Usable with a quick edit11 of 12 checks passed
The memo is clear, evidence-based, and actionable; a product manager could use it with minor wording edits and no re-checking of evidence or reasoning.
Output
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.
| ARR | Contribution | Payback | NRR | Logo churn | |
|---|---|---|---|---|---|
| SMB | ~$6.8M | ~$1.5M | 31 mo | 88% | 34% |
| Mid-market | ~$12.9M | ~$8.8M | 9 mo | 118% | 7% |
| Enterprise | ~$3.3M | ~$1.4M | 26 mo | 104% | 9% |
- 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.
- 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.
- 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.
- 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:
| Area | Metric | Target |
|---|---|---|
| Mid-market | ARR | +35–45% |
| NRR | ≥115% | |
| Win rate vs. main competitor | ≥60% as volume grows | |
| CAC payback | ≤12 months | |
| Adoption of multi-location reporting and payroll integrations | Majority of accounts with 2+ locations | |
| SMB | Support cost per customer | $610 → ≤$400 |
| Share of support tickets | 62% → under 45% | |
| Trial conversion | 4% → 6% | |
| Logo churn | 34% → ≤30%, after any support change | |
| Enterprise | Custom engineer-weeks | Zero new bespoke builds |
| NRR | ≥100% | |
| Margin | Moving toward SMB/mid-market levels |
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.
Grades and run details
Decision model 79 · LLM judge 92
Decision model checks
- partialUses the supplied evidence correctly2%
- passAddresses the actual decision100%
- passRespects explicit constraints45%
- passIdentifies material uncertainty100%
- partialAvoids unsupported claims38%
- passProduces the required deliverable72%
- passReads the segment economics92%
- passTells the CEO plainly100%
- passDiagnosis before prescription100%
- partialProposes tests that could fail81%
- failNames an advantage that's hard to copy67%
- passSays what it gives up100%
Run
- Run
- #1
- API response time
- 46 s
- Submitted
- 6 Oct 2026