We are deciding whether to license specialized commercial AI software or invest internal capital to build custom tools. What criteria should our leadership team use to decide whether to buy or build so we maximize enterprise value for an exit?

Question

Tyler Smith · Accepted Answer

Too many leadership teams waste capital trying to build custom software that software companies with hundreds of millions in venture capital are already building. Unless your company is fundamentally a software business, building custom models from scratch is almost always an expensive distraction from your Core Focus.

Use a clear filter during your quarterly planning sessions to decide whether to buy or build.

First, look at differentiation. If the tool supports a generic operational function like accounting, scheduling, basic customer service, or standard drafting, buy the best commercial platform available. Off-the-shelf software gives you immediate efficiency, automatic security updates, and predictable operational expenses without engineering overhead.

Second, look at proprietary data and defensibility. You should only build internal tooling when you possess proprietary operational data, proprietary client performance histories, or a unique Proven Process that commercial tools cannot replicate. In that scenario, building custom workflow automation or private fine-tuned layers on top of standard enterprise APIs creates genuine intellectual property.

Prospective buyers do not pay software multiples for services firms that built brittle, custom codebases requiring continuous internal developer maintenance. Buyers will discount your valuation if your internal tools create technical debt or key-person risk. However, buyers pay premium multiples for companies that take off-the-shelf platforms and wire them into an institutionalized, highly documented operating system that generates superior EBITDA margins. Buy the engine, build the proprietary operational wiring, and keep your balance sheet clean.