Episode 103: How to Financially Prepare Your Business for Maternity Leave, Sabbaticals, and Big Life Changes

Welcome back to another episode of Creative Minds, Smart Money. Today I’m very excited to talk about how to financially prepare for big life changes. This episode comes from one of my clients who’s wanting to start preparing for maternity leave, and that is a big life change. I think too often as service providers we feel like we might not be able to do this, and that’s why I want to talk about how to financially prepare for it.

So how do you prepare yourself for these big life changes? Maybe you’re taking a sabbatical, maybe you’re having a kid, maybe in worst-case scenarios you’re sick and you need to go through medical treatment and you need time to take away, but you don’t want your business to stop running. So when you’re through whatever you’re going through, you come out on the other end and you can handle it.

There’s a lot that business owners face that finances actually have to be ready for, and those are just a small smattering of them. Financial prep is so different when you’re self-employed versus when you’re an employee, obviously, because you have so much more going on. You have your business expenses, but you also have to account for yourself. And then you’ve got employees and contractors and things like that, and a bunch of stuff that ends up being added and compounded.

What employees have that we don’t

There are a lot of safety nets that employees have that creatives and self-employed people don’t. They have benefits. They have maternity leave they can take and still get paid for. When you’re self-employed, you can’t go to yourself and say, “hey, I’m taking maternity leave, I need to get paid for this,” right? Especially if you’re a website designer or someone with deliverables that need to get delivered on a consistent basis. It’s a lot harder to take that break or that time off.

There’s no paid leave when you’re self-employed. No maternity leave, no bereavement leave, no medical leave, nothing like that. There’s no employer-sponsored short-term or long-term disability, so if you hurt yourself on the job, maybe you’re a crafter and you cut your finger open in the middle of a project, there’s no pay for that. There’s no employer-paid health insurance either, and even if you have an insurance plan through your business, your business is covering the premium, so it stays whether income is coming in or not.

Income stops or dips the moment you step back, and there’s no severance, no notice period, and no transition pay. As business owners, we’re the face of our business, and when we draw back, there’s no break, there’s no pay magically continuing. So if there’s no pay coming in, or we’re not able to market and run things the way we usually do, we have to figure out how we keep the business going when we need to take that step back.

Planning the intentional changes

That’s where the planning for the intentional changes has to happen. We need to talk about what financial prep looks like for something planned, whether that’s maternity leave, a move, a sabbatical, going back to school, a relocation, and I can chat about this through the lens of my own recent move.

One of the things we’ve talked about before is a buffer, and that’s the 12-month-ahead buffer. Building a savings buffer for the leave typically starts a year out, because three months ahead is already too late. So if you’re thinking about taking maternity leave and you want to spend a year with your child, and you have contractors, a social media manager, ways for the business to keep going without you being there every step of the way, you need a plan for that. Even if you’re booked out, you need money in the bank consistently. That means accounting for all your expenses and setting aside the right amount for each of them.

Then there’s adjusting contracts, pausing onboarding, and setting expectations with current clients in advance so it’s not a surprise. When I went through my move last month in May, the most important thing to me was letting my clients know, “hey, I’m in the middle of a move, I’m not going to be able to look at my email a lot, I’m not going to be doing a lot of client work, but I made sure all of your monthly deliverables got out before I moved.” That was important to me, that my clients had what they needed. And then letting them know so it wasn’t a surprise.

When we go to Korea in November, I’m not going to let my clients know in November. I’ll probably let them know in September. Some of my friends and clients already know I’m going to Korea, but the plan around the actual client comms is to tell them a little later. They don’t need to know now because they’re going to forget by November anyway. Keeping them in mind in September is a good thing.

You also want to know what monthly revenue you need to be back at by month 3, 6, or 12 after the leave. If you have to take a step back and you’re only working with retainer clients (not onboarding anyone new), what’s the goal you want to be at when you come back? I know it sounds crazy. You’re thinking, “how do I predict all of this?” It’s not about predicting, it’s about setting yourself up for success and thinking about these things in advance, so that when you come back you already know.

And of course, you want to understand what your true monthly burn rate is, and that’s the question I want you sitting with. What are your true monthly costs? Software, contractors, office, rent, insurance, all of it. How many months of buffer does that actually require? Just looking at that and totaling it up is super, super, super important and very vital to your whole picture.

How far in advance you start planning depends on how long the leave is and how many things are going on, because you need to start making those intentional plans as a business owner.

When the big change isn’t planned

We’ve talked about the intentional planning, but what happens when a big change isn’t planned? Illness, a family emergency, burnout, a partner’s job loss, a million and one things that can go wrong unexpectedly. This is exactly why a business emergency fund is non-negotiable, and why I tell every client and every person I work with that you need to have this.

