Founders - Buy or build?
Solomon Bush
11 replies
When you are trying to add new functionality to your product, how do you pick between buying an existing tool and integrating it vs. building that tool from scratch?
Replies
Graeme O’Connor@iamgoconnor
Is it a core part of your value proposition and defensibility? If yes, build it, if not buy it!
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@solomon_bush yes and ability to do something not easily replicated by others!
@iamgoconnor I like that you mentioned 'defensibility.' So by this, you mean, your ability to defend your value prop?
We try and build where the function will directly add to the product as a feature. Anything non-core we'll buy in.
@maxwellcdavis Okay that makes sense. That's actually the best advice on this topic I have heard.
Great question @solomon_bush @solomon_bush1
1. First, I evaluate how long it will take me to build it in-house.
2. Then I multiple that x1.5.
3. Then, I turn those months into $ value by multiplying months with our monthly (entire) team costs.
Now that I know my cost (+ some opportunity cost), I can evaluate outsourcing or/and acquiring.
Then the point of discussion becomes do I care about the speed or precision or $.
Do I like the team I am talking to?
What's the edge, and why are they selling?
Are there any red flags?
Etc.
@vedranrasic Okay this is great advice!
So the x1.5 multiplier is just to hedge against possible scope creep?
Also, in your opinion what would an example of a red flag be?
@sachin_chandra1 do you then have to buy the team as well? If it's not your core competency. Thx
@solomon_bush "scope creep" precisely :)
I was looking to buy a product and it was all great; I performed a simple search on google and the guy resold the same code base multiple times. Sometimes you don't care. While in that case I did and I just left the call.
Another red-flag if they keep raising price on you for BS reasons.
Just like when buying a used-car or a house... you probably wanna do an inspection.
Thats a great point. I have been screwed on used card purchases plenty when I was younger, lol. I can't imagine buying a bust piece of software or license. So much sunken costs that are irrecoverable.
Launching soon!
Buy any day if it is not our core competency.