The real distinguishing question
Will this be sold to external customers as a product (SaaS), or used only by your own team to run your operations (internal tool)? The technology stack can be nearly identical — the difference is business model and audience.
What changes because of that difference
A SaaS product needs multi-tenancy, billing, and onboarding for unknown future customers from a certain point onward — see SaaS MVP Development. An internal tool needs neither, since there's one "tenant" (your own company) and no billing — see Internal Business Tools.
Where confusion happens
Some internal tools are genuinely valuable enough that a business later considers selling them externally — at that point, it needs to be re-architected with SaaS-specific concerns (multi-tenancy, billing) that weren't needed before.
Deciding upfront saves cost later
If there's a real chance of external sale later, it's worth flagging during initial scoping — some multi-tenancy groundwork is cheaper to build in from the start than to retrofit after the fact.
SaaS MVP vs Internal tool
Questions
Can an internal tool be turned into a SaaS product later?+
Yes, but usually needs real architectural changes (multi-tenancy, billing) — worth flagging the possibility upfront if it's a real scenario.
Is one cheaper to build than the other?+
An internal tool is usually cheaper initially, since it skips multi-tenancy and billing — but that's not a reason to misclassify a genuine SaaS ambition as 'just an internal tool.'
How do we decide which one we're actually building?+
Ask directly: will anyone outside your company ever pay to use this? If genuinely no, it's an internal tool.