The biggest barrier that midwives say to me about starting their private practice is having enough money to start and run the business first year. It is overwhelming to think about how much money you will need plus figure out where those funds are coming from. Part of hiring a consultant and getting some business training really creates a strong foundation to your practice. We want to create a win-win situation with community, investors, and banks when creatively thinking about ways to raise money to start with.
The traditional route is your own hard earned money. That is the most common, slowest start up option. I want to challenge people to think like a business woman and create opportunities for business partners or investors in your area. With a stunning business plan and showing strength of profit margins long term, there won’t be an issue finding the funds to start your business. Money follows profits and successful entrepreneurs.
With my first private practice, I did a Small Business Association loan. It was quite lengthy with paperwork and required around 30% down payment. It is a great option for midwives that have a large portion of the funds available. I want you think think outside the box for minimal input by midwife and non-traditional routes. Your value for partnership is expertise and sweat labor for committing to success of the practice.
You can create a non-profit organization with donations and community committees committed to this practice’s success just as much as yours. These style birth centers tend to be the ones that last longest in the United States when community owns the birth center versus midwives. Avoiding taxes is huge advantage with a non-profit organizations like hospitals and medical centers.
What about private investors that will either want an equity position in your practice or a business loan that needs to be paid back? The loan rate is usually hiring than banks, but gives you the flexibility of terms and lowering down payment requirements. If you know your practice will be profitable and grow quickly, sometimes doing a larger interest rate will be minor in the larger scheme of your business plan. Having a business partner needs to be thought through extensively since it will be a long term relationship versus ending when loan is paid off. I have seen the business partner model work great with a midwife and collaborating physician starting the practice together. Then you know both are long term committed to the mission and success of the business.
Another great option is starting a S-corporation and selling stocks to your practice. This is traditionally done with larger practices trying to raise closer to a million dollars due to the increase initial start up costs involved with this type of business entity. The stockholder will own your company and have voting rights about how it will be run. Most midwives will keep 51% of the stocks to keep majority of voting rights and sell rest to raise start up capital costs.
There are many great options available. Instead of selling your prized classic car or life’s possession to make your midwifery business a reality, think like a business owner and how they raise capital to start a company. They look to investors, bank loans, stock selling, donations from community, and partnerships to raise the funds needed instead of using all of their hard earned income. Your business will get started sooner and risk of start up will be spread between many different equity positions.