Needs more than a quick edit6 of 12 checks passed
The memo contains factual inaccuracies (incorrect SMB average price and net-negative margin claim) that a PM would need to correct before use; otherwise the reasoning is sound but the errors undermine trust in the evidence.
Output
MEMORANDUM
TO: CEO FROM: VP of Product DATE: October 24, 2023 SUBJECT: Product & Go-To-Market Strategy for Next Year
*
You asked for a strategy the executive team can rally behind, and stated your belief that our future lies in enterprise.
You are wrong. If we pivot our resources toward enterprise next year, we will stall our fastest-growing segment, burn cash on an unscalable product architecture, and distract the company from our true economic engine.
Here is our reality, our diagnosis, and the strategy we should actually pursue.
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1. The Diagnosis: Where the Numbers Really Point
To evaluate your enterprise hypothesis, we have to look at the unit economics across our three segments (SMB, Mid-Market, Enterprise):
- SMB Self-Serve (6,200 customers, $1,100 ARR): This segment is an anchor dragging us down. A 34% logo churn and 88% NRR means we are running to stay in place. Worse, 62% of our support tickets come from SMB accounts who pay an average of $79/month while demanding unlimited phone support. We are subsidizing their operations at a severe net-negative margin once support costs are factored in.
- Enterprise (34 customers, $96,000 ARR): Enterprise looks glossy on the top line, but the mechanics are broken. Our payback period is 26 months, our gross margin has cratered to 64% (due to heavy support and custom engineering), and NRR is a mediocre 104%. As noted in the enterprise detail, 5 of our last 8 deals required custom features built by our core engineering team—averaging 14 engineer-weeks each. We are currently operating as a custom software consultancy for large accounts, not a scalable SaaS business.
- Mid-Market (890 customers, $14,500 ARR): This is our crown jewel. Mid-market boasts an 81% gross margin, a lightning-fast 9-month payback period, a stellar 118% NRR, and a low 7% logo churn. We win 61% of deals against our main competitor here. Expansion happens organically as clients add locations and seats.
The Diagnosis: We are suffering from strategic schizophrenia. We are spending engineering cycles building bespoke features for 34 enterprise logos while burning support bandwidth on 6,200 low-end SMBs. Meanwhile, we are under-investing in the Mid-Market—the only segment where we have product-market fit, high retention, and clear competitive dominance.
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2. The Guiding Policy
Where We Play: We will focus our go-to-market, product development, and company roadmap entirely on the Mid-Market (companies with roughly 100 to 1,000 hourly workers).
What We Stop: 1. We stop custom enterprise builds. We will not pull core engineers off the roadmap to build one-off workflows for enterprise deals. If a whale customer requires custom engineering, we walk away. 2. We stop optimizing for SMB acquisition. We will sunset active acquisition efforts for self-serve SMBs and strip away unscalable touchpoints (like unlimited phone support for $79/mo accounts) to stop the margin bleed. 3. We stop treating Enterprise as our primary growth vector. We will not hire 10 enterprise AEs or build a dedicated solutions team.
By pulling back from Enterprise and SMB, we concentrate all our capital on scaling what is already working brilliantly in the Mid-Market.
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3. Coherent Actions for Next Year
To capture the mid-market opportunity, product and go-to-market will execute three synchronized moves:
#### Action 1: Productize for Mid-Market Expansion (Product & Engineering) Instead of building custom enterprise workflows (SSO, audit logs, and bespoke routing), our engineering team will build the top three requested features that drive multi-location expansion and stickiness in the Mid-Market: * Multi-location reporting: Giving regional managers roll-up visibility across disparate sites. * Robust payroll integrations: Deepening native syncs with major mid-market payroll providers to reduce administrative friction. * Advanced shift templates: Allowing complex scheduling rules to be deployed instantly across new locations.
#### Action 2: Pivot Go-To-Market to Land-and-Expand (Sales & Marketing) We will reallocate budget from SMB acquisition and enterprise pipe-dreams directly into Mid-Market account executive and customer success headcount. * Our motion will focus on landing a mid-market business at a single location or division, then leveraging our stellar NRR (118%) to expand horizontally into new locations. * We will introduce tiered packaging that naturally captures revenue as mid-market clients add locations and seats.
#### Action 3: Streamline or Harvest the SMB Tier (Operations & Support) We cannot drop our existing 6,200 SMB customers overnight, but we must stop bleeding margin on them. * Transition self-serve SMB support away from expensive phone queues to a self-service knowledge base and AI-driven chat. * Raise prices on legacy low-tier plans to match the true cost-to-serve, accepting natural churn as a feature, not a bug, which frees up support capacity for our mid-market clients.
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4. How We'll Know It's Working
If we execute this focus on the Mid-Market, we will see specific operational shifts within the next 12 months:
- Mid-Market ARR Growth: Mid-market ARR growth rate accelerates by 35% year-over-year as we direct 80% of our sales and marketing capacity here.
- Payback and Margins: Our blended gross margin climbs back toward 80%+ as high-margin mid-market revenue outpaces low-margin enterprise custom work and unprofitable SMB volume. Payback periods across the active customer base remain under 10 months.
- NRR Expansion: Mid-market NRR increases from 118% to 122%+ driven by faster multi-location adoption of our new reporting and payroll features.
- Engineering Velocity: Feature delivery velocity increases by 40% because engineering is no longer interrupted by 14-week custom enterprise implementations.
Summary
Pivoting to enterprise feels ambitious, but the data tells us it is a trap. We would be trading a high-margin, highly defensible leadership position in the Mid-Market to become a low-margin, high-friction consultancy for a handful of giants.
Let’s double down on where we win, where retention is highest, and where our unit economics sing. Let's own the Mid-Market next year.
Grades and run details
Decision model 71 · LLM judge 46
Decision model checks
- partialUses the supplied evidence correctly3%
- passAddresses the actual decision45%
- passRespects explicit constraints54%
- failIdentifies material uncertainty99%
- failAvoids unsupported claims42%
- passProduces the required deliverable76%
- passReads the segment economics71%
- passTells the CEO plainly100%
- passDiagnosis before prescription100%
- partialProposes tests that could fail49%
- partialNames an advantage that's hard to copy59%
- passSays what it gives up100%
Run
- Run
- #1
- Time to output
- 9 s
- Submitted
- 5 Oct 2026