As real-estate agents, Josh Collins and John Sears knew that banks, to maximize resale value, frequently need to renovate the foreclosed properties they acquire. They also knew that neither the banks nor the real-estate agents they rely on to sell those properties understand much about construction or renovations. So in 2009, Sears and Collins (pictured, left to right) decided to fill the gap and launched PresPro, a construction contracting company that handles foreclosure projects for banks and other investors. But rather than starting out small and scaling up, the company worked to launch nationwide right out of the gate. Since then, PresPro has increased sales to $3.5 million in 2013, up from $167,623 in 2010. The founders share the strategy behind their vision.
1. Go big from day one
Collins and Sears wanted to launch nationwide, both for the challenge and because anything related to real estate means thin margins. To be profitable, they needed volume. Nabbing even a single large bank as a customer would mean hundreds of renovations across the U.S., so they needed national capabilities. "We wanted to work for the guy with 10,000 properties," says Collins. To find contractors, they enlisted five staffers from their real-estate firm to do Web searches and cold call other property agents and insurance brokers for referrals. Their pitch: Those who become preferred contractors could get jobs without the cost and hassle of advertising and billing. PresPro now has 4,400 vendors throughout the country.
2. Be methodical
Collins and Sears knew that banks and real-estate agents might have concerns about quality control when dealing with a company offering thousands of vendors across 50 states. So they invested in rigorous online training for contractors and insisted that vendors agree to fixed prices. Collins wrote an algorithm to internally rate contractor performance on PresPro projects, and the company has used those ratings to pick contractors for future jobs. The pair retained local project managers to oversee renovations onsite and created a proprietary online project-management system to track jobs. "The key was persuading people that this business model worked," says Collins.
3. Test-drive your strategy
Collins and Sears believed they could handle a nationwide business, but they weren't foolhardy. They had to be certain that all their planning would, in fact, allow them to manage construction projects from coast to coast. So they contacted PMH Financial, a Denver asset-management company in charge of liquidating thousands of bank-owned properties (it has since been acquired). A three-month pilot program with PMH in 2010 proved PresPro could do projects in disparate locations, in half the time that local companies took, and for 30 to 40 percent less money, says Collins. That's thanks to its fixed-rate schedule and automated software for getting estimates, tracking jobs, and invoicing. That test "gave us credibility," says Collins.