Develop product strategy

Cadence: Next Year’s Strategy

To: CEO and Executive Team From: VP Product Decision: Make multi-location mid-market businesses our growth engine—not enterprise.

1. Diagnosis: Our constraint is focus, not deal size

I believe the enterprise-first plan is wrong for next year. Enterprise may become an attractive market, but our current evidence does not justify hiring ten enterprise AEs or orienting the roadmap around their deals.

Cadence has three materially different businesses:

Customers × average ARR.

Mid-market already generates 56% of ARR. It combines our best retention, strongest expansion, fastest acquisition payback, and highest gross margin, at 81%. A 61% win rate against our main competitor suggests a defensible product advantage. Expansion through locations and seats gives us a repeatable growth mechanism.

Enterprise offers larger contracts, but not yet a better business. Gross margin is 64%, the sales cycle averages nine months, and five of the last eight deals required custom development. Those five deals consumed approximately 70 engineer-weeks. Hiring sellers before fixing this delivery model risks scaling commitments faster than reusable product capability.

SMB is a different problem: substantial revenue with weak retention and disproportionate service demand. It generates 62% of support tickets; annual support cost averages $610 against $1,100 in ARR. Unlimited phone support on a $79 monthly plan is misaligned with self-service economics. A 4% trial conversion rate compounds the acquisition problem.

The central challenge is therefore allocating scarce product, engineering, and commercial capacity toward repeatable, retained revenue. Enterprise customization and SMB service demands are drawing capacity away from the segment where our model works best.

2. Guiding policy: Win multi-location mid-market

Where we play

Our primary customer is a mid-market business with hourly workers across multiple locations, where scheduling consistency, consolidated visibility, and payroll handoffs create recurring operational pain.

Our promise: make running the next location easier than running the first.

We will deepen that advantage and turn successful initial deployments into additional locations and seats. We will first target industries and acquisition channels where our own mid-market cohorts show the strongest retention and payback; the supplied evidence does not yet support choosing a specific vertical.

Enterprise remains a selective adjacency. SMB remains a supported, increasingly self-service business—not our primary acquisition investment.

What we stop

• Do not approve the ten-enterprise-AE hiring plan or a dedicated solutions-team buildout.
• Stop letting individual enterprise deals dictate core-team custom workflows.
• Do not commit to the entire enterprise feature bundle. SSO and audit logs must earn priority through demonstrated, reusable demand—not their “enterprise” label.
• Stop scaling SMB paid acquisition under current economics.
• End unlimited phone support as the default for new low-priced plans, while honoring existing commitments and managing any migration carefully.
• Stop broad roadmap work that cannot demonstrate a connection to mid-market acquisition, retention, expansion, or essential platform health.

We will continue supporting existing enterprise and SMB customers. Focus is not abandonment.

3. Coherent actions for next year

A. Build the multi-location growth loop

Product and Engineering: Give mid-market the clear majority of discretionary roadmap capacity, after reliability, security, and contractual obligations.

Sequence three connected capabilities:

1. Multi-location reporting: Give central operators visibility into staffing and hours across their estate.
2. Payroll integrations: Prioritize providers used by the largest share of our target accounts; reduce recurring payroll friction.
3. Shift templates: Make successful scheduling practices reusable across locations.

In Q1, validate scope with retained, expanding customers and establish adoption and workflow baselines. Release reporting and the first prioritized integration in the first half; expand integrations and template-based rollout in the second half. Measure customer outcomes and subsequent location adoption, not merely shipment.

B. Sell and expand the same repeatable product

Sales and Customer Success: Redirect incremental commercial investment toward mid-market rather than enterprise hiring.

Package a standard multi-location deployment, define onboarding milestones, and build expansion reviews around customers’ remaining locations. Align incentives with retained recurring revenue and successful activation, not bookings alone.

Increase acquisition spending in stages only while segment payback remains within our guardrail. Do not assume today’s economics survive unlimited scaling.

