The 3-Phase Time-off Schedule for Contractors

How I manage time off and schedule in new work

AKA "Asynchronous Pipeline Building", but more on that below...

Read this bit first

I've made this post with contractors in mind for two reasons:

1 - I've been one for 7 years now, so I feel a little more confident talking about it

2 - My definition of contracting is basically "staff augmentation for one company at a time", where you're just paid differently (via invoices and such) and don't get company benefits, so its easier to talk about time off around one client at a time (vs freelancers who might be working with various clients at once)

A lot of this post will be applicable to freelancers and consultants, but I've based most of it on my, and other contractors I've known, experience.

Intra-contract time off

As a contractor, depending on the exact terms you sign, you actually get quite a bit of flexibility on how and when you work. To simplify things dramatically, a usual relationship between client and contractor is:

client: hello contractor, here's what we need doing

contractor: ok, that task/feature will take X time

Things like time on-site, hours, meeting frequency are usually up for grabs and can be written into contracts.

If I, as a contractor, inform a client that I'm going to be offline on a particular day, or out-of-the-office, then one of two things will happen:

1 - absolutely nothing, because you didn't base your fees on "time spent" but "value created" and therefore as long as you're outputting and delivering as agreed, nothing needs to change

2 - you may lose a billable day, and the amount you invoice for that week/month will just be reduced.

So this post isn't really about those one off days off during a contract, but it's how to manage actual time off (holidays, trips) and how you can schedule in work for after you're finished sitting in your jim-jams.

Forcing a gap

Confession: I'm terrible at remembering to take actual solid blocks of time off. Because I personally find contracting to be quite flexible in terms of how I spend and plan my work day, I find I'm pretty good with continual work without experiencing burnout. I find I need to actually plan a proper trip and stick it in my calendar to block out some time off.

Now, for those proper blocks of time off, I'm talking anything over 2-3 days, how does one go about doing that during a contract? Well, that could honestly be tricky. If I were to have a 1-2 week holiday planned, I would make any new clients fully aware upfront, so it can be planned around. But the real fun comes when you're coming to the end of a contract; because this is your golden opportunity for a recharge and a break.

How much of a gap to put in

So you're coming to the end of a contract with a client, and you've been head down for 6 months and need a break. Ok, how much of a break do you want? How much can you afford to take?

Deciding on how much of a break you want is really going to depend on you, the individual and your own situation. Do you have kids and are looking at 2 weeks in a sunny climate? Are you looking to go traveling solo around Europe for 6 months? Do you want to go spend 7 days in a cabin in the woods? Or do you not want to go away at all, are you just looking for a "staycation" and enjoy the freedom of not setting an alarm for a month, and not needing to log in for a 9am standup on Zoom? I hear you.

Now, for the amount of time you can afford to take off, I'm going to keep things offensively simple and also you're gonna need to meet me halfway and apply your own financial situation here, I don't know how you've got things set up.

I'm not an accountant and this isn't financial advice

For a typical contractor who's the sole director and shareholder of their own LTD company, there are some basic assumptions I'm going to take the liberty of assuming: it's likely that you have a business bank account, your pay yourself salary + dividends once a month and you pay corporation tax once a year. Knowing these things, we can do some back-of-envelope calculations to keep in the back of your mind so you can quickly work out how long you can afford to take off. Also I'm going to use nice easy round whole numbers here and they are completely fictional so don't yell at me:

Your starting business bank account balance: £20,000

Allocated for corporation tax bill: 19% of £50,000 profit from previous year = £9,500 (which is the highest amount it will be, because a good accountant will be able to reduce your taxable profits through the expenses you've put through, ie. new equipment related to your business)

Your own personal monthly income you pay yourself: £1,041.66 for salary + £2,500 in dividends (google these magic and very specific amounts)

So, 20000 - 9500 - ((1041.66+2500) * 2) = 3416.68

or (starting balance) - (corp tax bill) - ((salary + dividends) * 2 months)

What this means is with a business bank balance of £20,000, you can afford to have 2 months off, without needing to bring in an income, still pay yourself, and still end up with a cushion of £3,416.68 in your account.

Cashflow at a glance

As an FYI - here is the structure I currently have set up in my Monzo business account, which allows me to see at a quick glance how the cash is split in my business account.

Oh yeah...payment terms

Yay, 2 months off! How ace.

Wait...

Don't fall into the trap I have before: that's 2 months off but needing to have your next invoice being paid 1 day immediately after those 2 months. That's not, "I'll take 2 months off and then start looking for more work". That's not even "I'll take 2 months off, but line up a gig for right after" because with most contracts you're going to be looking at 30 day payment terms. This means you won't have your first invoice paid until 60 days after those 2 months off. Ouch.

