How this instrument works
Build-or-buy is the comparison an engineering lead, an operations manager, or a founder runs before committing money to a custom tool, a piece of equipment, or an in-house system instead of a ready-made one. It answers one specific question: over the time you actually plan to use the thing, does building it yourself cost less than paying someone else's price for it? The comparison only works once both sides are expressed the same way — as a total dollar figure for a stated period, not a purchase price on one side against a vague sense of engineering effort on the other.
The build side is a straight line on purpose. It starts at the upfront cost to build — the engineering time, materials, or setup work spent before the thing exists at all — and then adds one more year of maintenance for every year on the horizon, because keeping something running costs money on a schedule the sticker price never mentions: hosting, patches, licence renewals, or the slice of someone's salary spent tending it. A three-year horizon and a ten-year horizon put the identical upfront cost through very different arithmetic, which is exactly why the horizon field carries as much weight in the answer as either cost figure.
The buy side, by contrast, is treated here as one flat number, which is a deliberate simplification worth watching. If the ready-made option is itself a subscription or a licence that renews, its true cost over the same horizon is that annual figure multiplied by the years, not the first invoice alone — feed in only the first year's fee and the sheet will flatter buying every time. The formula also skips the time value of money, opportunity cost, and delivery risk: a dollar of maintenance in year one and a dollar in year nine count identically, and a late or troubled build carries costs this arithmetic cannot see.
- Enter Price to buy, $ for the ready-made option — if that option renews annually, total the fee across the same number of years you plan to compare, not just one payment.
- Enter Upfront cost to build, $ for what it costs to have a working version before it runs a single day.
- Enter Annual maintenance to build/own it, $ for what keeping the built version alive costs every year — hosting, support, patching, or a slice of staff time.
- Set Time horizon, years to how long you genuinely expect to keep using whichever option you pick, not an arbitrary round number.
- Read Total cost to build for the build-side total, and Buy minus build (positive = build is cheaper) to see which option wins at that horizon and by how much.
Worked example — a $50,000 tool over three years
A team is choosing between a $50,000 licence for an off-the-shelf tool and building an equivalent themselves. Building costs $30,000 upfront in engineering time, plus $5,000 a year afterward to keep it running — hosting, patches, and the slice of an engineer's time it takes to maintain. Over a three-year horizon that is 30,000 + 5,000 × 3 = $45,000, the figure Total cost to build returns for this sheet.
Set against the $50,000 buy price, Buy minus build comes to 50,000 − 45,000 = $5,000: building is the cheaper choice at this specific horizon, by a narrow margin. Stretch the same inputs to a ten-year horizon instead and building costs $80,000 — $30,000 more than buying — because maintenance keeps accruing while the buy price never moves. Both answers are correct; they are simply answers to two different horizons.
Questions
Why does the same comparison flip when I change the horizon?
Because build cost is dev cost plus maintenance multiplied by years, a line that keeps climbing, while the buy price here is a single fixed figure entered once. Short horizons favor building, since only the upfront cost and a year or two of upkeep count against it; long horizons favor buying, since maintenance keeps compounding while the buy price never moves. Recompute at the horizon you actually expect to use, not the one that flatters your preferred option.
Does Price to buy, $ already include its own subscription costs?
No — this sheet treats it as one flat number. A subscription or licence that renews needs to be entered as its total cost across the same number of years you're comparing against, not just the first invoice, or the sheet quietly undercounts what buying actually costs over that horizon.
What belongs in Annual maintenance to build/own it, $?
Hosting or infrastructure, security patches and updates, third-party API or vendor fees, and the realistic dollar value of the staff time spent keeping the built option running — not the cost of adding new features on top of it later, which is a separate investment this sheet does not model.
Why might I still buy even when the delta favors building?
This sheet measures cash outlay only, not delivery risk or opportunity cost. A build can run late, tie up engineers who would otherwise ship revenue-generating work, or land rougher than a vendor product refined by thousands of other customers. Those costs are real, but none of them enter the upfront cost, the maintenance figure, or the buy price you typed in.
Why doesn't this sheet discount future maintenance to today's dollars?
Every dollar of maintenance is added at face value regardless of which year it falls in, so a dollar spent in year one counts the same as a dollar spent in year nine. Over a short horizon the distortion is small; over a decade-plus comparison, properly discounting future maintenance would make buying look relatively cheaper than this straight sum shows, since near-term cash is worth more than distant cash.
What happens if I set maintenance cost to zero?
Total cost to build then collapses to just the Upfront cost to build, $ figure, and the horizon stops mattering — appropriate only for something that, once built, genuinely runs itself with no ongoing cost. Most software, equipment, and in-house systems do carry some ongoing cost, so entering zero deliberately, and not by default, is worth a second look before trusting the answer.
References
- IRS — Publication 946, How To Depreciate Property
- U.S. Small Business Administration — calculate your startup costs
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.