C. Repair SMB service economics

Support, Product, and Finance: Identify the largest ticket drivers in Q1. Improve onboarding and in-product guidance around those problems; test appropriately priced phone support and service tiers for new customers.

Pilot changes before broad rollout. Evaluate support savings alongside conversion, retention, and revenue effects. A lower ticket count caused by driving customers away is not success.

D. Keep enterprise as a bounded learning option

Sales and Product: Accept new enterprise opportunities only when they fit the standard product, require no bespoke core-team development, and meet Finance-approved deal economics.

Review enterprise quarterly. Reconsider a larger investment only after multiple customers buy and deploy substantially the same product, with improving margin and acquisition payback. One marquee logo is not proof.

E. Establish a shared economic scorecard

Finance: In Q1, reconcile acquisition costs, implementation costs, support allocation, and payback definitions across segments. Confirm whether support is already included in gross margin before subtracting it again. Track custom engineering separately so its opportunity cost remains visible.

4. How we will know it is working

These are proposed operating targets, not forecasts:

The executive team will review results monthly and resource allocation quarterly. Leading indicators are faster location activation, adoption of the new workflows, and expansion pipeline; financial outcomes remain the test.

The strategy is not “avoid enterprise.” It is “scale the repeatable business we have earned.” Mid-market gives us the strongest foundation for growth next year—and a healthier route into enterprise later.

Memo: Next Year's Strategy

To: CEO From: VP Product Re: Where we play next year, and why I don't think it's enterprise

You asked me to tell you if you're wrong. I think you are, at least for next year. Enterprise isn't a bad market. But our numbers say our winning position is somewhere else, and an enterprise push would starve that position of the engineering time and sales capacity it needs. Below is the case and what I propose instead.

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1. Diagnosis

Cadence runs three different businesses, and only one of them is working well.

(Gross profit after support = ARR × gross margin − support cost. Total ARR is about $23M.)

Mid-market is the business. - It is 56% of ARR. - It pays back CAC in 9 months. - It grows on its own: 118% NRR on $12.9M means about $2.3M of net new ARR next year before we sign a single new logo. - We win 61% of the time against our main competitor. - Expansion comes naturally as customers add locations and seats.

Enterprise looks big per logo but is weak as a business today. - Gross margin is 64%, versus 81% in mid-market. - Each customer costs $21K a year to support. - CAC is $118K, payback takes 26 months, and the sales cycle is 9 months. - The hidden cost is engineering. 5 of the last 8 deals needed custom features, at about 14 engineer-weeks each, built by the core team. That is roughly 70 engineer-weeks diverted from the product that 890 mid-market customers pay for.

SMB is roughly break-even and pulling capacity away from everything else. - Each customer generates $248 a year after support. - With 34% annual churn, the average customer lives about 3 years. Lifetime contribution is roughly $730, against $740 of CAC. - SMB produces 62% of our support tickets. The cause is structural: we offer unlimited phone support on a $79/month plan, so support costs ($610) eat more than half of revenue ($1,100). - Trial conversion is 4%.

The core problem: we are trying to be everything to everyone. The cost shows up in two places. The roadmap gets hijacked by single enterprise deals, and the support budget gets consumed by SMB.

Why the enterprise plan makes this worse. Assume 10 new AEs close 20 enterprise logos next year, which is optimistic given a 9-month cycle and ramp time. - That adds about $1.9M of ARR. - It costs about $2.4M in CAC. - If 5 of every 8 deals still need custom work, it consumes about 175 engineer-weeks, or 3–4 engineer-years, on custom features alone. - That is before the work on SSO, audit logs, and custom workflows. - Most of that ARR would land late in the year and pay back in year three.

Meanwhile, the mid-market roadmap would stall in the segment where we already win.

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2. Guiding Policy

Where we play: We will be the best scheduling and time-tracking platform for multi-location operators with hourly workforces, from roughly 10 to a few hundred locations. Mid-market is the core. Every product, sales, and support decision should first answer one question: does this help a mid-market customer win, stay, or add locations?

