He trained as a carpenter but before you could say "self-starter", the McCarthy & Stone boss had earned his first million. Now his retirement homebuilding business makes profits that turn contractors green with envy.
"Contracting is a mug's game. I wouldn't touch it with a bargepole," says John McCarthy, owner of mega-successful sheltered housing specialist McCarthy & Stone.

The pint-sized 59-year-old can afford to sound a little smug. He made his first million at 29 and his firm's profits make contractors' mouths water. Last year, it made a pre-tax profit of £28.5m, its gross margins were 40%, and it built about 1500 units – or "granny flats", as McCarthy calls them – for the firm's elderly customers.

McCarthy refers fondly to his typical customer as "granny": 80% of them are women in their mid-70s, buying one of his retirement flats priced, on average, £78 000.

He has been quick to latch on to the idea of the "grey pound". Back in the mid-1970s, long before anyone had even heard the term, he started building homes for elderly ladies who could afford to buy secure, specifically designed housing without a mortgage.

Not that McCarthy set out to corner the retirement housing market. The housebuilder started out as a carpenter, like his grandfather and uncles before him. He says he has a natural affinity with wood and has just chosen to build himself a workshop.

"I make all my own window frames and furniture," he says proudly. But these days all the wood comes from his own Wiltshire estate.

His craftsman's eye means that he will not tolerate cowboy botch-jobs among his subcontractors. McCarthy claims that if a television documentary crew was ever to film shoddy workmanship on one of his sites, heads would roll.

"Someone showed me a video of one of those TV programmes on cowboy builders," he says. "I was shocked. But what really got me was the lack of a lead taken by the National House Building Council in the matter. As an industry, we pay a hell of a lot to these guys. There should be more inspections."

After five years' training as an apprentice joiner, the young McCarthy decided to go into business with friend Bill Stone. With no experience of development, the pair approached a Hampshire farmer with an audacious plan to buy a plot of land and pay him when they sold the first bungalow. They borrowed £500 from the bank to buy materials, did all the work themselves and sold the first unit to a college friend for £3500. McCarthy & Stone was in business.

Stone focused on the practical side of the business; McCarthy was the front man, persuading bank managers to back him – however risky his ventures. He secured his first loan at 21, despite having no guarantor and no track record; then two years later he was asking for more money – this time from an investment bank.

I remember one bank in the City where the guy asked me for a cash flow. I hadn’t even heard of it, let alone done one

"I remember one bank in the City where the guy asked me for a cash flow [projection]. I hadn't even heard of it, let alone done one, but I said I'd send it to him and he seemed satisfied," he says in typically down-to-earth fashion.

But his relationships with the banking world have not always been so cordial. McCarthy & Stone hit trouble during the oil crisis of 1974. Interest rates were running at 20%, and came close to crippling the business. A deal with another investment bank almost went belly-up when the bank went bust in mid-development. A legal battle ensued.

"There was £25 000 of the company's money frozen and every time we sold a house the funds went into that account. The liquidator tried to claim back the land but we went to the High Court and won with costs," McCarthy explains.

And in the recession of the early 1990s, he is rumoured to have risked everything to keep the company afloat; as one industry source says, half-joking, at one point even his gold Rolex was in hock.

It was during that recession that McCarthy made the decision to take the company back to basics: "We had previously diversified so much that we even owned a concrete company and lifts business," he says. "We got rid of it all and focused on sheltered housing.

Once you've done well in one sector you think you can do well in others, but this has been quite an eye-opener." The company combined this approach with an in-depth marketing exercise to find out exactly who "granny" is and what paper she reads (the Daily Mail, as it turns out), in order to advertise direct to its target audience.

McCarthy also has a policy of keeping his (non-union) subcontractors on their toes. The housebuilder runs a "subcontractor of the year" award, but the boss also likes to conduct unannounced tours of his sites: "If I saw defects, I would go bananas," he says.

This uncompromising attitude has obviously paid off. In the past five years, the 600-strong firm has built up £30m cash in the bank, and has reported a 33% increase in pre-tax profit for the six months to February 1999.

Personal effects

Who’s who in your family? My wife, Gwendolin; daughter Claire; and three sons, Clinton, Spencer and Scott. What car do you drive? An Aston Martin. Where do you buy your suits Savile Row. Where do you like to holiday? On my yacht in the Mediterranean. What are you reading? George Soros’ latest book.