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Build vs. Buy: Should You Build Your Own Tools for Your Subscription Business?

When does it make sense to do it yourself?

Resource allocation is often the Achilles heel of growing SaaS or subscription-based businesses. Many organizations opt to build their own tools to manage critical processes. But when does it make sense to DIY? When does building your own tools impede growth? When should you hack it?

I once worked with rocket scientists. Back in the day, I led financial reporting, planning and analysis, and financial operations relating to the network and network security at MIT, and many of my colleagues were MIT graduates.

(The saying “it’s not rocket science” takes on a whole new meaning when some of your colleagues remind you that they are, indeed, rocket scientists.)

While here, I learned that each field of study at MIT had its own inside joke related to graduates of other fields of study. For example, my network engineering colleagues taught me that physics graduates are notorious for believing they can build anything.

“As the legend goes, physics graduates often build their own cars rather than buy them.”

I took this to be part metaphor and part truth. Though these physics graduates maintained a deep intellectual curiosity about the innermost workings of the universe, it came with a degree of impracticality. I wondered why someone would reverse engineer a car just to figure out how to build one when buying one is so easy and efficient. Believing they could build anything was impressive, but entirely unrealistic.

Maybe You Can Build a Car, But Should You?

This is the least understood issue when entrepreneurs consider build vs. buy. The majority of growing SaaS or subscription-based business should not be in the business of building their own homegrown systems and tools.

“Just as you wouldn’t build your own car, don’t build your billing system,
and don’t build your CRM system.”

Fundamentally, the infrastructure required to support today’s modern-day start-up (particularly one with a greater need for process and discipline like SaaS) is readily available off the shelf for implementation, integration and configuration.

Related reading: The importance of process and structure in SaaS and subscription-based companies.

The beauty of many of these tools is the ability to configure anything. When I get into my car, it senses from my key fob the settings for the tilt of the mirrors, how reclined I like my seat, and how I prefer the steering wheel to be positioned relative to my body. I configured the car to do this. I did not build this functionality, I bought a car that allowed me to do this.

What Keeps Founders Handcuffed to the Build vs. Buy Dilemma

Many early-stage founders have not swiftly moved past the buy vs. build dilemma because they nurture the following two beliefs that keep them handcuffed to the problem:

  1. They believe their business is a snowflake. They mistakenly think they are unlike any other business in the world, with a product built and administered in such a way that billing and pricing needs infinite flexibility to accommodate them.
  2. They feel that because their developers are highly skilled, they should leverage this asset to build systems such as integrated billing and credit card processing.

Both beliefs are incorrect. Successful SaaS and subscription-based businesses are not so different (there are exceptions to this, but they are rare.) There are some very standard metrics that each of them adheres to for both funding and operational health. (Use this free calculator to measure 9 of the most critical SaaS metrics.) Founders, your business likely fits into enough of a pattern that many available tools are designed to accommodate your existing needs.

“As for your developers, their time is not free.” 

Though many developers are highly skilled, building in-house tools is strategically not the right use of their time. Founders who invest in off-the-shelf tools are in a position to run necessary reports without detracting from valuable product development cycles. They are also able to satisfy the needs of auditors who seek standardised reporting, without manipulating the data in Excel themselves.

Build vs. Buy vs. Hack

One point of contention among many founders is that enterprise, integrated back-office systems are extremely expensive. They end up down the rabbit hole of internal tool development because they believe off-the-shelf is too pricey for their cash-strapped companies. They’re half right – there are many tools that are simply too expensive and robust for early-stage businesses. But in this era of hundreds of thousands of cloud applications for business, there is a new option in the build vs. buy debate: hack.

One of my clients faced this dilemma recently. They had purchased a really expensive integrated general ledger and time tracking system costing them over $20,000 annually. Two years into the contract, they hadn’t even begun to use major features of the tool. While their intentions were good – they didn’t want infrastructure preventing growth – they simply weren’t ready for a tool so robust. They were wasting money and effort managing a complex system.

In reality, they needed easily available cloud applications that cost no more than $100/month to run the business in a structured way, without the unnecessary bells and whistles weighing them down. Together, we removed the bulky, expensive tech, and implemented less expensive applications for billing, the ledger system, and timekeeping. There are a plethora of web apps available to the modern small business. Many of them provide the necessary power depending on the state of your business, and will meet your needs today.

Build vs. buy is a big decision. Many companies associate buying tools with massive IT implementations. But often you don’t need to build or buy at all, but rather hack together a solution that fits your stage of growth and maturity. Consider what can be done using spreadsheets or less expensive applications. Once you have outgrown your existing tools, it is appropriate to consider a large, integrated back office solution.

Every parent believes their child is going to Harvard when they’re in elementary school. Eventually, most learn that maybe they are not destined for the Ivy League. In a similar way, founders don’t need to invest unnecessary time, funds, and internal resources in building a massive, scalable back office until it truly fits their maturity as a business. My advice: don’t overspend, and don’t overthink it.

Denice Sakakeeny, our Subscription Insider Guide to SaaS Finance and Growth, is a sought-after operational consultant for nearly 20 years by recurring revenue and high-tech companies, Denice guides organisations through the most challenging parts of their life cycle, solving the most difficult problems related to finance and operations and removing impediments to growth. (Read full bio)

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