TIPS FOR SELLING A MIDWIFERY BUSINESS
Having your own midwifery practice is one of the most fulfilling part of being a midwife. Putting your driven passion into action, supporting families with a normal birth opportunity, helping other midwives & community improve birth outcomes, & being your own boss are just a few perks. However, after few years or even decades of having your own midwifery practice, you may decide to sell your midwifery practice versus closing to continue the legacy and make a smooth transition for the community. There are so many benefits to years of planning in advance for selling your practice. Time is essential to get the best price and find the right person to take over your “baby.”
So what does it take to sell your midwifery practice? What are the things that you should consider? Do you just sell it to someone you know? How much time is needed for planning and closing a business sale? Sometimes it feels like there are more questions than answers at this stage of your practice’s transition.
Selling a unique midwifery practice is not as easy as it seems. It takes a lot time, research and study, even learning the business laws that may be involved. Therefore, deciding to sell your own midwifery practice is a huge disposition anyone can make. However, with persistence, attention to detail and willingness to be objective about actual value of practice. You not only can reap the financial rewards of selling your practice, but also know the community has a strong midwifery practice to continue serving them. With the rising demand in midwifery around the US, it is indeed easier for one midwife to sell her practice to another versus just “opening up shop.”
Here are some few tips you should consider when selling your midwifery practice:
- Research Prospective Buyers
Trust is a valuable instrument in selling a practice. You don’t want to sell your practice to a person whom you can’t trust. It is indeed important that you already have someone in mind that is capable of continuing your vision and mission to the community. In finding the right buyer for your practice factors such as the reputation, available funding, practice philosophy and business management skills are very important. A competent successor ensures a good transition for clients to get safe and valuable services still. It doesn’t necessarily have a to be a midwife, but a business owner that UNDERSTANDS midwifery and can continue the midwifery model of care with the hired staff.
- Plan Early
If you can take years of preparation in selling your practice, finding the right buyer, having them do their due diligence, and negotiate an offer. Planning is crucial right from the moment you consider selling your practice. If you want to retire in a three years versus three months, it makes finding a buyer and getting the best value from your business happen. Motivated sellers don’t get much more than value of building and supplies when time isn’t on their side.
- Know the Financial Value (Not Emotional Value) of Your Practice
Knowing the value of a practice is challenging because the value is based on tangible and intangible assets. If you choose to value practice strictly on profitability (easiest way to estimate value of business), most midwifery practices won’t look very “valuable on paper.” When you starting valuing the building, supplies, insurance contracts, established clients, birth center accreditation, and marketing campaign to more of a replacement cost if someone else tried to do the exact same thing, then the value goes way up. Bottom line, if your practice isn’t making money, prospective buyers aren’t going to want to buy the business. They will only want to buy your location and supplies for wholesale rate since business itself won’t be a profitable investment. The need for midwifery services based on demand and safe care being provided has unfortunately no financial value to the potential buyers. An independent medical practice appraiser like Midwifery Business Consultation can help you objectively value your business based on the following factors:
- Tangible assets — birth center, office clinic, equipment, & supplies
- Intangible Assets — established clients, reputation in community, insurance contracts, trained staff, location near hospital, collaboration agreements, policies and procedures, birth center accreditation and licensure, & profitability
- Consult with the Right People
In selling your midwifery practice, consulting with the right people is the best decision that you can make. Leverage the experts around you. We are good at being midwives, not selling businesses. Meet with your legal team like lawyer, accountant, and financial planner to see what tax implications are to think about when selling practice for cash and gain taxes all at once versus being the business loan provider for the seller and slowly getting paid over time plus interest. These people can also help you handle legal and financial issues, comply with any state laws governing the sale of your practice, and evaluate your insurance needs as you wind down your involvement in the practice. Remember, you are selling a practice. Having someone who can give you the best advice involving financial matters and assists with selling businesses regularly is crucial to protecting your business and your financial future.
- Protect Your ASSets
In every negotiation, protecting your interest you have placed your sweat and tears into is a must. Many prospective buyers will try to decrease the value you set upon your practice. Be objective and create a win-win situation with buyer. When time is on your side, you can pass on one deal and not feel pressured that others aren’t coming around before retirement. Consult with your lawyer to ensure that appropriate protection clauses are included in the final sales contract, such as a clear definition of the seller and buyer’s role in the transition, the seller and buyer’s financial responsibilities, and protections against breach of contract.
- Know the tax consequences Taxes have a big impact on how much you ultimately earn from the sale. Careful planning is the key to reducing your corporate and personal federal and state tax liability from the sale. Consult your tax advisor for assistance.
The most fulfilling part of selling your midwifery practice is the continuation of the legacy, philosophy and its service to community even if that means that you are no longer the owner of it. Some may still work in the practice for transition purposes and business consulting support, while others choses to retire and just focus on their lives by exiting involvement with midwifery practice they just sold.
Anytime you are considering selling your midwifery practice, there are key tips are want everyone to take away: giving time, hiring the experts, create fair value for practice, and negotiating a win-win situation for you and buyers. We need to keep these amazing midwifery practice alike for the future generation of families to enjoy. Buying an established midwifery practice has far higher success rates than another midwife just starting from “scratch” with their practice. We need to keep this midwifery momentum strong and the clinical and business knowledge needs to be passed on.
There are many midwives that plan for starting for a birth center and very, very few that successfully sell their practice for a profit. There are dozens of midwives each and every year that don’t have a strong exit strategy for leaving their business model. When planning of sales doesn’t occur, the community looses a massive service. The midwife loses a retirement income stream and opportunity to pass on her knowledge to the next generation of midwives.
There are many great ways to find out what a business is worth, what the timeline of exit strategy of selling their share of the midwifery practice, where to find the right buyer, and tips to negotiate that win-win situation between each party. I created a step-by-step tool and guidelines to help midwives value their practice, understand a realistic timeline of selling a business, and negotiating tools available to make both parties very happy with the transition from prior to new owners. Come join us Saturday, October 9th from 3:00PM to 4:00PM at AABC Birth Center Conference to learn more about birth center selling strategies.