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.

To: CEO and Executive Team From: VP Product Subject: Next year’s strategy: win the mid-market, fix the cost to serve

Diagnosis

I think you’re wrong that enterprise should be our primary strategy next year. Enterprise can be a selective opportunity, but the evidence does not support building the company around it.

Mid-market is our strongest growth engine: it has the best retention (118% net revenue retention, 7% logo churn), a 61% win rate against our main competitor, and clear expansion paths through more locations and seats. Its requested improvements—multi-location reporting, payroll integrations and shift templates—reinforce the core scheduling product rather than pull us into one-off work. At $14,500 average ARR, it represents roughly $12.9 million of ARR across 890 customers.

Enterprise has only 34 customers and about $3.3 million of ARR. Its economics and delivery model are less attractive: 64% gross margin, $21,000 annual support cost per customer, 26-month reported CAC payback, and a nine-month sales cycle. Five of the last eight deals required custom features, consuming about 70 engineer-weeks in total. Hiring 10 AEs and building custom workflows would scale a motion we have not shown is repeatable. SSO and audit logs may be worthwhile if they serve a broader, standard product—not as the opening move in a bespoke enterprise program.

SMB is also not where we should prioritize growth investment. It has 6,200 customers, but 34% annual logo churn, 88% NRR, and 62% of support tickets. Unlimited phone support on the $79 plan appears poorly matched to the segment’s economics.

One caution: the reported payback figures do not reconcile consistently with ARR, gross margin and support cost. We should standardize their definition before using them to allocate capital.

Guiding policy

Play to win multi-location mid-market employers with hourly workforces. Make Cadence the easiest dependable way to schedule and track time across locations, with strong payroll connections and repeatable workflows.

Stop treating enterprise as the company’s growth thesis. Do not hire 10 enterprise AEs or build customer-specific workflows with the core team. Pursue enterprise deals only when they fit the standard product, support attractive economics and do not displace mid-market priorities.

Stop subsidizing SMB support through unlimited phone service on the entry plan. Keep serving SMB customers, but shift the offer toward scalable self-service and appropriately priced support—not a broad retreat from the segment.

Coherent actions for next year

1. Make the mid-market roadmap the top product priority. Deliver multi-location reporting, payroll integrations and shift templates in that order, validating scope with customers and tying releases to adoption and expansion. Build configurable, reusable capabilities; decline requests that create customer-specific branches.

1. Focus go-to-market on repeatable mid-market wins. Equip sales and onboarding around multi-location use cases, implementation playbooks and expansion from existing locations and seats. Invest in customer success where it can turn adoption into expansion and reduce avoidable churn.

1. Set an enterprise investment gate. Pause the proposed 10-AE hiring plan. Evaluate SSO and audit logs as reusable platform capabilities, but fund them only with evidence of demand beyond individual deals. Require enterprise opportunities to fit the standard product; price implementation and customization explicitly, and do not commit core engineering to bespoke workflows. Revisit enterprise hiring only when deals are repeatable and payback is demonstrably attractive.

1. Repair SMB service economics without breaking the customer experience. Move entry-plan support toward self-service, improve onboarding and help content, and test paid higher-touch support. Measure the effect on conversion and retention before making a broad pricing or support change.

1. Create one trusted segment-economics view. Reconcile CAC payback and consistently include gross margin, support, implementation and custom engineering costs. Review it quarterly before adding segment-specific capacity.

How we’ll know it’s working

• Mid-market: NRR rises from 118% to at least 120%; logo churn falls from 7% to 6% or less; win rate stays at or above 60%. Track ARR expansion from added locations and seats, plus adoption of the three roadmap investments.
• Enterprise: No broad AE expansion; custom core-engineering work falls sharply, with a target of no more than two engineer-weeks per won deal. Track fully loaded payback and sales-cycle length before increasing investment.
• SMB: Reduce support tickets per customer and support cost per customer; improve trial conversion from 4% without worsening churn. Make any support-tier changes conditional on those customer outcomes.
• Company-wide: Review segment ARR, gross profit after support and implementation, and fully loaded CAC payback together. Growth that depends on unrepeatable engineering or uneconomic service is not success.

This strategy does not abandon enterprise or SMB. It puts our next year’s scarce product and hiring capacity behind the segment with the clearest evidence of repeatable growth, while setting firm conditions for investing more elsewhere.