Waste oils are a very promising raw material in the biodiesel industry, which is why great efforts have focused on the removal of the free fatty acids (FFAs) present in this source, mainly through the esterification reaction. Many studies have evaluated the influence of different variables on the reaction conversion, such as temperature, catalyst concentration, and alcohol/oil ratio. However, it is still necessary to verify how the esterification is affected by higher water concentration. In this study, different acid‐catalyzed esterification reaction conditions with distinct water concentrations were tested experimentally, and a new rate expression was proposed. This newly obtained reaction kinetics was then used to undertake a complete analysis of the biodiesel production process from waste oil, evaluating the influence of higher water concentrations in the esterification, and including different optimizations and an economic evaluation. Concerning some of the process modifications, it was verified that the inclusion of three energy‐saving heat exchangers reduced utility costs by 40%. In contrast, the inclusion of an ethanol‐recycling distillation column reduced raw material costs by 40%. Different settings were also tested, varying the feed composition and the esterification reaction time and conditions, resulting in a payback period of less than 3 years in any evaluated scenario. © 2021 Society of Chemical Industry and John Wiley & Sons, Ltd