Hey, many featuring friends, this one hits different. I sat down with a close friend of mine the other day, a third generation machine shop owner. His grandpa started it, his family built it, and he decided to sell. Sounds like a win, right? Yeah, but it didn't come easy. We're talking pressure, legacy on the line, and decisions that don't just affect a balance sheet, they affect your name. If you ever thought about selling your shop or wondered what it really takes, this one's worth your time. Precision isn't just machining, it's mindset. GD&T gives us structure, and true position keeps everything aligned where it matters most. In life and in business, we also hold true positions, shaped by trust, lessons learned, and risks. This is my true position, a no BS manufacturing podcast, sharing insights and strategies to help you lead with confidence, grow your career, and take control of your future. Let me tell you something, we all think about this. If you own a machine shop, if you've built something over years, God decades, maybe your grandfather started, your dad carried it, and now it's on your shoulders, you've definitely thought about an exit. Don't kid yourself, you've asked the question, what's this thing worth? Who the hell would buy it? And when the time comes, how the heck do I actually get the fuck out? Because on paper, it sounds simple. You've built a great company, someone writes a check, and you're right off into the sunset and you're Cadillac. No, that's not reality, my friends. This process, it's complex, it's layered, it's emotional, it's strategic, and if you think you can just wing it, you're setting yourself up to get burned. Listen, you need the right people around you, advisors, attorneys, financial professionals who know how to navigate this game. Not your buddy down the street, you need a real deal support. You also need your family align, because this isn't just a business transaction. It's legacy, it's identity, it's years of sacrifice wrapped into one decision. You need thick skin because there's gonna be moments where you're questioning everything, the value, the timing, the buyer, and more importantly yourself. And you need time, time to prepare, time to position the business, time to go through the process the right way. Not rushed, not reactive, but deliberate, because when it's done, it can change your fucking life. But getting there, that's the part nobody talks about. And that's exactly what we're gonna get into today. I hope you enjoy it. And now your my true position, news update. (upbeat music) All right, my friends, just gonna go over a couple of headlines that I'm seeing right now. The first one is, we just got news, well now I'm recording this, that the Airman that got ejected from that F-15E fighter jet that they couldn't find that the two ejected over Iran, what a miracle that they found him. Just heard it this morning on the way to work. The CIA was involved strategically with this. Those airmen have been trained for a long time for situations like this. And apparently, let me read the article here. The CIA, which traditionally assists with efforts to rescue American pilots, trap behind enemy lines, developed a deception plan to buy time to find the airman by keeping the Iranians away from where he might be according to a senior administration official. I mean, it's awesome that they found him. I'm thrilled and makes me feel good. I'm sure his family is just overwhelmed that he is still alive and he's not hurt from what I understand. (upbeat music) The manufacturing PMI, it's expanding, 52.7% marking the 17th straight month of economic growth. It's supported by stronger production, but slightly easing new orders. Costs are going up, that's creating a problem. Gas, you know, is up to over four bucks a gallon now. But I guess unemployment kicked down to about 4.3% last week. So I don't know, it's a mixed bag. Some people I know are really suffering. Some people are really busy, but overall, I think it's just putting on. Before we get started with this week's episode of my true position, here's what's hot on the shop floor. So we had our Q1 offsite EOS meeting this last week. It was really good. It was probably one of the best ones we ever had. We rented a private room. You know, they have those spaces all over the place, those work spaces. We went into the room. It wasn't expensive at all. It was really nice. They had just remodeled it. We were there from 8 a.m. to 4 p.m., brought and launched. We didn't use the structured quarterly EOS process. Ryan had created his own metrics that he wanted to share with the team. I was super impressed with what he brought to the table. And we talked a lot about process control. I'll tell you why, because we had a big meeting this week with our customers. Our leadership team went to one of our larger customers. And one of our customers said, "It sounds like our process control needs to get under control." Whatever that meant to that customer, we took seriously. And we actually laid it out. And we thought, you know, let's dig into this. Because if somebody is telling you this and you think you're not, maybe we really are. So we went through everything from when we get an RFQ to when we ship the job and everything in between. And we wrote out all our process. We wrote out where we're failing or where we need help at. It was a fabulous meeting. I highly recommend doing these. Well, you know, I'm a big ambassador for traction and EOS. But this time it was kind of funny. We kind