A small general contracting firm wished to expand business by developing housing through acquisitions of older properties, tearing down the physical structures and building new housing in this attractive suburban target market.
The contracting firm was successful as a service provider but needed to develop and implement a business plan in order to get into the development business without endangering the core contracting firm and its client base.
The first task was to define how the development business would fit into the general contractor business, including identifying practical day-to-day issues for employees and subcontractors. The challenge was to focus on a community that was not competitive with clients of the contracting firm, general contractors or developers, and then implement a communications program to reassure them. Next, specific realtors were offered unique incentives to alert the firm about potential acquisitions. Creating a special incentive program for realtors and other referral sources concerning acquisitions was especially important since it was a competitive market. Therefore, Cadre provided a unique capital solution to strip high yield debt, which provided the needed capital for each project but did not require the entrepreneur to adopt a totally different accounting system.
Cadre and the entrepreneur worked on more than four such projects. The contractor eventually moved on to larger projects and no longer needed to depend upon outside capital. He continued to develop projects within the original business plan using his own capital.