Build vs Buy: Complete Decision Framework

The Build vs Buy Decision

Every feature, tool, or system you need can theoretically be built custom or purchased as a third-party solution. The build vs buy decision is fundamentally a resource allocation question: where should you invest engineering time?

Why This Decision Matters

Engineering time is your scarcest resource. Every hour spent building a custom CRM is an hour NOT spent building your core product. Every dollar spent on SaaS subscriptions is a dollar NOT available for hiring or marketing.

Get build vs buy wrong and you:

• Build custom solutions that could've been solved with $50/month SaaS
• Integrate 15 SaaS tools with duct tape when a single custom system would be cleaner
• Create technical debt that compounds for years
• Miss market windows while engineering builds non-differentiated features

The Build vs Buy Decision Framework

Evaluate every build vs buy decision through these five lenses:

1. Strategic Value: Is This a Competitive Differentiator?

Core question: Would customers choose us over competitors because of how we implement this feature?

Build if:

• This feature is central to your unique value proposition
• How you implement this enables a business model competitors can't replicate
• Customer experience would be meaningfully worse with a generic solution
• Proprietary data or algorithms create defensible competitive advantage

Buy if:

• Customers care that it works, not how you built it
• Competitors use third-party solutions for this without losing deals
• This is table stakes functionality, not differentiation

Examples: Email delivery, authentication, payment processing, analytics—these are almost never differentiators. Buy them.

2. Total Cost of Ownership: What's the Real Cost Over 36 Months?

Most founders dramatically underestimate build costs and overestimate SaaS costs. Calculate honestly.

Build costs include:

• Upfront development (estimate hours × $100-$200/hour)
• Ongoing maintenance (bugs, security updates, dependency updates)
• Feature enhancements as requirements evolve
• Documentation and knowledge transfer
• Opportunity cost (what else could the team build?)

Buy costs include:

• Monthly or annual subscription fees (× 36 months)
• Integration/implementation costs
• Training and change management
• Support overhead when things break
• Potential switching costs if you outgrow the tool

Reality check: A feature that "only takes 2 weeks to build" actually takes 4 weeks (scope creep), requires 2 hours/month maintenance, and 1 week/year for enhancements. Over 3 years that's ~60 days of engineering time = $96k at $200/day. Is it really cheaper than $500/month SaaS?

3. Time to Market: How Fast Do You Need This?

Speed has strategic value. Launching 3 months earlier can be the difference between winning and losing a market.

Build if:

• You're not in a rush to launch this specific feature
• Building gives you learning that's strategically valuable
• Engineering has spare capacity (rare!)

Buy if:

• You need this feature to close deals NOW
• Speed to market is a competitive advantage in your space
• Every week of delay costs you customers or funding opportunities

4. Risk Assessment: What Could Go Wrong?

Both building and buying carry risks. Evaluate likelihood and impact.

Build risks:

• Underestimating complexity (very common)
• Key engineer leaves and knowledge walks out the door
• Security vulnerabilities in custom code
• Maintenance burden grows faster than expected

Buy risks:

• Vendor goes out of business or gets acquired
• Vendor raises prices 10x after you're locked in
• Tool doesn't integrate well or has hidden limitations
• Vendor security breach affects your customers

Risk mitigation strategies:

• For build: Code reviews, documentation, security audits, abstraction layers
• For buy: Choose established vendors, negotiate price locks, ensure data export, maintain abstraction layers

5. Reversibility: How Hard Is It to Change Later?

Some decisions are easy to reverse, others lock you in for years.

Easy to reverse (low risk):

• Email platforms, analytics tools, help desk software
• Most horizontal SaaS (can switch with 1-2 weeks effort)

Hard to reverse (high risk):

• CRM or ERP (data migration nightmares)
• Core database or infrastructure
• Payment processing (PCI compliance, customer trust)
• Authentication systems (user credentials)

Decision rule: For easily reversible decisions, move fast and course-correct if needed. For hard-to-reverse decisions, invest more time in upfront evaluation.

Total Cost of Ownership Calculator

Use this simplified TCO framework to compare build vs buy options over 36 months:

TCO Calculation Example: Invoicing System

Scenario: Should you build custom invoicing or use Stripe Billing ($50/month)?

Build option:

• Initial development: 160 hours × $150/hr = $24,000
• Maintenance: $24k × 10% × 3 years = $7,200
• Enhancements: $24k × 25% × 3 years = $18,000
• Opportunity cost: What else could 160 hours build?
• Total: $49,200+ over 36 months

Buy option (Stripe Billing):

• Integration: 16 hours × $150/hr = $2,400
• Subscription: $50/month × 36 months = $1,800
• Maintenance: Handled by Stripe
• Enhancements: Handled by Stripe
• Total: $4,200 over 36 months

Result: Buy saves $45k+ and 144 hours of engineering time. Unless custom invoicing is your competitive differentiator, this is an easy decision.

