Microsoft 365 Licensing - A Simple Guide for Small-Business Owners
If you’ve ever tried to make sense of Microsoft 365 licensing, you’re not alone - even IT professionals joke that it feels like a new form of torture. With names like Business Premium, E3, E5, F3 , and mysterious add-ons, it’s no wonder business owners feel overwhelmed.
But here’s the good news:
If you run a small business, choosing the right Microsoft 365 licence is actually much simpler than it looks.
This guide breaks it down in plain English - no jargon, no headaches.
1. Most small businesses only need Microsoft 365 Business Premium
Business Premium is the “all-rounder” that covers nearly everything a small organisation needs:
- Full Office apps
- Email and Teams
- OneDrive & SharePoint
- Device management
- Strong built-in security
- Data protection tools
- Works for up to 300 users
If you just need productivity tools and solid security, Business Premium is the smart, cost-effective choice.
2. Have warehouse, retail, or shift workers? Use F3 licences
Many businesses waste money giving full licences to employees who don’t even use a computer every day.
That’s where F3 (Frontline) licences come in.
They’re perfect for:
- Warehouse staff
- Drivers
- Retail teams
- Anyone who mainly works away from a desk
F3 includes:
- Web/mobile Office apps
- Teams
- A small mailbox
- Basic security policies
And it costs much less than Business Premium.
3. Growing fast? Here’s the 300-user rule
Business Premium is capped at 300 users.
Once you hit that limit, you can’t buy licence number 301!
At that point, you move new users to:
- Microsoft 365 E3 , or
- Microsoft 365 E5
E3 is similar to Business Premium — same Office apps, same Teams — but it does NOT include the same security. You need to add extra security licences, which increases the price.
So think of E3 as Business Premium’s older, more expensive sibling.
4. When do you actually need E5?
Short answer:
Only if your industry demands heavy-duty compliance and advanced threat protection.
E5 is for:
- Finance
- Legal
- Healthcare
- High-risk, highly regulated organisations
E5 includes:
- Advanced cyber-threat detection
- Automated investigation & response
- Full audit and compliance tools
- Cloud app monitoring
- Teams Phone
- Power BI Pro
…basically everything Microsoft offers.
But at around £52 per user per month, it’s not a casual purchase.
If nobody in your business has “compliance” in their job title, you probably don’t need E5.
The Simple Cheat Sheet
Small business (under 300 users)
- Best Licence: Business Premium
- Why: Affordable, secure, full Office suite
Frontline/warehouse/retail staff
- Best Licence: F3
- Why: Cheaper, mobile-friendly
Growing beyond 300 users
- Best Licence: E3 (+ security add-ons)
- Why: Scales past Microsoft’s limit
Finance, legal, medical, high-risk
- Best Licence: E5
- Why: Maximum security & compliance
Final Thoughts
Microsoft licensing doesn’t have to be confusing.
For most small businesses, the answer is simple:
👉 Use Business Premium for office staff.
👉 Use F3 for frontline workers.
👉 Only move to E3 or E5 when you truly need to.
Get these basics right, and you’ll save money, reduce complexity, and give your team exactly what they need — nothing more, nothing less.
FOS.net: Your Microsoft 365 Money-Saving Champions
At FOS.net, we specialise in helping small businesses optimise their Microsoft 365 licensing.
We’ve seen countless companies overspend — simply because nobody has reviewed their licence assignments in years.
When was the last time your MSP audited your Microsoft 365 licences?
If the answer is “I can’t remember” or “never”…
then you are almost certainly paying more than you should.
We can help you:
- Identify unnecessary licences
- Remove duplicate or outdated plans
- Move users to the right licence type
- Save money every single month
- Improve your security while reducing costs
Let FOS.net make sure you’re not paying over the odds.
We know Microsoft licensing inside out — Get in touch and we’ll make it easy, clear, and cost-effective.