Build vs Buy – The Age Old Question
This is the age old question faced my management when they are growing businesses. Do i build it from scratch, buy it or something in between. I have just had a discussion with one of my board members that comes down to this very topic. He was asking me why are we buying a business when we can build it for less. On the surface he had a clear point, however once you delved below the covers, it became clear that there is far more to this than just a financial calculation.
So i thought i would give you my 10c on this hairy topic.
I think the answer is simple – what are you trying to acheive?
If you want to build something that is strategically important and provides a competitive advantage then you need to either build it or buy it (as in a business) and own it, or at least have an option over owning it. The last thing you want to do is allow your competitors to have access to what makes your business tick.
As for all the rest – let someone else do that hard work and just implement the results. E.g. who would want to build an accounting system. That is why the JD Edwards of the world make money – allowing you and me to customize what they do.
Much of the value is created in how you use a product or a service not the product or service by itself. A great example is Google maps. Let them do the hard work and you incorporate them into your site in a way that you think will create the most value.
Suffice to say you can apply the same logic to acquisitions. You don’t have to own it all today especially if you lose the passion and excitement of the owners / entrepreneurs who will make it happen.
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