Compass Precision Reaches Company Milestone
CHARLOTTE, NC – October 16, 2024 – A global pandemic. An historic national US election. A disruption in the supply chain. And of course, Taylor Swift dating Travis Kelce. A lot has happened over the last five years.
The same is true for Compass Precision, which celebrated its 5-year anniversary on October 16.
“Five years went pretty darn quick,” said Advanced Machining Operations Manager Patrick Reynolds. “It’s been a lot of work for five years, but what we’ve done is very cool.”
“It’s crazy. Time is definitely flying,” said Quality Products Estimating & Business Development Scott Zagora.
Over the last five years, Compass has grown from 65 employees to 160 through acquisitions and expansion of its own management team. It’s grown from an operation with three companies spanning roughly 50 miles in the Charlotte area to eight companies stretching across more than 3,000 miles.
At its 5-year anniversary, Compass has operating companies in three US time zones, servicing customers across the entire country. And it’s only still growing.
“We’re only getting started,” said Compass COO Bill Canning.
An Original Idea
The parent company’s origin story isn’t quite as cliché as CEO Gary Holcomb devising the plan on a napkin. But the business concept is about as innovative as it gets in the CNC machining industry.
“We had an idea about a way to create a unique organizational structure which would capture the benefits of both small, well-run entrepreneurial shops and the advantage of scale with having a big organization and more resources,” said Gary.
Gary, along with Main Street Capital Holdings partners Dennis Proado and Ryan Davis, researched the industry and studied successful CNC machining companies for two years before founding Compass. Through their research, they found the best machine shops had 10-30 employees.
Fewer than 10 employees and the operating company doesn’t have enough resources to reach its potential. More than 30 employees and then the operating company isn’t nimble enough to be efficient.
The trio aimed to establish multiple companies on a national scale. But to prevent disorganization that bigger companies encounter with growth, Compass keeps its acquiring companies in its location and gives them autonomy.
Gary described Compass’ shops as focused on manufacturing and not true integrated businesses in the sense of traditional consolidation. Compass has never eliminated jobs because of an acquisition or moved a shop, and in many of their operating company purchases, the previous owner has remained in a presidential position for at least a short period.
As a result, Compass’ operating companies have the benefits of both a small CNC machining firm and a large corporation.
“They have our backs, and that’s a good feeling,” said Quality Products Operations Manager Greg Donaldson. “To come to work and know that our parent company has our back.”
At two of Compass’ original three operating companies – Advanced Machining & Tooling and Tri-Tec Industries – one of the company’s original founders still serves as president. Keith Felts at Advanced and Rick Loyd at Tri-Tec built their companies from the ground up over several decades long before Compass.
There’s little doubt the two CNC manufacturing units would still be successful without Compass. But the support from their parent company gives them opportunities to grow even faster.
“We purchased a DMG Mori NTX about three years ago. That kind of investment would have been difficult without corporate backing,” Keith said. “But they support us with those kinds of equipment upgrades while acknowledging each unit’s expertise and what they do with their customers.”
Rick can’t recall a time where Compass said no to an equipment purchase.
“If you need something bad enough, they’ll make it happen even if it’s not a good time to make it happen,” said Rick.
In reality, even Compass has needed to make difficult decisions. Not every piece of equipment on each operating company’s “wish list” is always necessary.
But if an operating company needs to expand its capacity, Compass bends over backwards to make it happen.
“Sometimes it’s been a little bit of a fight to get new equipment, but you expect that when you’re spending the kind of money we’re spending,” said Patrick. “It’s greatly supportive. We wouldn’t be where we are without them.”
Five Acquisitions Over Five Years
Compass started with three operating companies – Tri-Tec Industries and Quality Products & Machine in Charlotte and Advanced Machining in Salisbury, NC. In its first five years, though, Compass has averaged adding another operating company each year.
First, Compass stayed in North Carolina with the purchase of Gray Manufacturing Technologies in August 2020. Gray specializes in 5-axis machining and services the aerospace & defense and space markets.
Over the last year, Compass has used Gray to develop relationships with potential space customers for the other operating companies.
“We really put a giant focus on leveraging Gray, their experience and relationships, and then starting to spread the word about our other operating companies, specifically Advanced, Quality Products and R&D Machine,” said Compass Precision VP Sales Jim Miller.
R&D Machine, located in Oldsmar, FL, was the third add-on acquisition Compass made in April 2022. A little more than a year prior to acquiring R&D, Compass moved into the central time zone with the purchase of Douglas Machining Services in Winona, MN.
But there’s never any rest for the weary at Compass. Compass acquired another company in July 2022, expanding onto the west coast, with Strom Manufacturing in North Plains, OR.
The acquisitions of Douglas, R&D and Strom occurred within a 17-month period. Compass then added its most recent operating company with Bergeron Machine in April 2023.
Compass has considered numerous other potential acquisition candidates. But the management team at Compass has no interest in acquiring less than stellar shops.
“They bought good companies. That’s the foundation of Compass’ success,” Patrick said. “It’s the people at each unit. Compass is there to have our back, support us anyway they can. But without the people at each individual unit, we’re a zero.”