When to Build Custom Solutions

Building custom makes sense in specific scenarios. Here's when to build:

1. Core Product Differentiation

If the feature IS your product or core to your competitive advantage, build it.

Examples:

• Netflix's recommendation engine
• Uber's routing and dispatch algorithms
• Stripe's payment processing infrastructure

2. Unique Workflow or Requirements

When your workflow is truly unique and no SaaS comes close to fitting, building may be the only option.

Warning: Before building, ask "Is our workflow unique, or just different?" Often, adapting to a proven workflow is better than building custom.

3. Integration Complexity Exceeds Build Complexity

Sometimes duct-taping 5 SaaS tools together is more complex than building a unified custom solution.

Threshold: If you're integrating 3+ tools to accomplish one workflow, and integration costs exceed $20k, consider building.

4. Proprietary Data or Algorithms

When you have unique data or algorithms that create defensible competitive advantage, build to protect your IP.

Examples: ML models trained on proprietary data, industry-specific algorithms, unique data aggregation.

5. Unreasonable SaaS Pricing

When SaaS pricing doesn't scale with your business model—e.g., per-seat pricing when you need 1000 seats, or usage-based pricing that would cost $50k/month at your volume—building can make economic sense.

Threshold: If SaaS costs would exceed $100k/year and you can build for under $50k, run the numbers carefully.

When to Buy or Integrate SaaS Solutions

Default to buying in these scenarios:

1. Solved Problems

If the problem has been solved thousands of times, use a proven solution.

Examples:

• Email delivery (SendGrid, Postmark, AWS SES)
• Authentication (Auth0, Clerk, Firebase Auth)
• Payment processing (Stripe, Braintree)
• Analytics (Google Analytics, Mixpanel, Amplitude)
• Customer support (Intercom, Zendesk, Help Scout)

2. Compliance or Security Requirements

Let experts handle regulated domains. Building custom payment processing (PCI compliance), healthcare data storage (HIPAA), or tax calculation (nexus rules) is prohibitively expensive.

3. Rapid Feature Delivery

When you need functionality NOW to close deals or launch features, SaaS is almost always faster.

4. Non-Differentiated Functionality

Internal tools, admin dashboards, reporting—if customers never see it and it doesn't create competitive advantage, buy it.

5. Expertise Gap

If your team lacks expertise in a domain (e.g., fraud detection, tax calculation, video processing), use specialized vendors who've solved it thousands of times.

Hybrid Approaches: Best of Both Worlds

Sometimes the smartest approach combines building and buying.

1. Build on Platforms

Platforms like Salesforce, Shopify, or WordPress offer middle ground: more customization than SaaS, faster than from-scratch.

When to use: Your workflow needs customization but fits within a platform's domain (e.g., e-commerce on Shopify, sales automation on Salesforce).

2. SaaS + API Customization

Use SaaS for core functionality, build custom layers on top via API.

Example: Use Stripe for payment processing, build custom subscription management and billing UI on top using Stripe's API.

3. Incremental Replacement

Start with SaaS, replace with custom incrementally as ROI becomes clear.

Strategy:

1. Launch with SaaS to validate demand and learn requirements
2. Identify specific pain points or high-cost areas
3. Build custom replacements for high-ROI pieces only
4. Keep using SaaS for everything else

4. Abstraction Layers

Whether you build or buy, implement abstraction layers to make switching easier later.

Example: Instead of calling Stripe directly throughout your codebase, create a PaymentService abstraction. If you switch to Braintree later, you only change one module.

Common Build vs Buy Scenarios

Common Questions About Build vs Buy

Making Your Next Build vs Buy Decision

Next time you face a build vs buy decision, use this process:

1. Define the requirement: What problem are you solving? What are the must-have vs nice-to-have features?
2. Research solutions: Spend 2-3 hours researching SaaS options. Can any solve 80%+ of your need?
3. Calculate TCO: Estimate 36-month total cost for top 2 SaaS options AND custom build
4. Assess strategic value: Is this a competitive differentiator or table stakes?
5. Evaluate time to market: How fast do you need this? What's the urgency?
6. Check reversibility: How hard is it to switch later if you choose wrong?
7. Get a second opinion: For decisions >$25k impact, get technical advisor or fractional CTO input

Default to Buy, Build Only When Justified

When in doubt, buy. SaaS tools are cheaper, faster, and lower risk than most founders realize. Build custom only when you have clear answers to:

• Why does this create competitive advantage?
• Why is TCO lower than SaaS over 36 months?
• Why can't we start with SaaS and build later if needed?

Related Resources

• Build vs Buy Calculator