of like didn't go down the standard EOS structure. We just kind of went on our own thing. Let me tell you, it was really good. Lastly, I want to shout out to some new friends, Paul and Laura both the Inkonosha Wisconsin. You guys are great. I went up there this week. I toured their facility. They're just two of the nicest people I've ever met. I really am lucky to be able to connect with people through this podcast. Paul and Laura reached out to me because they're avid listeners of the show. And I made some new friends in here. So shout out to you guys looking forward to seeing me this week. And this week's episode is titled Three Generations One Exit. What it really takes to sell a machine shop. This is part one of a two part series. And I hope you enjoy it. I have been wanting to do this episode for about five years now. I think it's been about five years. A good friend of mine sold his family-owned and operated machine shop here in suburban Chicago. We're going to talk about it and the makeup and the family dynamics in just a minute. But I've been wanting to have this guy on the show for quite some time. Even before I started my true position, I wanted to have him on. Today, I finally got him. We're sitting at his office right now and we're going to start the conversation. So welcome to my true position, my good friend, Mr. Brian Panic. Brian, hey bud. - Hey Jim. - Thanks for having me again. - Yeah. - Good to be here. Good to talk about this. - Brian, you know as well as I do how many machine shops are out there in the desert. 18,000 machine shops across the country. I don't know the exact number. I don't have that prepared. Doesn't make any difference. There's so many of us that are being inundated with private equity, merges in acquisitions people. They want a piece of what our family has built. So that's what we're going to talk about today. And before we get there and you share what you feel comfortable sharing with us, tell us a little bit about Panic precision throughout the years. Grandpa started it and that evolution. - Yeah, so we were founded in 1945 by my grandfather, Chester Panic. He was working at the Rock Island Arsenal during World War II. The war came to an end and he moved back to Chicago and ended up purchasing a machine shop as a little drill press shop on North Avenue. My father and I actually found the bill of sale maybe about seven, eight years ago from 1945 and he had purchased it for $5,000 around. And as we thought about it, he didn't have any money. So I don't know how he scrounged up $5,000, but he did. And that was actually a decent amount of money back in 1945. Back then, again, little drill press shop, probably twice the size of our conference room here. And it just grew from there. So I think his original customers were Western electric. was titled.
back then, but there were no CNC machines back then. I don't even think there were screw machines yet. And just over the over many years, it's grown and grown and grown into what it is today. So he was a machinist at the rock island arsenal. That I'm not sure of. I don't know. He had to have some skills. He was a craftsman for sure. For sure. So he moved back to Chicago. Correct. Identified this small little drill press machine shop that all they had was drill presses. I believe all it was just drill presses. Yep. And he bought it for five grand. About five grand. Is that machinery equipment? The whole thing. The whole thing. Yep. It was a, I don't even think it was an eight and a half by 11 sheet of paper. Probably like a little invoice receipt with carbon paper written in cursive, probably written in cursive. Maybe someone used a typewriter. Oh, that's so cool that you and your dad found that. We found that and yeah, probably again, twice the size of our conference. So 1945 take us through the years. So 1945, we've been in five buildings since so north Avenue. I forgot where the second building was, but then moved to Milwaukee Avenue, Milwaukee and Addison. I forgot what's the name of the hot dog stand over there. Gene and Jude's now. It was in the Wayne's World movie. Oh, I don't know. I can't think of the the name of it, but moved over there Milwaukee on Milwaukee Avenue. Then moved up to Northbrook, our first location where again, went from this little drill press shop to about 35,000 square feet. From the drill press shop. Drill press shop became like, let's call it eight to 10,000. Then the third shop on Milwaukee was probably somewhere in the 15 to 20,000 square foot range. Then moved to Northbrook. That was 35,000 square feet. The first building. 2005, we ran out of room again and ended up here where we're at on Academy Drive in 108,000 square feet. So it's been slow and steady growth over 80 years now. And tell about the niche in the industries that you served back then and how it's evolved to where you are today. Back in 1945 again, local customers, Western Electric, I've read with a phone company was back then too. And it's probably bell. There's some funny stories there, but that's really time. But 1963, we've never done automotive work. And my grandfather told my grandfather, he was probably 18, 19 years old at the time. He had me go out and sell. His father told them, that's fine, but whatever you do, don't get into automotive. So the first thing my dad did was he got into automotive and found a company downtown called the Cleveland Corporation. Was the old Maramon Corporation. They're involved in ride control suspension, things like that. Had awarded