The Build vs. Buy Calculator: 5-Year Real Numbers

"Should we build or buy?" Every business asks this question. Most answer it emotionally or based on incomplete information. Few run the actual numbers over realistic timeframes with all costs included.

Here's the spreadsheet analysis you need: real costs, honest assumptions, break-even calculations, and scenarios where each approach wins.

The Full Cost Components

Building Custom

One-time costs:

• Requirements and planning
• Design and architecture
• Development
• Testing and QA
• Deployment and launch
• Documentation
• Initial training

Ongoing costs:

• Hosting and infrastructure
• Maintenance and bug fixes
• Updates and improvements
• Support
• Team time managing custom solution

Hidden costs:

• Opportunity cost (time not spent on other projects)
• Risk of project failure or delays
• Technical debt accumulation
• Team knowledge dependency

Buying SaaS

Ongoing costs:

• License fees (per user, per month)
• Add-on features
• Integration costs
• Premium support
• Training

Hidden costs:

• Customization limitations (workarounds)
• Integration complexity
• Vendor lock-in
• Pricing increases over time
• Lost productivity from poor fit

Scenario 1: Project Management Tool

Company: 40 employees, 30 active users

Buy: Monday.com

Year 1:

• Licenses (Pro): 30 users × $19/month × 12 = $6,840
• Setup and configuration: $2,000
• Training: $1,500
• Integrations (Zapier): $600
• Total Year 1: $10,940

Year 2-5:

• Licenses: $6,840/year
• Growth to 45 users by Year 3: $10,260/year
• Integrations: $1,200/year (growing)
• Year 2: $8,040
• Year 3-5: $11,460/year

5-Year Total: $52,160

Build: Custom PM Tool

Year 1 (Development):

• Requirements and design: $8,000
• Development: $45,000
• Testing: $5,000
• Deployment: $2,000
• Training: $2,000
• Total Year 1: $62,000

Year 2-5 (Ongoing):

• Hosting (AWS): $200/month = $2,400/year
• Maintenance: $8,000/year
• Enhancements: $5,000/year
• Per Year: $15,400

5-Year Total: $123,600

Winner: Buy (Monday.com) Savings: $71,440 over 5 years

But consider:

• Monday.com doesn't perfectly fit workflow (30% efficiency hit?)
• Custom would have exact features needed
• Year 6+: Monday costs $11,460/year vs. custom $15,400/year
• Break-even would occur at 10+ years

Conclusion: Buy makes sense for project management at this scale

Scenario 2: CRM System

Company: 50 employees, 20 sales/support users

Buy: Salesforce

Year 1:

• Licenses (Enterprise): 20 × $165/month × 12 = $39,600
• Implementation: $50,000
• Integrations: $25,000
• Training: $10,000
• Total Year 1: $124,600

Year 2-5:

• Licenses (growing to 30 users by Year 4): $39,600-59,400/year
• Admin/consultant: $40,000/year
• Add-ons: $15,000/year
• Customization: $20,000/year
• Year 2-3: $114,600/year
• Year 4-5: $134,400/year

5-Year Total: $622,600

Build: Custom CRM

Year 1 (Development):

• Planning: $15,000
• Development: $120,000
• Integrations: $30,000
• Training: $5,000
• Total Year 1: $170,000

Year 2-5 (Ongoing):

• Hosting: $500/month = $6,000/year
• Maintenance: $20,000/year
• Enhancements: $15,000/year
• Per Year: $41,000

5-Year Total: $334,000

Winner: Build (Custom CRM) Savings: $288,600 over 5 years (46% reduction)

Break-even: 22 months

Advantages of custom:

• Exact fit to sales process
• No per-user fees (can scale to 50+ users same cost)
• Full control and ownership
• Lower long-term costs

Conclusion: Build makes sense for CRM at this scale

Scenario 3: Internal Operations Platform

Company: 30 employees, all users

Buy: Airtable + Integrations

Year 1:

• Airtable Business: 30 × $20/month × 12 = $7,200
• Zapier Professional: $599/month × 12 = $7,188
• Setup: $3,000
• Total Year 1: $17,388

