier.
How to decide which plan you need
For most small businesses with five to fifty staff, Business Standard is the right choice. It gives your team the desktop apps they are used to, professional email, cloud storage and Teams. It covers the day-to-day needs of a typical business without paying for security features you may not need at that tier.
If your business handles sensitive data, if you need to enforce security policies on staff devices, or if you want advanced email threat protection beyond standard filtering, Business Premium is worth the step up. The security features in Premium are genuinely useful and provide protections that would cost significantly more if purchased separately.
Business Basic only makes sense if your team is entirely browser-based and nobody needs desktop applications. This is rare for most businesses.
Common licensing mistakes
The most common mistake is paying for the wrong plan across your entire team. Not everyone needs the same licence. A staff member who only checks email and attends meetings does not need the same plan as someone who works in Excel spreadsheets all day. You can mix plans within your organisation to match what each person actually uses.
Another common issue is paying for licences that are no longer in use. When someone leaves and their account is not properly offboarded, the licence continues to be billed. Over a year, unused licences can add up to a significant waste.
Some businesses also pay for add-on products they do not need because they were included in a bundle or recommended during initial setup without much thought. An annual review of what you are paying for versus what you are using almost always finds savings.
What about the enterprise plans?
Microsoft also offers Enterprise plans like E3 and E5 which are designed for larger organisations. These include features like unlimited OneDrive storage, advanced compliance tools and enterprise voice capabilities. For most small businesses these are overkill and significantly more expensive per user. Unless you have specific compliance or scale requirements, the Business tier plans cover everything you need.
Getting it right
The difference between the right plan and the wrong one is not dramatic in monthly cost per user. But across a team of ten or twenty people, multiplied by twelve months, choosing the right plan and eliminating waste can save a meaningful amount over the course of a year.
At Recloud we review Microsoft 365 licensing for our clients to make sure everyone is on the right plan, unused licences are removed and the business is getting full value from what it is paying for. If you are not sure whether your current setup is optimised, get in touch and we will take a look.