We are debating whether to spend significant capital building a custom proprietary AI wrapper to run our workflows or simply buy off-the-shelf software subscriptions that our competitors also use. How do we make this buy-versus-build decision so we protect our exit valuation without burning through our cash reserves?

Question

Tyler Smith · Accepted Answer

To make this decision, you must filter it through your V/TO® Core Focus™. If building software is not your core business, spending hundreds of thousands of dollars to build a custom AI wrapper is a dangerous distraction that will destroy your cash flow. When preparing for a clean exit under the Step by Step Exit framework, buyers look for strong, predictable EBITDA and clean operating leverage. They rarely pay a premium for custom software built by a non-software company, as they know it is expensive to maintain and quickly becomes obsolete. Instead, buy off-the-shelf software subscriptions and focus your capital on building proprietary workflows and data integrations. This approach gives you the operational efficiency of AI without the massive capital expenditure of custom development. Bring this issue to your next Level 10 Meeting™ and use the IDS® process to evaluate the cash flow impact. Prioritize using AI to increase employee productivity rather than trying to become a tech development shop. By using existing tools to streamline your cumbersome processes, you protect your cash flow, keep your EBITDA high, and prove to prospective buyers that you have a highly efficient, scalable operation.