Develop product strategy

MEMORANDUM

TO: Chief Executive Officer FROM: VP of Product DATE: October 24, 2023 SUBJECT: Next Year Strategy: Diagnosis, Guiding Policy, and Execution Roadmap

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Executive Summary: The Direct Answer

You asked: “I believe it’s enterprise. Tell me if I’m wrong.”

You are wrong. Going all-in on Enterprise next year would be an expensive strategic error.

Enterprise is currently acting as a high-friction, low-margin professional services trap. It requires 9-month sales cycles, consumes massive engineering resources (70 engineer-weeks burned on bespoke code for just five recent deals), and yields an uninspiring 104% NRR at a 26-month CAC payback. Hiring 10 enterprise AEs and a solutions team right now will accelerate cash burn while starving our real growth engine.

That growth engine is Mid-Market. Mid-market is exceptional: 81% gross margin, 9-month CAC payback, 118% NRR, 7% logo churn, and a 61% win rate against our primary competitor.

Next year, our rallying cry must be: Dominate Mid-Market, automate SMB into positive cash flow, and gate Enterprise until our core platform is ready.

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1. Diagnosis: Where Value Is Created and Destroyed

Our current ARR is ~$23M across three starkly different businesses:

#### Three Key Findings:

1. Mid-Market is an elite SaaS business. Customers expand by adding locations and headcount (118% NRR). Our sales efficiency is world-class (9-month payback vs. industry average of 14–18 months). Most importantly, their feature requests (multi-location reporting, payroll integrations, shift templates) are repeatable, software-native, and scale across the entire cohort.
2. Enterprise is a bespoke distraction masquerading as scale. At 64% gross margin, 26-month payback, and only 104% NRR, our Enterprise motion does not scale. 5 of our last 8 deals required custom development—averaging 14 engineer-weeks per deal. We are acting as a subsidized software development shop for 34 accounts, pulling our best product talent away from core roadmap investments.
3. SMB is drowning our operations. SMB accounts for 62% of all support tickets. We charge $79/month ($948/yr) while spending $610/year in support per customer due to unlimited phone support. With 34% logo churn and 88% NRR, the 31-month CAC payback means a significant portion of SMB customers churn before breaking even on acquisition and service costs.

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2. Guiding Policy: Where We Play, Where We Win, and What We Stop

Our guiding policy for next year is Repeatable Scale over Bespoke Revenue.

``` ┌──────────────────────────────────────────────┐ │ MID-MARKET: ACCELERATE │ │ Core growth vector; 118% NRR; 9-mo payback │ └──────────────────────┬───────────────────────┘ │ ┌─────────────────────────┴─────────────────────────┐ ▼ ▼ ┌─────────────────────────────┐ ┌─────────────────────────────────────┐ │ SMB: AUTOMATE │ │ ENTERPRISE: DISCIPLINE │ │ Eliminate phone support │ │ Freeze custom dev; sell off-the- │ │ Product-led self-service │ │ shelf MM product at premium tier │ └─────────────────────────────┘ └─────────────────────────────────────┘ ```

#### Where We Play: * The Sweet Spot: Multi-unit hourly employers with 50–500 employees (Mid-Market). These buyers have acute scheduling complexity across locations but lack the bureaucratic demands for custom software architectures.

#### What We Stop: * Stop custom engineering for individual deals. Zero custom branching or deal-contingent roadmap commits. * Stop hiring 10 Enterprise AEs. We will not deploy massive quota capacity into a 9-month sales cycle with an unstandardized product. * Stop offering phone support on sub-$5,000 ARR plans. Unlimited phone support for $79/month ends in Q1.

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3. Coherent Actions for Next Year

To execute this guiding policy, our actions across Product, GTM, and Operations must reinforce each other.

#### A. Product & Engineering: The Repeatable Core * Deliver the Mid-Market Trifecta (H1): Allocate 70% of product capacity to build: 1. Multi-location reporting & dashboarding (enables regional managers to view compliance and labor costs across units). 2. Tier-1 payroll integrations (ADP, Gusto, Paychex, UKG) to make scheduling-to-payroll frictionless. 3. Advanced shift templates & auto-scheduling to drive rapid store-level adoption. * Enterprise Baseline, not Bespoke (H2): Build only standardized administrative features (SAML SSO, SCIM provisioning, audit logs, role-based access control). If an enterprise buyer cannot deploy our standard multi-tenant product with these enterprise rails, we walk away. * SMB Self-Serve & Deflection: Revamp onboarding flows to drive the 4% trial conversion rate upward and deploy in-app guided setup, chat deflection, and an updated knowledge center to cut incoming tickets.

#### B. Go-To-Market: Scaling the Engine * Reallocate Capital from Enterprise to Mid-Market: Instead of 10 Enterprise AEs, hire 6 Mid-Market AEs and 2 MM Sales Engineers. With our 9-month payback and 61% win rate, MM sales hires will reach cash-flow break-even within the year. * Establish an Enterprise Gatekeeper Rule: The existing enterprise sales team may close deals only under two conditions: (1) standard product only (contractually zero custom dev), and (2) minimum contract value of $100k ARR with standard pricing. * Refocus Inbound & Outbound: Concentrate marketing spend on multi-unit franchisees, regional hospitality groups, and mid-sized healthcare operators.

#### C. Operations & Support: Unit Economic Realignment * Tiered Support Model (Effective Q1): * SMB / Self-serve: In-app digital assistant, community, and email support (target: reduce support cost from $610 to <$150/year). * Mid-Market: Priority email, live chat, and scheduled onboarding calls. * Enterprise: Dedicated CSM and SLA-backed escalation. * Grandfathering/Pricing Migration for SMB: Shift low-tier customers requiring phone support to an “Assisted Support” add-on ($99/month), turning a cost center into a margin-accretive tier.

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4. Scorecard: How We’ll Know It’s Working

We will monitor operational health and strategic traction via four quarterly benchmarks:

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Conclusion

Enterprise is seductive because the contract sizes are large. But right now, chasing it will turn us into a bespoke agency with depressed margins and burnt-out engineers.

Mid-Market is our path to category leadership. It gives us high win rates, compounding expansion, rapid payback, and product leverage. Once we harden the platform with multi-location mid-market capabilities and standardized enterprise controls, we can attack the enterprise from a position of structural strength—not structural compromise.

MEMORANDUM

TO: CEO FROM: VP of Product DATE: October 24, 2023 SUBJECT: Product & Go-To-Market Strategy for Next Year

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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:

1. 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.
2. 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.
3. NRR Expansion: Mid-market NRR increases from 118% to 122%+ driven by faster multi-location adoption of our new reporting and payroll features.
4. 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.