Build vs Buy Calculator

Build custom software only when it provides a genuine competitive advantage that cannot be replicated by off-the-shelf tools, when your requirements are so unique that existing solutions cover less than 50% of your needs, or when regulatory or security requirements mandate full control. Building custom tools costs 5-10x more than buying equivalent software per Gartner research.

Buy when an existing solution covers 80% or more of your needs, when time to market is critical (building takes months, buying takes days), and when ongoing maintenance would distract engineering from your core product. Most non-core functions (CRM, billing, analytics, HR) should always be bought since the market for each is mature and competitive.

Build when the software is your core competitive advantage, when no suitable solution exists, or when security requirements demand full control. According to a16z, companies should "buy everything that isn't your core product." Building custom tools costs 5-10x more than buying off-the-shelf.

Buy when an existing solution solves 80%+ of your needs, when time-to-market is critical, and when ongoing maintenance would distract from your core business. The total cost of building includes development, testing, hosting, security, and ongoing maintenance, typically 3-5x the initial build cost.

For building: (developer salaries × months) + infrastructure + maintenance + opportunity cost. For buying: license fees + implementation + training + customization. Most companies underestimate build costs by 2-3x. Include 5 years of maintenance in your comparison.

Revisit annually as your needs evolve and the market changes. A tool you needed to build 2 years ago may now have excellent off-the-shelf alternatives. Conversely, a bought solution may have become too limiting as you scale.

The build vs buy decision determines whether to develop custom software or purchase an existing solution. It matters because building when you should buy wastes engineering resources, while buying when you should build limits your competitive advantage and flexibility.

Migration costs include planning and scoping labor (5-15% of total), data migration tooling and execution (20-30%), staff retraining (15-20%), integration rebuilding (20-30%), and lost productivity during the transition period (10-20%).

Prioritize the highest-volume, most repetitive processes with the highest error cost: invoice processing, email follow-up sequences, data entry and enrichment, report generation, appointment scheduling, and payment reminders.

Build when your requirements are highly unique, you have a strong engineering team, and the software is a competitive differentiator. Buy when standard solutions cover 80%+ of your needs.

The six most important SaaS benchmarks are MRR growth rate, monthly churn, LTV:CAC ratio, net revenue retention, gross margin, and CAC payback period. OpenView and Bessemer publish annual reports with stage-specific targets for each of these.

Equity dilution is the reduction in an existing shareholder's ownership percentage when a company issues new shares. The average founder retains 15-25% of equity after a Series B according to Carta data.