Year 2-5:

• Airtable (growing to 40 users): $7,200-9,600/year
• Zapier (growing needs): $7,188-14,388/year
• Year 2-3: $14,388/year
• Year 4-5: $23,988/year

5-Year Total: $93,752

Build: Custom Operations Platform

Year 1 (Development):

• Development: $60,000
• Total Year 1: $60,000

Year 2-5 (Ongoing):

• Hosting: $300/month = $3,600/year
• Maintenance: $10,000/year
• Per Year: $13,600

5-Year Total: $114,400

Winner: Buy (Airtable + Zapier) But close: Only $20,648 difference over 5 years

Break-even: ~48 months

Considerations:

• Hitting Airtable limits frequently
• Zapier task consumption growing
• Custom would eliminate both costs Year 6+
• Savings Year 6+: $23,988/year

Conclusion: Borderline. If expect to grow significantly, build. If staying stable, buy.

Scenario 4: Customer Portal

Company: B2B SaaS with 200 customers needing portal access

Buy: Portal SaaS Solution

Year 1:

• License: $500/month × 12 = $6,000
• Customization: $15,000
• Total Year 1: $21,000

Year 2-5:

• License (scaling with customers): $6,000-12,000/year
• Additional features: $3,000/year
• Year 2-3: $9,000/year
• Year 4-5: $15,000/year

5-Year Total: $69,000

Build: Custom Portal

Year 1 (Development):

• Development: $80,000
• Total Year 1: $80,000

Year 2-5 (Ongoing):

• Hosting: $400/month = $4,800/year
• Maintenance: $12,000/year
• Per Year: $16,800

5-Year Total: $147,200

Winner: Buy (SaaS Portal) Savings: $78,200 over 5 years

But consider:

• Generic portal vs. branded, exact-fit custom
• Per-customer pricing on SaaS may escalate significantly
• If grow to 1,000 customers, SaaS could be $30,000-50,000/year
• Custom scales to any customer count same cost

Conclusion: Buy initially, consider custom if scale significantly

Break-Even Analysis Framework

The Formula

Break-even = Custom Development Cost / (Annual SaaS Cost - Annual Custom Maintenance)

Example:

• Custom: $100,000
• SaaS: $25,000/year
• Custom maintenance: $15,000/year
• Break-even: $100,000 / ($25,000 - $15,000) = 10 years

If SaaS cost grows:

• Year 1-3: $25,000/year
• Year 4-5: $40,000/year (growth)
• Recalculated break-even: 4-6 years

Key Variables

Makes build more attractive:

• High per-user SaaS costs ($50+/user/month)
• Growing user base (multiplies SaaS costs)
• Long time horizon (5+ years)
• Unique workflow needs (SaaS poor fit)
• Stable requirements (less change = lower maintenance)

Makes buy more attractive:

• Low SaaS costs ($1,000-5,000/year)
• Stable or shrinking user base
• Short time horizon (1-3 years)
• Standard workflow (SaaS good fit)
• Rapidly changing requirements

The 3-Variable Decision Matrix

Variable 1: Annual SaaS Cost

• Under $5,000: Almost always buy
• $5,000-15,000: Probably buy
• $15,000-40,000: Evaluate carefully
• $40,000-100,000: Lean toward build
• Over $100,000: Almost always build

Variable 2: Time Horizon

• 1-2 years: Buy (unless SaaS is terrible fit)
• 3-4 years: Break-even zone, depends on costs
• 5-7 years: Lean toward build if costs high
• 7+ years: Build almost always wins economically

Variable 3: Fit Quality

• Perfect fit: Buy (why rebuild what exists?)
• Good fit (80%): Buy, accept compromises
• Mediocre fit (60%): Evaluate carefully
• Poor fit (40%): Strong case for build
• Terrible fit (20%): Build or find different SaaS

Real-World Break-Even Examples

Example 1: E-commerce Platform

SaaS (Shopify Plus): $2,000/month ($24,000/year) Custom: $150,000 + $20,000/year maintenance

Break-even: $150,000 / ($24,000 - $20,000) = 37.5 years

Conclusion: Stay on Shopify

Even though custom would offer more control, break-even is unrealistic.

