Develop product strategy

Cadence: Next-Year Strategy

To: CEO and executive team From: VP Product Decision: Make multi-location mid-market customers our growth engine—not enterprise.

1. Diagnosis: Our constraint is profitable, repeatable growth

I think the enterprise-first plan is wrong for next year. Enterprise may become attractive, but our current evidence does not justify hiring ten enterprise AEs, adding a solutions team, and committing the core product team to enterprise features simultaneously. That would scale a motion we have not yet made repeatable.

Our strongest business is already mid-market:

¹Customers multiplied by average ARR.

Mid-market contributes approximately 56% of current ARR, has the best retention and margins, and expands through additional locations and seats. Its 61% win rate against our main competitor suggests a competitive advantage worth reinforcing.

Enterprise has larger contracts, but not better economics. Sales take nine months; five of the last eight deals required custom features, consuming approximately 70 engineer-weeks. Those deals impose an opportunity cost beyond their acquisition expense: the core team cannot simultaneously build bespoke workflows and improve the product that drives our best-performing segment. Enterprise NRR of 104% provides little evidence that expansion will compensate for that burden.

SMB is also not an efficient growth engine today. Trial conversion is 4%, annual churn is 34%, and SMB generates 62% of support tickets. Unlimited phone support on a predominantly $79/month plan is a service promise poorly matched to customer value.

We should validate how support costs enter reported gross margin and payback before constructing a fully loaded profitability model. But the segment ranking is clear enough to act.

The central problem is resource allocation: we are tempted by large contracts while underinvesting in the customers where acquisition, retention, expansion, and product fit already reinforce one another.

2. Guiding policy: Win repeatable multi-location growth

Where we play: Businesses with hourly workers operating multiple locations, within our existing mid-market segment. We will refine that profile by industry, location count, and integration needs using our strongest retained and expanding cohorts—not assume every mid-market customer is equally attractive.

How we win: Make it easier to run scheduling, time tracking, and payroll handoffs consistently across locations. Land with a repeatable implementation, then grow as customers add locations and seats.

What we stop:

• Do not execute the proposed enterprise hiring plan. No ten-AE expansion or dedicated solutions-team buildout next year.
• Stop allowing individual prospects to commandeer the core roadmap. Custom workflows are not a strategic product category.
• Stop optimizing SMB for signup volume while ignoring conversion, churn, and support burden.
• Stop promising unlimited phone support to new low-price SMB customers. Change existing commitments carefully at renewal, with notice and clear alternatives.

We will retain and serve existing enterprise customers and accept selective new opportunities that fit the standard product. Enterprise remains an option to prove—not the company’s organizing strategy.

3. Coherent actions for next year

A. Build the multi-location operating backbone

Owners: Product and Engineering

Commit at least 70% of planned product capacity to the mid-market growth loop and its enabling reliability work.

Prioritize the three requests supported by current customer evidence:

1. Multi-location reporting: Give operators a consistent view across sites.
2. Payroll integrations: Reduce manual handoffs and implementation friction; prioritize providers used by our target customers.
3. Shift templates: Make repeatable scheduling easier across locations.

In Q1, confirm priority and scope through customer research, usage data, and lost-deal analysis. Ship in staged releases during Q2–Q3, then use Q4 to improve adoption and remove rollout friction. Success means customers using these capabilities—not merely features released.

SSO and audit logs enter the roadmap only where they unlock repeatable demand from our target segment or address necessary security obligations. We will not bundle them with speculative custom workflows.

B. Align selling and customer success around location expansion

Owners: Sales and Customer Success

Reallocate growth investment toward mid-market rather than enterprise headcount. Increase selling capacity in stages, conditional on cohort payback remaining healthy.

Create a standard qualification and implementation playbook. Establish an explicit location-expansion plan for suitable customers, including rollout milestones, adoption checkpoints, and commercial packaging that makes expansion straightforward.

Track why we win against our main competitor and turn that evidence into positioning, demonstrations, and onboarding. Product adoption, selling, and expansion should reinforce the same promise.

C. Repair SMB economics without abandoning customers

Owners: Growth and Support

For new customers, introduce clear support tiers, reserving phone support for appropriately priced plans. Improve onboarding and self-service around the largest ticket drivers. Test packaging and onboarding changes before broad rollout.

Do not increase SMB acquisition spending until conversion and cohort payback improve. Existing customers receive a transparent transition, not a surprise withdrawal of service.

D. Put enterprise behind an investment gate

Owners: CEO, Sales, Finance, and Product

Require executive approval for exceptions, with engineering effort and opportunity cost recorded before signing. Prefer standard-product deals; do not hide custom development inside revenue targets.

Reconsider a dedicated enterprise expansion only when successive cohorts demonstrate materially improved margins, payback approaching 12–15 months, and wins that do not depend on bespoke core-team work. A handful of large bookings is insufficient evidence.

4. How we will know it is working

Finance will establish consistent cohort definitions and quarterly reporting in Q1. Our proposed operating targets are:

• Mid-market: NRR at least 120%; annual logo churn no worse than 7%; gross margin at least 80%; CAC payback no worse than 12 months as we scale.
• Competitive position: Maintain at least a 60% win rate against our main competitor, using a consistent opportunity definition.
• Product impact: Improve time to activate additional locations and adoption of reporting, integrations, and templates against Q1 baselines.
• SMB repair: Lower tickets per customer and support cost per customer, improve trial conversion, and shorten new-cohort payback without worsening retention.
• Execution discipline: Deliver the agreed mid-market capacity allocation and report every enterprise customization exception.

