‘Homemade’ is for cooking not your billing system

This post was originally written on the Chargebee blog.

Startups are naturally buzzing with curious minds and entrepreneurial spirit. So it’s no surprise when they opt for building in-house solutions. You have a couple of spare geniuses who can throw some code together, and build a functioning tool out of thin air, and voila!

You’re open for business.

It’s a tale as old as time. Okay, not that old, read on.

Over time, as you achieve product-market-fit and start scaling your business, your in-house solution needs to upgrade as well. So you keep adding workarounds and devoting full-time developers to maintenance and debugging. It’s a little clunky but it gets the job done right?

It’s like using a broken ladder. We think it’s “fiinnneee” until one day we fall. Similarly, you convince yourselves that your in-house billing system is fiinnee, until one day — you send your customer the wrong invoice or your pricing change goes horribly wrong, or one of the other hundred things that could go wrong in a complex subscription business.

The tale of build vs buy is one you’ll find all around you in startup circles as well as in established giants. As the scale increases, the stakes become higher, the errors become deadly, and the bottom-line impact becomes acute. The unfailingly optimistic build-it-yourself attitude leads you into a quagmire of technical debt and pesky bugs that you’re confident you’ll come out of if you kick just a tad harder. But alas, you don’t.

Even armed with all the business advice in the world, the decision to build vs buy isn’t always an easy one. You need to go through the deliberation process and arrive at that decision on your own. This process can even look like the 5 stages of grief. Don’t believe us?

Here’s a story of an ed-tech platform that learned this (education pun) the hard way. Read on carefully because this could be your story too.

Denial — “Of course, we can build it ourselves!”

This ed-tech platform had achieved scale in 2021 and had over 450,000 accounts bringing in a revenue of $25mn/year. They had a great product on their hands and they were thriving. They had plans to scale up to other knowledge-based products and explore international markets. Like in most growth-stage businesses, they had 20 other immediate priorities, and evaluating a subscription billing tool wasn’t one of them. Since they had significant engineering muscle, they decided to build an in-house billing system to handle their customers’ payments, checkout flows, and recurring billing, integrating heavily with Stripe behind the scenes.

Anger — “Why isn’t this working?!”

But with scale, their in-house billing system that had brought them this far was starting to act up. Scrambling between multiple systems having the same information, they constantly tackled bugs and errors.

“Stripe is excellent for the early part of scaling but a risk analysis from a finance level would suggest that you need to separate your billing from your payment processing.”

– VP of Product

After their initial set-up, they hadn’t experimented with their pricing and packaging. While they knew their current setup was functional enough to manage subscriptions, they wanted to maximize their revenue using price optimization. However, with an inflexible system, even simple pricing changes proved to be nefarious. Without a robust product catalog, executing pricing changes for multiple products across multiple currencies was a hassle. They couldn’t grandfather their customers and in case an experiment didn’t perform well, they couldn’t roll back the changes easily.

To make matters worse, they had trouble nailing down a reliable source of data for their revenue engine. As the volume of their transactions increased, data discrepancies cropped up between what their payment recovery system was reading from Stripe and what their own database revealed. Without the right numbers, their product decisions and financial forecasting were grossly misled.

Without accurate reporting, they were piecing together insights and decisions like a poorly made jigsaw puzzle with 5 extra pieces!

For complete article, please visit Chargebee blog.