Build vs. Buy Calculator
Compare the costs of building your own software versus buying an external service. Calculate total build costs, annual maintenance, break-even point, and years to profit to make an informed decision about whether to build or buy software for your business.
Last updated: January 28, 2026
Need a custom calculator for your platform? Get a Quote
Buying an external service
Monthly or annual license fee for the external service.
Building your own software
Number of developers needed to build the software.
Overhead costs as a percentage of gross salary (e.g., insurances, benefits).
Number of days per period that an employee will spend on maintenance.
Build or buy?
Effective cost per employee
$10,000 / month
CE = SE × (1 + OV)
Cost to build
$120,000
N × T × CE
Annual maintenance
$24,000 / year
D × CE × 12 / 5
Annual buy cost
$10,000 / year
Annual savings
-$14,000 / year
Annual buy cost − Annual maintenance
Years to profit
Never
Break-even = Cost to build ÷ Annual savings
Building costs more annually than buying — building is not profitable.
How the Build vs. Buy Calculator Works
The build vs. buy calculator compares the total cost of ownership for building your own software versus buying an external service. It calculates development costs, ongoing maintenance, and determines when building becomes profitable compared to buying.
Cost to Build Formula
Cost to build = N × T × CEwhere CE = SE × (1 + OV)N = Number of employees required
T = Time to build (converted to months)
CE = Effective cost per employee per month
SE = Monthly gross salary per employee
OV = Overhead percentage (e.g., 25%)
Annual Maintenance Formula
Annual maintenance = D × CE × 12 / 5D = Days of maintenance per month
CE = Effective cost per employee per month
12 = Months per year
5 = Working days per week
Break-Even Point Formula
Years to profit = Cost to build ÷ (Annual buy cost − Annual maintenance)If break-even occurs in under 3 years, building is typically a good investment.
If break-even occurs in 3-5 years, consider your long-term needs carefully.
If break-even occurs after 5+ years, building may not be profitable unless you plan long-term use.
When to Build vs. Buy
- • Break-even is under 3 years
- • You need custom features
- • Software is core to your business
- • You plan long-term use (5+ years)
- • You need full control and customization
- • Break-even is over 5 years
- • You need quick deployment
- • External service meets your needs
- • You want to avoid maintenance burden
- • You prefer predictable monthly costs
Build vs. Buy Calculator Example
Buying Option:
- Cost: $10,000 per year
- Total 5-year cost: $50,000
Building Option:
- Employees: 2 developers
- Time: 6 months
- Salary: $8,000/month
- Overhead: 25%
- Maintenance: 1 day/month
Calculation Results:
- Effective cost per employee: $10,000/month
- Cost to build: $120,000
- Annual maintenance: $48,000/year
- Annual savings: -$38,000/year
- Years to profit: Never (building costs more annually)
Recommendation: In this example, buying is more cost-effective since building costs more annually than buying.
Frequently Asked Questions
Found This Calculator Helpful?
Share it with others who need help deciding between building and buying software
Suggested hashtags: #BuildVsBuy #Software #Business #Calculator #DecisionMaking