Compass Builds Its Management Team
As “hands-off” as the management team at Compass is, Gary couldn’t remain the only official Compass employee for long with the number of acquisitions the parent company wanted to pursue.
So, Compass has also grown its management team over the past five years. Not in a big way, but it now possesses a four-person crew that perfectly complements each other’s strengths.
From its purchase of Advanced, Quality and Tri-Tec, Compass inherited a CFO, David Crow. But David elected not to relocate from Atlanta to Compass’ headquarters in Charlotte.
Therefore, the first order of business for Gary was to find a new CFO. He did that with the addition of Paul Wilhelm.
“He was a great hire because he can do the strategic stuff, but he was also willing to roll his sleeves up and do the hardcore accounting stuff that most CFOs don’t do,” said Gary. “We were able to transition from our old CFO to Paul, and we didn’t miss a beat.”
About a year later, Compass added another key team member – Jim Miller.
Ideally, Gary wanted to hire a VP of Sales who was, of course, great at sales, but also experienced in CNC machining to talk intelligently to machinists and customers. Jim’s candidacy exceeded Gary’s expectations, though, because of his level of experience.
Jim successfully started and sold two of his own CNC manufacturing companies in California. To use a sports analogy, he’s now Compass’ point guard.
“Jim has a lot of knowledge in the sheet metal business and machining. He has a great attitude, and he’s a great person,” said Greg. “Having him around to help us with the quotes and get his input from potential new customers and what they’re looking for is great.
“He just works side-by-side with us. He’s here a couple days a week. It’s great having him here to collaborate with. It helps us bring that new customer in.”
As Compass made its big expansion from March 2021-July 2022, the company was growing too big for Gary to provide the support each operating unit might need. It then became necessary to hire Bill Canning as Compass COO.
Bill joined Compass in March 2023. He grew into his role quickly, becoming a vital part at Quality Products following the retirement of President Kevin Farmer. In addition to his continued involvement at Quality, he oversees Strom, Gray, and Bergeron.
“Bill has been terrific. He had a connection, and we’re outsourcing some of these 10-foot parts that are 5-axis,” said Scott. “That’s getting us in the door with this new customer, and I think eventually, it’s going to lead to even more equipment investments.”
Gary described Bill as a very technical person who understands the operations and possesses great management experience. His ability to run a machine shop, if needed, brought a great compliment of skills to what Compass already had when it added Paul and Jim.
Growing Collaboration
With the vision Gary, Dennis and Ryan had five years ago, they saw the companies they acquired working together. It takes time, though, for new companies that become sisters under a new corporate umbrella to trust each other.
That trust has grown tremendously over half a decade. Consequently, Compass has seen the cross selling and cross sourcing between its operating companies really take off in 2024.
“It’s pretty neat to see three companies become eight,” Patrick said. “The communication between each other in the beginning was really lacking. But now the communication seems to be opening up.
“Different avenues for working together on jobs. Helping support each other to help everybody kind of grow at a quicker rate had they been alone.”
For instance, Patrick said he talks to Gray Manufacturing’s General Manager Evan Grose at least once a week. Greg said that whenever he is in Denver, NC, where Gray is located, he always stops in to see what his sister company has been up to.
R&D VP & General Manager Justin Kovscek has visited Charlotte to see the four operating companies in the area. There’s plans for more visits between the shops too.
At Compass, it’s about building relationships not just with customers but between each operating company. In the long run, that will only benefit the customers.
With cross selling and cross sourcing, a shop such as Advanced Machining, with 15-17 pieces of equipment, becomes a place with more than 100 pieces of equipment.
“We use a number of our sister companies as sources for machining to enlarge and enhance our capacity,” said Keith. “A lot of the units have processes that we don’t have here, so it gives us access to a fuller set of capabilities.”
Rick said that recently, a customer came to him with a project for another division within their company. The customer contacted Tri-Tec because it knew that even if Tri-Tec couldn’t complete the job, its sister companies very likely could.
“That’s hugely beneficial to all of us,” Rick said. “I have access to Quality Products’ machines if I’m at full capacity.”
Looking at the Next Five Years
It’s been an incredible five-year run for Compass Precision. But in many ways, it’s just getting started.
Gary projected that Compass could double its operating companies to 16 over the next five years. That potential for expansion is truly exciting but also presents obstacles.
Because of its unique foundation, with each success, Compass also encounters more potential hurdles.
“The challenge is going to be expanding and still being able to cooperate with each other,” Gary said. “They’ll be more brothers and sisters. They’ll be more people to get to know. There will be more people to potentially cooperate with.”
Compass currently has 160 employees at eight different locations. Gary estimated that could double too over the next five years.
Gary’s goal is for the parent company to continue “running its playbook” – small decentralized shops with local decision making but with corporate support and sister company collaboration.
The other challenge Gary foresees for Compass is the continued evolution of technology. New technology changes many industries and CNC machining is no different.
That doesn’t mean replacing employees with a machine. But it does mean Compass must find the right mix of new technology and automation to continue its efficiency.
“Can’t rest on our laurels. We need to keep getting better and better and better,” said Gary. “If we don’t, someone will pass us. We are highly motivated to make sure that doesn’t happen.”