Time Off for Owners
A matrix of options.
This is the third part in a trio of posts about extended leave in a business. Much of what I wrote about providing paid leave for employees applies to owners, but there’s obviously some particularities about ownership that require some more thought. Today I bring you a Boss Talk about taking extended time off for owners.
Read the first two posts:
We also did a Whiskey Fridays Podcast episode about leave!
Rather than a specific step-by-step, which depends too heavily on business particulars to jam into any sort of tidy article, this is an attempt at a framework to point towards various paths for problem solving. One of the things I’ve realized working with folks on these issues, is figuring out exactly which problems are most important to solve is something like 60% of the battle.
With or Without You
Before we get to what kinds of leave and how to pay for it, there’s an obvious first canyon to cross: can the business function without your varying degrees of holding up the entire sky self?
I’ve worked with a fair number of folks who swear on everything good and holy that they cannot take more than a few days away from their business, only to witness some sort of serious medical situation or family emergency force leave. Obviously not ideal! I don’t wish calamities on anyone! But dire circumstances will force the tough decisions that we otherwise avoid.
Shit happens, so even if you don’t care about nice things like sabbaticals or long vacations or having a baby, this post is for you, as a mortal human existing in a chaotic world.
Part of a sustainable, regenerative operation is understanding where potential points of failure exist in your system. Planning for anyone’s extended leave will strengthen your business, but we owners often avoid implicating ourselves because the path to extrication feels impossible (see also: control issues…).
There is an obvious baby step here that will help you figure out which stair needs replacing before your foot crashes through— take two weeks vacation off in a row without checking in or looking at email. Solve for a two week vacation first, then look at the longer term leave.
Otherwise, two paths depending on your business:
No you, no money: The business does not generate revenue when you’re not working.
No you, at least some money: The business generates some or all of it’s revenue without your direct labor.
No you, no money
This is mostly solo service businesses— you may have some admin support, but you, the owner, are the service delivery.
Your primary solve will likely be revenue coverage, or to put another way, covering your income through some combo of insurance or profit savings.
Timing is your second solve— schedule programs or client engagements for planned time off. With advance planning you can schedule clients to wind down around the same time.
Use wait lists (consider taking deposits) for the other side of your time off.
Some folks continue paying admin support to handle email, marketing, etc… Newsletters are easy to schedule ahead of time! I know some folks that have created “greatest hits mix tapes” to sidestep the crush of creating a bunch of new content at once. [ Substackers, more advice here. ]
No you, at least some money
Some of you have business partners and/or lead teams who handle some or most of the revenue-facing roles. Wanderwell is a good example of a mixed circumstance, I’m the only person who provides advisory services, however we have a second revenue stream (accounting & bookkeeping) where my substantive role is sales, but I’m not delivering the service.
You may be solving for some or a lot of revenue coverage or cash flow; though the tradeoff with a revenue-generating team is that you have more operational puzzles to solve.
What to focus on specifically, in this order:
Planning and strategy! Shifting decision making (you not making all the decisions / solving all the problems) is nearly impossible if your team doesn’t know where they’re headed and why. The strategy can be maintenance, and outlining outcomes for maintenance mode will give your team the guardrails they need to keep things going.
Decision making. This is usually the one that’ll trip teams up the most.
- ’s 3 levels of decisions framework is one of my favorite tools for figuring out who decides what.
Process & knowledge documentation. I’m putting this one last because while documentation is important, it’s not a crutch or replacement for the above. If your team understands strategy and is empowered to make their own decisions, the need to document every little thing for every scenario (which is impossible to do anyway) disappears.
A Money & Planning Matrix
I worked out a bit of a matrix of leave funding and whether you get the luxury of planning or not.
Planned things:
Sabbaticals
Welcoming new babies/children1
“Life Stuff” that you can plan ( I dunno, an extended honeymoon? Moving? )
Planned medical care or surgery
Unplanned things:
Sudden illness or disability
Death of a loved one
Family emergencies / life stuff you can’t plan
Not-the-Business Money
Basically, insurance.
You may get lucky living in one of the spare few states where owners can opt in to state-run employee family and medical leave policies.
Otherwise businesses can obtain insurance privately. There’s multiple forms of coverage, depending on what sorts of risk you’re attempting to cover. Personally, I’m more concerned with long term than short term, figuring that personal or business savings can float me in a short-term emergency, but long term I would need some sort of income replacement. Counterintuitively (because you won’t want to pay for it), lower margin / tighter profit businesses should think more about short term disability insurance.
Insurance doesn’t cover 100% of anyone’s salary, so that will mean…
Business Money
Basically, profit.
Profit is a form of maintenance and care taking.
True profit cares for the future, it’s not there to extract endlessly.
Continually stripping the business of cash (or doing so at the end of the year), is a bit like sticking a houseplant in a hot room without watering. Plants need water, your business needs profit and cash. 10% profit margin is baseline (under that, you’ll likely experience cash flow issues in normal times), so a higher margin will provide more buffer2. Siphon profit cash in a separate business savings account, and over time you’ve built your leave fund.
Normally about 2 months of operating expenses is sufficient in almost all businesses,3 however for planned types of leave, you may need to sock more away. Project this based on months in the red (where expenses will exceed income) as well as reserves for any lag time on return— you’ll most certainly defer something while you are out. That may not be revenue, but it might be sales, or initiatives or big internal projects. Aim to return with money still in the bank.
Profit also gives you options for leadership coverage.
Maybe you have a key employee who can step up in leadership temporarily, and you’ll want to bump their pay or provide a bonus. Or you want to hire an advisor you work with to do some fractional management support— I did this for a client’s recent maternity leave.
“Not for me”
I’m imagining two different objections to this post: the first is that this “doesn’t apply to me”, for those with imagined cloaks of invincibility. And the second is “never for me”, the folks that can’t imagine figuring out how to step away. I have some thoughts around what to do with this info for those of you with those responses.
I often think of leadership development as just getting better and better at making tough decisions quickly; often the objections to any kind of time off for owners show exactly where tough decisions are being avoided:
Things like letting go of a client that doesn’t really work with your business anymore; developing a team that can autonomously solve problems; paying yourself a regular, market salary while still have profit savings in the bank. Figuring out what to do with a business partner that you can’t really leave alone— none of these are easy, all are potentially impossible feeling! But also…these are the kinds of tough problems that harm a business long term.
So if nothing else, take this as a courageous exercise in future proofing a business that supports all the humans, revealing where the tough decisions are lurking, waiting to be made.
There are exceptions: my brother and sister-in-law adopted a newborn about a year ago (omg, I’m obsessed with her) and run a restaurant together; though of course they knew they were in an adoption process, they were not prepared for a call asking them to travel across the country with a day’s notice. They lucked out and were already on vacation. Since no one was recovering from birth, they ended up just alternating nights at work and not really taking any time off.
Worth underlining that this is after owner salary. A wild number of owners muddle up their salaries and their profit, we’re calculating after normalizing for a owner salary.
There’s a nervous system component to cash reserves— there are a few clients that I work with where we set levels at luscious princess and the pea dozens of feather beds levels (translation: 4-6 months of reserves instead of 2-3). Practically, there are almost no businesses that actually need that level of reserve for regular operations, but financial calculations aren’t the only consideration. Sometimes your nervous systems needs to feel really financially secure to make the best decisions for you and your business.