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To build, or to buy? That is the question
Let's dive into one of the most crucial questions that a company needs to constantly answer
One of the most crucial questions startups must address early on is whether to build or buy the products or features needed to operate and scale. This decision requires a team, executive or otherwise, to consider the advantages of building or buying in relation to the company's strategy and value proposition. However, companies often neglect to thoroughly explore this question, leading to wasted engineering efforts and significant financial losses. Let's examine the essential factors to consider when addressing this question and the risks associated with each decision.
First thing first: what are we doing here?
Before even contemplating whether to build or buy, your team must have a clear understanding of your strategy and value proposition. Ask these questions:
What value are we trying to provide?
What market are we targeting, and what makes us uniquely positioned to do so?
Which aspects of our product do not exist in the market today?
If similar products exist, can we build a product that better delivers on the value we aim to provide?
What parts of our product need to be proprietary, and which parts do not?
These questions will help you comprehend how you are uniquely positioned to create the solution you intend to bring to market and assist you in determining what to build versus what to consider buying.
Why would I buy it?
Numerous components are involved in running a business, ranging from managing your workforce to handling clients and driving revenue. You would never decide to build all the software required to operate your business yourself (please, tell me you wouldn't!). Clear examples of software to buy instead of build include:
HR and payroll management systems (top-tier tools like Rippling, ADP, and Gusto already cater to your company's needs)
Tools for internal employee communication (leading tools like Slack already address this requirement)
Tools for sending emails (renowned tools like Outlook and Gmail already exist)
Video chat services (prominent tools like Zoom and Teams already exist)
While it might seem obvious to purchase rather than build these tools, it illustrates the point that solutions exist that meet your company’s day to day needs and you don’t ever think of building them. However, there are other areas where companies spend considerable time building when viable solutions can be purchased.
The most apparent examples are customer support and sales pipeline management. Let's discuss each separately.
Almost all companies need to determine how to handle customer inquiries. Let’s start by stating the obvious: Gmail is not a suitable solution for managing customer inquiries. It doesn't scale, and there's no effective way to track trends in customer inquiries or gather meaningful data on customer inquiry volume to staff or manage your customer support team's performance.
A common misconception that companies fall for is believing their customers are unique, necessitating a custom solution. This is simply not true. Numerous tools, such as Salesforce, Zendesk, and Front, can help manage customer support work-streams across multiple channels. These tools are often customizable enough to design the right workflow for your customers, addressing their specific needs while still providing excellent customer service—the ultimate goal.
Sales Pipeline Management
In my professional experience, deciding whether to build or buy a sales pipeline management system has been one of the most contentious topics at a company. As a Salesforce enthusiast, I tend to lean towards buying rather than building in this area. Let me explain why.
When it comes to sales pipeline management, you need to:
Track your pipeline of prospective clients (leads)
Have a place to store your clients and ongoing deals
Monitor the performance of your sales representatives
Quickly assess progress towards goals
These requirements are standard across companies, regardless of their industry focus. What is often unique is the product or service they sell. So, should companies build their own sales pipeline management solutions because their products are unique? The answer is a resounding no.
Let's use the questions mentioned earlier to arrive at the right conclusion. If your company's goal is to disrupt the customer relationship management tool ecosystem, then by all means, build your solution. If not, there is no reason to reinvent the wheel. Plenty of solutions, such as Salesforce, can address this critical business need. While Salesforce may not be perfect, its customizability and adaptability to fit specific business needs are unmatched.
I have used Salesforce in SaaS, property management, marketplace, and Web3 businesses to meet diverse needs across various products and services. Salesforce's customization allowed me to build unique solutions for each business with minimal engineering involvement. As an operator, this enabled me to move quickly and build elegant solutions to meet the business needs at different growth stages. I'm not alone; Salesforce is used by companies of all sizes generating millions or more in revenue. If those companies have chosen to buy, I challenge your decision to do otherwise.
It is worth noting that you might decide not to store certain proprietary data in a third-party system to avoid unnecessary data duplication or because you consider it your secret sauce and don't trust third parties with it (although this is often a stretch). Tools like Salesforce enable you to visualize that data in their system without actually storing it. If this is important to you, consider this possibility when making your buy or build decision and when designing the implementation of third-party systems.
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Why would I build it?
At the risk of belaboring the point, let's delve deeper into the reasons one might choose to build rather than buy.
If the solution you're trying to create doesn't currently exist in the market, then by all means, build it. This is a clear-cut case where you're uniquely positioned to deliver.
If you believe you can improve upon an existing solution, then building could be valid. However, I urge you to conduct thorough market research before reaching this conclusion. Additionally, consider a mixed approach, where you buy certain components of the product you're trying to build (as feasible) and build others.
You may want to build the necessary features or solutions, but it's entirely acceptable to decide that now is not the right time. To make this determination, ask yourself:
What does our product roadmap look like?
This question is crucial because it helps you identify priorities for today, tomorrow, and a year from now. If you don’t have a product roadmap, then you have another issue entirely
Do we have the internal skillsets required to build what's needed? Do we even have the capacity to build those things today?
Numerous companies begin by purchasing a product or feature to meet their immediate needs. As they grow, they bring aspects in-house because it more directly addresses customer needs or it better aligns with their product vision. Companies like Meta (f.k.a. Facebook) used products like Salesforce to manage their clients and deal pipelines for over a decade before deciding to build their solution. This example stands out because Meta generates over $100 billion in annual revenue, and they opted to buy until they deemed it appropriate to build. If they can do it, I encourage you to carefully consider whether your company should follow suit.
A company’s death knell
At the risk of sounding alarmist, I believe that failing to make the right decision about whether to build or buy can lead to a company's downfall and millions of dollars wasted. You started a business because you believed in your unique value proposition for customers. Relentlessly focusing on addressing that unique value proposition is the only path to success. Your resources are limited and valuable; concentrate on what matters. Take the time to consider the questions I've posed here to make the right decisions for your business. Once you think you've reached a decision, discuss it with other builders to ensure it's the correct one.
If I can lend an ear as you think through these decisions or help you reach the right conclusion, please don't hesitate to reach out.