You can of course try and negotiate payment upfront, or 0 day payment terms, and if you can; good for you. I'm proud.

So armed with all of the above knowledge, here's how I would personally structure time off and lining up new work so you're not left short in your business account and unable to pay bills (tried and tested personally), or eat into your allocated corporation tax bill money.

The 3-Phase Time-off Schedule for Contractors:

This is a system I've used to plan, manage and structure my own time off as a contractor, and it takes into account finding new work. The beauty with this system is, well, it's a system, so I would apply it for 3 weeks or 3 months off, just split each phase into 1/3 into the total time off period.

FUN

Phase #1. This is it buddy. You did it. You closed your laptop, logged out of Slack and stuck a middle finger up to Zoom. Turn that alarm off and just..... be.

This is for that trip you've planned, or for sitting in your jimmies at 11am reading that book you've not gotten round to. I personally use this time to enjoy not having to sit behind a laptop for extended periods of time. I would not even be thinking about your next gig. Put it out of your head.

FEELERS

Now, phase #2. We're still in P-A-R-T-Y? (cus' I gotta) mode, but we're gonna sprinkle in some Asynchronous Pipeline Building (I talk about this more in my previous article on contracting from 2017, under "Asynchronously looking for work"). Asynchronous Pipeline Building is a fancy schmancy way of me saying: now can be the time for you to progress that neglected side project, polish your portfolio site, write those blog posts that have been sat in draft in Notion, contribute to some open source, etc. Essentially, it's all the soft meta work that's involved in pushing yourself onto people's radars as an Expert In Your Field™.

Repeat business

I would also be using this time to chat to other contractors I've worked with before, see where they're at. Many of my gigs in the past have come from word-of-mouth from a contractor I've worked with who's on the lookout for someone else to join the company they're currently contracting with, or they're moving on and need to replace themselves. Emailing old clients and seeing how their project's going, did it ever get launched, do they have any problems they're currently facing. Again, a few of my "new gigs" were just old gigs with new terms.

You never really know what a lot of this "soft" communication can lead to, because there's an enormous amount of value in repeat business. They're already sold on you, you've already laid the groundwork.

Whilst you've been pushing updates on your side project or publishing blog posts, Joe Schmo has seen your work and passed it onto their boss and suddenly you've got a very exciting lead in your inbox. Great!

So whilst I wouldn't be on the hardcore hunt for locking in gigs, this phase is nice because there's no pressure to take the first thing that comes in just for the sake of locking in some income. You have the freedom to see where fun, interesting and exciting opportunities take you. At this point, I would still be mostly enjoying time away from my desk/laptop if I could help it...

TERMS

Now, phase #3. It's getting time to turn the screws on locking in your next invoice payment. Hopefully by now, you might have some idea of who or what you're going to be working on for your next contract. If not, I'd try and get that in mind earlier on in this phase. The earlier you have that lead, the earlier you can be negotiating terms, especially payment terms. Cashflow is king.

All of the self-marketing we did in phase #2 should mean that we have a fairly healthy stream of leads or conversations in our inbox. If not, ramp it up: pester your own network, call in favours, spam your Twitter feed, etc

The great thing about contracting is that even if you have a slight gap in income, your rates and fees tends to be a little higher than an employee's, so you can recover quite quickly.

Wrapping up

In an ideal world as a contractor, you wouldn't be waiting until you need work to try and find work, you'll actually have a few opportunities land in your inbox on a regular basis. If I'm mid-contract, I'm still speaking to prospective new clients, taking calls, etc. Just because I'm not available at that moment in time, doesn't mean I won't be in 6 months....and guess who's going to be top of my list to contact during phase #2?

The great thing about all of the self-marketing I mentioned above is that you'll end up with companies coming to you for your expertise, not you pitching them your skills. You've already reframed the conversation to put you in the driving seat, which gives you the advantage when negotiating terms and avoids the need to "sell yourself".

Word of mouth can go a long long way and often propel you past a few of the initial cold steps you have to do when pitching to a prospective new client. I once agreed a 6 month contract with a potential new client, with fees, terms and starting date set all within a 90s phone call, simply because a contractor there had put in a good word for me and vouched for my technical skills.

As an employee, if you take 3 weeks off, the high chances are you're going back to the same job as before, without a worry or a need to find more work. As a contractor, you're essentially starting a new job with each contract (which could be every 3, 6 or 12 months).

Put those pipeline building efforts in upfront, and they'll pay dividends when it comes to scheduling in time off.

My DMs are open if you want to ask any advice on the above or chat about something you'd rather not post publicly: @ben_howdle