You need three months of operating expenses in a separate account that aren’t touched for anything else but an emergency fund. It’s the same idea as our personal emergency funds. You need systems that let the business keep functioning if you have to step back for 30 days. That’s delegation, automation, and a break-glass SOP someone can actually follow. If you have contractors or someone who can step in, like for example, I’m working with my OBM to make sure I’m not a bottleneck. She has the ability to respond to questions and step in if I had to take a step back, so she could handle whatever might need to be handled, a question, a process, whatever it is.

Then there are the insurance gaps. Short-term disability, life insurance, business interruption coverage. Those are all conversations to have with an actual financial advisor and an insurance broker, not me, but they’re things you really do need to think about.

The legal protections too, things like a will, a business succession plan, a power of attorney covering business accounts. Conversations to have with an attorney, not just me. For example, in my business I have an “in case of emergency” plan built in so that, God forbid, if I got hit by a bus tomorrow, my husband could literally look at this one document and know everything in it, so he could get access to bank accounts, emails, wherever, in order to do what he needs to do to either keep my business running or close it out.

The difference between a creative who’s prepared and one who isn’t is a creative who, when a family member dies or something major happens, has the room to actually be in that experience, instead of also having to scramble to keep the business alive.

There’s a million and one different things to think about, and I’m not trying to scare you. There’s so much that goes into the preparation, and sometimes things happen anyway, but when you have a backup plan and you’re prepared for it, it makes things a thousand times easier.

The mindset piece

When we run our own business, when we’re self-employed, it’s very hard for us to step away, and the reason is because we ARE the business. We’re the face of it, so it feels like we’re stepping back from ourselves. Our identity is tied up in the productivity of the business, which is exactly why we build the systems we build. The fear of losing momentum or clients is absolutely real, and it’s why we do good prep to prevent those fears. If we lose a client, hey, we still have expenses covered. We’re good, and we have time to get our feet back under us.

The guilt around rest when income is variable is also real. There’s a true guilt around taking a break when you’re the face of the business and your income is unpredictable, and it doesn’t go away just because you can afford the break on paper. You’re still thinking about it. The story underneath the resistance is, “can my business actually survive this?”

Most creatives need someone outside the business to look at their numbers and tell them they’re allowed to take the time, that they can afford it. For example, one of my clients is going to Japan for a couple weeks and she’s good. Payroll’s covered. Everything else is covered. Her work is covered by her contractors. There’s nothing she needs to worry about. And our next step is planning for her maternity leave. Even when you’re the face of the business, taking a step back doesn’t automatically mean your business is going to fail.

What real preparedness looks like

So what does being prepared for these breaks actually look like? The number one thing you can do right now is start an emergency fund. Today. Even if it’s step by step. The client we’re working on a budget with right now, we’re tackling one subscription at a time. Every month we put away an additional month of one subscription, and we just keep building it until we’re a month ahead, then two months ahead, and so on. Slow is fine. If you have extra funds and you want to go faster, great, but that’s up to you and where you’re at.

When you’re fully prepared and everything feels stable, you’re still scared sometimes, because you run your own business, but you also feel stable underneath the fear.

You also need a cash architecture, which is three buckets, and we’ll talk about these buckets more in a future episode: a tax reserve for your estimated taxes, an emergency fund for whenever something goes wrong, and an opportunity fund for bigger expenses. Each of these buckets needs to be sized correctly for your business.

You need a cash flow forecast that models what 30, 60, or 90 days of your business actually does, so the answer is known instead of feared. When we look at the cash flow with my client who’s leaving for Japan, she already knows she’s covered. It’s not even a blip on the radar. She’s letting her clients know, but it’s literally not affecting her at all.

And then a document that captures who runs what if you step back: vendor and software logins, client communication, payment processing, the bookkeeping handoff, whatever it is. Who’s running all this stuff so you can step back? If you have people running it, and SOPs in place, and the business is running the way you want it to, then you don’t have to worry about it.

There’s a peace of mind that comes from knowing the answer to “what would happen if I took a step back tomorrow?” instead of just hoping you don’t have to find out.

The level of preparedness that goes into this is something we focus on in some of my bigger packages. If you have a big change on the horizon and you’re thinking, “am I ready for this?”, that could be a conversation we could have. Just shoot me a message and let’s talk about what big life changes you have coming up and what we need to prepare you for.

As always, if you loved this episode, please like it, share it, and subscribe on social media. I always appreciate you guys hanging out with me. If you need anything else, just let me know.

As always, I wish you the best week ever, and we’ll see you next week.

Farewell, fellow travelers.