How to Commercialise Internal Software and Tools

Many B2B companies in traditional industries—like construction, engineering, or logistics—end up building their own software because the 'off-the-shelf' options are poor. You might have a custom pricing calculator, a unique project management dashboard, or a specialised compliance tracker.

Once built, these tools are often better than anything available on the open market. Commercialising them means turning 'our tool' into 'the industry's tool'. It allows you to generate recurring software revenue (SaaS) without being a 'tech company'.

From 'Sunk Cost' to 'Scalable Asset'

Software development is expensive. If you've already spent £50k building a tool to make your business better, that money is gone. But if you can sell that tool to 100 other companies for £100 a month, you've turned a one-off expense into a £120k annual recurring revenue stream.

This is a high-leverage 'Channel Creation' strategy. You are moving from selling 'man-hours' to selling 'machine-hours'.

Commercial Reasoning: The Six Pillars

1. Revenue

Software revenue is highly desirable because it is 'recurring'. It builds value in the business (valuation multiples for SaaS are much higher than for services). It also scales without a linear increase in costs.

2. Margin

The gross margin on software is typically 80-90%. Once the code is written and hosted, the cost of adding a new user is minimal. However, you must account for 'support' and 'maintenance' costs which can eat into these margins if the tool is complex.

3. Cash

SaaS is a 'cash-positive' model. You collect the subscription fee at the start of the month, well before you have to pay for the hosting or the support team.

4. Capacity

A software product requires zero delivery capacity from your core team. It does, however, require 'Product Management' capacity—someone needs to decide which features to build and how to fix bugs. If your internal IT team is already stretched, this will be a problem.

5. Complexity

• "**UX/UI:** Internal users will tolerate a 'clunky' interface; external paying customers will not."
• "**Multi-Tenancy:** You must ensure that Company A cannot see Company B's data."
• "**Security:** You are now responsible for the data security of other firms."
• "**Technical Debt:** You must maintain the code as browsers and operating systems change."

6. Risk and Competition

The risk is that your competitors might use your tool to become as efficient as you. You must decide whether the software revenue is worth more than the competitive advantage the tool gives you. There is also the risk of 'feature creep'—trying to build everything for everyone and ending up with a tool that works for no one.

Validate Before You Build

Do not hire a software agency to 'polish' the tool yet. Show a 'screenshare' demo of the raw internal tool to three potential customers. Ask them: 'If I gave you a login for this tomorrow, what is the one thing you would use it for, and what would you pay?'. If they don't want to pay for the raw tool, a polished interface won't save it.

Check the Growth Route Finder to see if a software-led strategy aligns with your business goals.

When NOT to Commercialise Internal Software

• "**When it is your 'Secret Sauce':** If the software contains your unique pricing algorithms or proprietary designs, don't give it to the market."
• "**When you can't support it:** If a customer's business stops because your software is down, they will call you at 3 AM. If you aren't ready for that, don't sell software."
• "**When it's too 'Bespoke':** If the software only works because it is integrated with your specific, weird internal database, it will never work for anyone else."

The 'Spin-Off' Strategy

Many successful companies eventually 'spin off' their internal software into a separate legal entity. This protects the core business from the risks of the software business and makes it easier to raise investment or sell the software division later.