my dad a job and started doing little bushings and irings and things like that. And that became the start of our automotive trend of that side of the business. So then it was after market automotive in the 60s and the 80s who got involved in OE, automotive manufacturing, tier 1 type of stuff. They got involved with exhaust work in the 90s, larger automotive components in the 2000s. Then probably about 2005 or six fuel related components, more stainless steel type of work. And then 2015 got heavily involved in military. Okay. So we're still probably about 55% automotive, another 25 military and then bounces industrial. Obviously you weren't using CNC machines in 1963. So you were probably using all bridge ports, drill presses. There was no automation back then, you know, maybe a vice was probably automation back then. When did you start adopting CNC technology? So CNC would have been in the 1980s. And I remember this because I was a kid and my father is so excited about his first CNC. He would set them up himself originally. Right. So he'd bring me in on the weekends on Saturday on Sunday, just to show me how he was programming this machine. I didn't know the difference between mechanical and a CNC screw machine. Sure. Yeah. Screw machines probably went back to the 50s with him. Okay. So single spindle brown and sharp. Okay. That's what I want to hear driven. Okay. And then new Britain multiples, six spindle multiples back and probably the 60s is when they started purchasing those machines and lived off of the brown and sharps and the new Britons up until the 80s. And then CNC became prevalent. Brown and sharp had a CNC machine. So you could buy a single spindle CNC brown and sharp. And we still have about three left on our floor that we used. Yep. Still use it. I'm still using them. They're probably a workhorse. They're a workhorse. The mechanics are great. You can't find the electrical anymore. Yeah. I'm sure I think we're on like the last one or two boards left that we were able to scrounge up on eBay over the last 10 years. But they're still out there. But anyway, so CNC we bought our first laid, bought the first bridge port machine center in the 80s and that's obviously grown over the last 35 years. You have Swiss. You have turning. You have CNC machines, three X's, four X's and five X's. Multi spindle. So now that we understand the makeup of panic where it started, grandpa started the business. That's quite a story. I did not know that. How about you? Was manufacturing always in Brian's blood? I think I probably thought. In my father thought, it was always in my blood. I didn't start that way. Tell the quick story about how that went. The quick story is I was working here usually in the summer, both high school and college. And I want to say it was early in college. Again, I was working at the old building. And my father's biggest customer, a buyer of his, happened to be in town and started talking to me, hey, son, what are you going to do after after out of school? I said, well, I'm going to come work here. You look me straight in the eye. And he said, let me give you the best advice you've ever had. Because you go do something else for five years. He goes, I don't care who it's for, what it's for, go do something else. And that always stuck with me. And my father's staying next to him. I could see the look on his face like, are you nuts? He's going to come work with me. Ended up working and advertising for five years traveled around the US. It was for a direct marketing company. I knew it was for marketing. I didn't know the travel was involved in that. I traveled to Minneapolis. I traveled to Houston to Texas to New York City. That was all during 9/11. And got to meet a bunch of great people. And being an advertising, it's a whole different world of people. Oh, I'm sure. Oh, it's fast. It's fast. But even the dynamic, you've got us manufacturing folks. It's all mechanical. It's all oil and chips and everything else. You go in the advertising world. Well, now you're dealing with production people. You're dealing with artists. You're dealing with copywriters. You're dealing with people who came from completely different backgrounds. And it for sure grew me as a person. But then I also learned from people who knew nothing about manufacturing. The things I learned from them help me come into panic precision in 2004 and change things for the better. And so somehow marketing. Well, of course, we know how marketing can affect a business. It doesn't matter what industry it is. We take that knowledge of marketing that you've learned. You were educated in it too, right? Correct. And then you had real-world experience and you brought it back to the family business and you were able to implement that strategy, that knowledge, that skill set. Absolutely. And quite frankly, I think that's how you and I came to know each other and appreciate each other. You came from a marketing background. I had this passion for marketing. We were hanging in a circle of people through our technology manufacturing association. And we were like geeking out on marketing shit, right? Yeah, the manufacturers don't market enough. They don't market enough. Way too little. Way too little. I think the standard is 5 to 8% of your total annual revenue. And if you could find a manufacturer doing half that you're lucky, right? Right. So that's how Brian and I got to know each other. I think it was early 20, probably about 20. I think before that, probably 20 times. Yeah. Yeah. And