These are targets, not a revenue forecast. Finance should translate the strategy into a funded operating plan.

Bottom line: Next year should prove that Cadence can compound a repeatable advantage. Mid-market already shows that pattern. Enterprise currently does not.

Cadence strategy memo: next year

To: CEO and exec team From: VP Product

Short answer

I don't think enterprise should be the strategy. I think mid-market should. Enterprise should stay an option we keep cheap and revisit with evidence. You're right that we need a higher ceiling than SMB gives us, but the data says mid-market is the route to it.

Diagnosis

Approximate ARR is customers × average ARR. Contribution is ARR × gross margin, minus support cost.

1. Mid-market is the business. It is about 56% of ARR and roughly 75% of contribution. It pays back in 9 months, expands on its own as customers add locations and seats, and we win 61% against our main competitor. Customers are telling us what they want: multi-location reporting, payroll integrations, shift templates. We are under-serving our best segment.

1. SMB is a leaky bucket that we subsidize. It is 62% of tickets, which matches its ~61% share of support spend. The $79 plan includes unlimited phone support, so a $1,100 account costs $610 a year to serve. Trial converts at 4%, churn is 34%, and payback is 31 months. That is roughly the average customer lifetime, so we barely break even on the typical account. But SMB is still 30% of revenue and a cheap feeder. The fix is to repair it, not to exit.

1. Enterprise, as currently run, has the worst unit economics we have. Gross margin is 64%, support costs $21k per customer, the sales cycle is 9 months, and payback is 26 months. Five of the last eight deals needed custom features at ~14 engineer-weeks each, which means we are paying for product work out of the core team's capacity. NRR of 104% and churn of 9% are fine but not special.

1. The proposed plan scales the weakest model. Ten AEs plus a solutions team plausibly costs on the order of $3M+ a year fully loaded (my estimate, so finance should check it). That is about the size of today's entire enterprise ARR, with 9-month cycles and ramp time, so most revenue lands after next year. Custom workflows would deepen the bespoke-work problem. And 34 customers is a thin sample to bet the company on.

What I don't know. I have no enterprise pipeline data, no enterprise win rate, and no view of mid-market market size or channel saturation. I also don't know whether SSO and audit logs are blocking mid-market deals. Those gaps shape the tripwires below.

Guiding policy

Win multi-location mid-market. Make SMB profitable. Keep enterprise as a gated option.

Where we play - Core: hourly-workforce businesses with multiple locations, in the mid-market range. Growth comes from landing and expanding across locations. - Feeder: SMB self-serve, run for margin and for conversion into mid-market, not for volume. - Option: enterprise deals we can close with the standard product and little custom work.

What we stop - Hiring the 10-AE enterprise team and the dedicated solutions team. - Bespoke feature builds for individual deals. Any enterprise requirement must be built as a standard product capability or declined. - Unlimited phone support bundled into the $79 plan. - Spending acquisition dollars on SMB channels that can't pay back within about 18 months.

Coherent actions

1. Point the roadmap at mid-market (about 60% of product and engineering capacity). Ship multi-location reporting first, then payroll integrations (starting with the two or three most requested), then shift templates. Sequence by expansion impact: which features most increase locations and seats per account.

2. Put the sales investment where payback is 9 months. Redirect the headcount budget to mid-market: a handful of AEs plus customer success focused on expansion. Add a multi-location expansion motion, such as account reviews triggered when a customer opens a new location. Size the hiring to what mid-market pipeline can absorb. Prove that first with a small cohort before scaling.

3. Fix SMB economics (about 20% of capacity). - Move phone support off the $79 plan. Offer it as a paid add-on or a higher tier, with chat, email, and in-product help as the default. Grandfather existing customers for a period and test the change on a cohort before a full rollout, because churn is already 34%. - Work the trial: onboarding, templates, and time to first published schedule. Moving conversion from 4% to 6% beats buying more traffic. - Build a clear upgrade path for SMB customers who add locations.

4. Run enterprise as a disciplined option (about 10–15% of capacity). - Serve and renew the existing 34. Set a target for support cost per account and margin, and review the biggest cost drivers. - Pursue inbound and referral enterprise deals with a small team: one senior AE plus existing sales leadership, no new organization. - Build SSO and audit logs as standard platform features, but only after win/loss analysis confirms they block mid-market and upper-mid-market deals. If they do, they pay off in both segments. If not, they wait. - Stop custom workflows. Where customers need them, define a configurable, productized version or turn the deal down.

5. Instrument everything first (first 60 days). Get win/loss reasons by segment, enterprise pipeline and win rate, and fully loaded cost per enterprise deal (including those custom builds). This turns the open questions above into data.

How we'll know it's working

Proposed targets, to be pressure-tested with finance:

Tripwires. I'd revisit the enterprise question at mid-year, and invest more if all of these hold: - At least 3 enterprise-sized deals closed with minimal custom work (about 2 engineer-weeks or less each). - Enterprise support cost per account falling. - Pipeline data showing a repeatable motion, not one-off wins.

I'd pull back on the SMB support change if churn among affected accounts rises beyond the savings. I'd slow mid-market hiring if win rate or payback degrades as we scale.

The ask

Align on mid-market as the center of next year's plan, with SMB repaired and enterprise as an option. If you still believe enterprise is the bigger long-term prize, the way to get there is to make mid-market large and stable first. That funds the bet and gives enterprise buyers a product with SSO, audit logs, and multi-location reporting built for real customers. I'd rather be wrong about enterprise on a small budget than be right with the team stretched across three segments.