What we stop: 1. Custom feature builds for single deals. If a feature isn't on the roadmap for a segment, we don't build it to close one logo. 2. The 10-AE enterprise hiring plan. We redeploy that budget (see below). 3. Unlimited phone support on the $79 plan. That plan moves to in-app help, chat, and a knowledge base. Phone support becomes a paid tier. 4. Custom workflows as a product initiative. This is a services business disguised as a feature.

What we deliberately keep: - Our 34 enterprise customers, served well on the standard product. - Inbound enterprise deals that can close without custom work. - SSO and audit logs. Upper mid-market buyers increasingly expect these, so they serve the core rather than a new segment.

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3. Coherent Actions for Next Year

These actions reinforce each other. Product makes mid-market expansion easier. Go-to-market (GTM) captures that expansion. Fixing SMB frees money and support capacity to fund both.

Product (mid-market roadmap, Q1–Q3) - Multi-location reporting. This is the top request, and it directly drives location expansion, our main source of NRR. - Payroll integrations. We will prioritize the top 3–4 providers by customer count. Integrations increase switching costs and reduce churn. - Shift templates. This reduces setup time for each new location, so expansion becomes cheap for the customer and for us. - SSO and audit logs. These are table stakes for larger mid-market accounts. We will scope them tightly and avoid gold-plating. - Engineering capacity rule: zero engineer-weeks go to one-off custom builds.

Go-to-market - Redirect the enterprise AE budget. Fund roughly 4–5 mid-market AEs and 3–4 account managers whose job is location and seat expansion inside existing accounts. A 9-month payback and 118% NRR make this the most efficient growth dollar we have. - Build a competitive playbook. Codify why we win 61% against our main competitor, and target that competitor's mid-market base. - Handle enterprise inbound on the standard product. One senior AE and the existing team qualify enterprise leads. A deal requiring custom work is a no unless the feature is already on the roadmap.

SMB economics - Restructure support. Move the $79 plan to digital-first support and introduce a higher tier that includes phone support. The target is cutting SMB support cost per customer from $610 to under $350. - Overhaul onboarding and trials. A 4% conversion rate signals weak activation. Fixing onboarding should also reduce tickets. - Find out whether SMB feeds mid-market. We need to learn how many mid-market customers started on SMB. If SMB is a real feeder, we keep it as a low-cost funnel. If not, we run it purely for margin.

Enterprise - Improve margins on the existing base. Standardize their configurations and reduce bespoke support. - Track demand without chasing it. We log every enterprise request, so that if we return to enterprise later, we can build a standard product rather than custom one-offs.

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4. How We'll Know It's Working

Leading indicators (quarterly) - Multi-location reporting and payroll integrations shipped by end of Q2. - Engineer-weeks spent on custom deal work: 0. - SMB support tickets per customer down 30% by Q3. - Mid-market win rate against our main competitor: 61% → 65%.

Outcomes (year-end) - Mid-market NRR ≥ 120%, up from 118%. - Mid-market new-logo ARR grows at least 25%, with payback held at ≤ 12 months. - SMB support cost per customer under $350, and SMB contribution per customer roughly doubled. - Enterprise gross margin above 70%, up from 64%, with no logo churn among the top 10.

When we would revisit enterprise: I'm not saying never. I'd reopen the question in Q3 if either of these happens: - Mid-market customers are outgrowing us into enterprise-scale deployments, meaning enterprise becomes the natural next step for our core. - We close at least 3 enterprise deals on the standard product.

Either signal would mean enterprise has become an extension of our strength rather than a separate bet. At that point, a focused enterprise motion built on a product we actually have would make sense.

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Bottom line: The exec team can rally behind this: win multi-location mid-market, stop subsidizing segments that don't pay. It builds on where we already win, funds itself by fixing SMB economics, and keeps enterprise open as a future option rather than a costly bet. I'd welcome the chance to pressure-test this with you before the offsite.