we've been really good friends since then. We shared executive committee tasks. I guess you could call them along the way many times. And we've a passion for red wine. Well, I think our first interaction was young leaders. I was the old guy in the young leaders. The old guy that we kept pulling back like, well, he's kind of says he's older, but he's kind of cool. So let's bring him into with the young guys. And he likes to drink. And now I'm too old for young leaders. I know you are. Anyway, that's how we got to know each other. And it's been an absolute pleasure knowing you and growing with you. And this manufacturing journey, right? We've been through a lot. We've been through a hell of a lot. And it's not easy. If anyone says it's easy, they're fucking crazy. Here's the opening question. When did you? When did you and your dad finally say, yes, we're going to sell. And when you said that, what was the impetus behind saying yes? So I think we officially, we officially said yes sometime around 20 end of 2019 early 2020. That doesn't mean we weren't thinking about it before that, but the official, the official go was around around that time. As a benefit, we're always thinking about it, right? And you talk to a guy here and there, and then you know, you just, you just start networking with them a little bit. But there must have been a point when you said, dad or Greg said, Brian, let's go for it. Yeah, it was definitely that time frame. But like you said, as small business manifolds,
actually just small business owners in general. We've been getting bombarded for 25 years, 30 years, probably my dad and even before that for 50 years. You want to sell your business? I'll buy your business, but how serious those inquiries were? Who knows? We never took them that seriously. Right. But I think I think a lot has changed in the world over the last 25 years in the Merges and Acquisitions market where small business has become more highlighted, more prevalent in those transactions as the internet's probably changed some of that. Social media has probably changed some of that. And the more and more we were being inundated with phone calls and emails, it's like, hey, maybe we should take a look at this. Maybe this does make sense. There's a reason why they're asking, do they know something that we don't? Exactly what I said. I swear to God, that's exactly the words in my head. But who was leading the, was it your dad, fielding? All of these inquiries, was it you? Was it both of you? Were you strategic? Were you talking about it? Like, were you getting together at night over a glass of wine and saying, I just talked to this dude today from Manhattan, New York and he said this. No, that never happened. I think as I think back about it, I've got a lot of friends in private equity, ironically enough. And all my roommates in college, they're in private equity, they're in finance, they're attorneys, they're doctors. I'm like the lone wolf that went into this crazy industry called manufacturing. Like, what do you do? I do machining. But the hell is that mean? All right, you ever seen the movie Tommy Boy? Yes, I'm Tommy Boy. Holy schnikes. That's the big joke amongst all of us. And you talk to them more and more about the business and talk to the ones that are in private equity or in did a lot of them in A4 banks and things like that. You start to hear more from them. Hey, this is a serious thing. This is a serious industry. A company your size, we're starting to see more and more. Those are the types of companies that are selling in our attractive to whether it's private equity or other merger and acquisition type companies or someone looking for a strategic buy. Maybe you do want to get serious about a brine. And this probably goes back to 2010. One of my best friends, my roommate. He's been pretty big in that for a number of years. And start saying, Hey, there's pros and cons to doing it. I can walk you through both. But it might be something that makes sense for you and your dad. And that's that's slowly how it started. I didn't take it super seriously back in 2010. But the more conversations I would have right exactly friends started to drive it more and more that hey, Dad, maybe we should think about this. Yeah. You probably went well over the seven touch points. You know, before you before you said, Yes, correct. It was more like 70 probably. Yep. For sure. So you and your dad said, Yes, we're going to go down this path and you picked your roommate from college to take you through this process. At least give me some guidance on how and how this works. And he actually, he said, he goes, if you're ever going to do this, I've got the investment banker for you. Because I've known this guy forever. So it wasn't investment banker technically. It's investment banker, but it's a small company, another family owned company, investment banking company. And what I will tell you and I would tell the listeners is as a smaller business, it was the best decision we made as far as who we went with from the standpoint of we weren't just a number to them. The big banks have investment banking sides that will tell you, Hey, we can sell you. We'll get you the best value. But I felt like the group that we went with, they really, we were a big deal to them. They understood where we were coming from. They were they were small business, were a small business. They know what, you know, what was important to us and treated us like a high profile client. Whereas other conversations we had