Example 2: Booking System

SaaS (Acuity/Calendly Business): $600/month ($7,200/year) Custom: $40,000 + $8,000/year maintenance

Break-even: $40,000 / ($7,200 - $8,000) = Never breaks even

Wait, maintenance exceeds SaaS cost?

Recalculate with growth:

• Year 1-2: $7,200/year
• Year 3-5: $14,400/year (doubled bookings, higher tier)

Break-even: $40,000 / ($14,400 - $8,000) = 6.25 years

Conclusion: Borderline, depends on growth expectations

Example 3: Inventory Management

SaaS (Fishbowl): $4,400/user/year, 5 users = $22,000/year Custom: $80,000 + $12,000/year

Break-even: $80,000 / ($22,000 - $12,000) = 8 years

But growing to 10 users: SaaS Year 3-5: $44,000/year

Recalculated break-even: $80,000 / ($44,000 - $12,000) = 2.5 years

Conclusion: Build makes sense if expect growth

The Opportunity Cost Factor

Building custom means not building other things.

If you have development team:

• Time spent on internal tool = time not spent on product
• Opportunity cost = potential revenue from product features
• Must factor into build decision

Example:

• Internal tool: 3 months dev time
• Those 3 months could build features worth $50,000 revenue
• Opportunity cost: $50,000
• Adds to custom development cost

When opportunity cost is high: Favor buy

When opportunity cost is low:

• Slow period with available capacity
• Can hire external team (no opportunity cost to internal team)
• Internal tool is the product

The Risk Factor

Building carries risk:

• Project delays (40% of custom projects delayed)
• Cost overruns (average 30% over budget)
• Failure to deliver (15% of custom projects abandoned)
• Technical debt accumulation
• Key person dependency

Risk-adjusted cost:

• Multiply custom cost by 1.3-1.5 to account for typical overruns
• Adds 6-12 months to break-even

Buying carries different risks:

• Vendor lock-in
• Price increases (historical: 10-20% annually)
• Feature changes/deprecation
• Vendor acquisition or shutdown
• Poor fit worsening over time

The Thalamus Build vs. Buy Analysis

What we provide ($1,500-3,000):

1. Complete cost modeling:

   • All SaaS costs (obvious and hidden)
   • All custom costs (development and ongoing)
   • 5-year projections with growth scenarios

2. Break-even analysis:

   • Multiple scenarios
   • Sensitivity analysis (what if costs change?)
   • Growth impact modeling

3. Fit assessment:

   • How well does SaaS match needs?
   • What compromises are you making?
   • What would custom enable?

4. Risk evaluation:

   • Project risk factors
   • Vendor risk factors
   • Mitigation strategies

5. Clear recommendation:

   • Build, buy, or hybrid approach
   • Timeline and milestones
   • Expected ROI

Common findings:

• 40%: SaaS makes more sense (cost or fit)
• 30%: Custom makes sense (economics favor it)
• 30%: Hybrid (start SaaS, plan migration to custom)

The Bottom Line

Build vs. Buy isn't emotional—it's math:

Buy wins when:

• SaaS cost under $15,000/year
• Time horizon under 4 years
• Good workflow fit (80%+)
• Stable or shrinking users
• High opportunity cost to build

Build wins when:

• SaaS cost over $40,000/year
• Time horizon over 5 years
• Poor workflow fit (under 60%)
• Growing user base
• Unique requirements

Break-even typical ranges:

• 2-3 years: Aggressive build case
• 3-5 years: Common break-even
• 5-7 years: Conservative build case
• 7+ years: Buy rarely wins unless perfect fit

The key question: What's the 5-year total cost, and how well does each option fit?

Run the numbers honestly. Include all costs. Model growth. Calculate break-even. Make the decision based on economics and fit, not ideology or emotion.

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About Thalamus: We provide build vs. buy analysis and build custom solutions when economics justify it. Full cost modeling, break-even analysis, honest recommendations. Analysis service: Contact us