I was recently on Money with Melissa Francis on a panel talking about the fiscal cliff deal (hint: I’m the one in the red FullContact T-Shirt that looks woefully out of place).
I mentioned it briefly during the segment, but the most important component of this fiscal cliff deal is the increase in payroll tax by 2%.
It’s a 2% increase in taxes on everyone that takes home a paycheck.
Sounds small, right? Not when you compare it relative to discretionary income.
Discretionary income is all the cash you have to buy non-essential stuff. And frankly, non-essential spending is what drives economic growth.
For a middle class person making $60,000 per year or $5,000 per month, this 2% increase represents a decrease in take home pay of $100 per month, which is a whopping 10% decrease in discretionary income.
To illustrate, let’s take a single person in Colorado making $5,000 per month:
| Gross Monthly Income | +$5,000.00 |
| Tax: Federal | -$783.65 |
| Tax: Social Security | -$310.00 |
| Tax: Medicare | -$72.50 |
| Tax: State | -$223.00 |
| Net Monthly Pay | $3,610.85 |
| Rent | -$900.00 |
| Utilities | -$152.00 |
| Health care | -$250.00 |
| Food | -$500.00 |
| Transportation | -$625.00 |
| Clothing |
-$125.00 |
| Monthly Discretionary Income | $1,058.85 |
So basically there’s $1,000 per month leftover for everything else: entertainment, savings, retirement, investing, gifts, travel, software, electronics, etc.
10% – or $100 per month – really moves the needle.
It represents a Dropbox subscription, an Amazon Prime account, a NetFlix account, an iTunes Match account, a Spotify account, a Hulu subscription, an MLB.TV subscription, an Evernote account, a bunch of domain names, a Google Apps account, your all important FullContact API account and a few more services.
Where does your SaaS subscription service offering fit in?
Is your SaaS offering worth what you are charging? Are you a must-have and not a nice-to-have?
Heading into 2013 and faced with less cash in the customer’s pocket, what are you doing to make your service an essential offering? How are you thinking about its intrinsic value?
My definition of value is pretty simple:
Value = Benefit - Cost
In 2013, our resolution at FullContact is to make sure that we can answer the question “What’s the benefit to the customer?” sufficiently for every user story we take on.
It’s a simple practice, but it helps us prioritize our efforts and make sure we’re customer focused.
That’s our plan for delivering value in face of tightened spending. What’s yours? Feel free to chime in below!