with larger investment bankers felt like we were a number. This is leading to so many questions. So did you have to get your numbers in line? And I know you know what I mean. And you don't have you don't have to go into the detail. But did you have to get your numbers in line? You've got to make sure that your numbers are buttoned up for sure. Okay. I figured that. I just I just want to make sure that was probably a learning process in itself. It was, but we were very fortunate. We did not have a CFO as part of our company until we sold really. My dad had the numbers in his head. I have the numbers in my head. But we had a top-notch accounting manager that we had hired back in 2011. Okay. She cleaned up all of our all of our internal books from the standpoint of now is in our system. We weren't going back and forth with our accounting firm all the time, you know, monthly and quarterly to reconcile certain things from an accounting perspective. She had all bundled up. So once we dove into the process, that was actually the least of the least of the amount of work that we had to do. Right. Because you were doing your accounting due diligence, you just needed to get the numbers that the private equity people wanted to look at, right? Correct. And how much do they really look down your nose? Oh, they look at everything. They look at everything. They look inside your ears. And for yet accounting, it's even beyond that. Once I don't know if we want to get into this part of the conversation yet. But once you get to a letter of intent or whatever, I forgot there's another name for it that once the company makes a bid. Once you get past that into due diligence, well, now it's accounting. Now it's it's safety. It's operations. It's customers. It's there's a laundry list of items that if they're a good private equity and a good company, they're going to look at because they're buying a company. They need they need assurances that what you're telling them is reliable and is truthful. And it goes beyond just the accounting. Even people, employees. What makes a third generation family own an operated machine shop attractive to one of these private equity firms? I can only speak from our own experience. But I think I think the consistent and steady growth of the company at that point over 75 years is one of the more attractive sides of it. Are there down years throughout 75 years, of course? There were times in the 80s or times in the 90s. That's why we used to have recessions. Now we haven't had a real recession in a long ass time, right? Right. Right. But it's that long term predictability of the company that I think is number one. It doesn't matter if it's private equity, if it's strategic by whatever, other types of buyers that are out there, they want to see that slowing industries industries for sure technologies that helps. Okay. Or newer equipment along that line reinvesting back in the company. Of course. You haven't just sat there for 25 years and relied on the same customer base, the same set of machinery. At that point in 2021, when we sold, there was eight years of heavy automation for us. Were you top heavy in automation? Did it represent a certain a higher percentage of your customer base that was probably good and or bad? I'm talking automation internally here. Oh, okay. Yeah. The robots and automation here for the internal operation. So over the course of eight years, we had gone from zero to 70 robots on our shop floor. Yeah, that's pretty impressive. You've been out there. It's been a long journey and process with the automation, but I think one of the more attractive things to potential buyers because they know that the customer base values that whether you're in automotive, you're in medical, you're in aerospace. The customer's definitely value on the automation side of your operation. But what about the industries? I think that's what I meant to ask just a minute ago was you said you were heavily into automotive and whatever percent it represented of your total annual revenue. Did they look at that as a positive or a negative? The diversity of the customer of the industry base and the customer base. Yeah, so within for sure. You can have 10 customers, but if they're all in aerospace, that might not be good. If that, those 10 customers represent 90% of your business, right? Correct. So diversity of customer and I think it's okay to be in a certain industry, heavily concentrated in a certain industry, but it's having a broad group of customers within that industry. Got it. You think of automotive, there's suspension, there's exhaust, there's transmission, fuel injection, and I know we can get into the whole EV, the whole EV thing too, which is kind of snapping back, but I don't necessarily think being in one industry is a negative, as long as you're diversified within that industry as well. If you like the content you're hearing, subscribe to the show, rate and review me, and by all means feel free to send me some feedback. My email address is
[email protected], and remember this mantra. A wise man once told me over and over again, "Jimmy, just push yourself." So I did, and I still do, and now I'm telling you exactly the same, whatever you're chasing in business and like, just push yourself, stay hungry, and stay driven because the only way to build the life you want is to go out there and make it happen. Thanks again for listening in my friends. I'm Jim Carr, and this is My True Position.
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