Culligan of Southern Minnesota is rapidly gaining ground in our region, snagging dealerships in 13 area towns and revitalizing the businesses as they go. The company is owned by fast friends Rich Johnson and Dave Cone of Fairmont. The pair went to high school together, and though they went their separate ways after graduation, they always stayed in touch.
With the launch of their joint Culligan venture in 2020, they realized a lifelong dream of pooling their resources and going into business together.
“The friendship is what started it, and it’s continued through this,” Dave Cone said. “Rich is realizing his dreams. I’m realizing my dreams. We have more dreams down the road, of course, that we’d like to see come to fruition. But we’re super excited about what we’ve accomplished. “
I sat down with Dave and Rich to see how their growing Culligan network is performing and to learn the strategies they used to fuel their rapid growth.
Could you provide a brief recap of your careers? Why did you decide to start a business together?
Rich: I’m a third-generation Culligan dealer. My grandfather started a dealership in 1949 in Fairmont and covered four counties in Southern Minnesota: Jackson, Martin, Faribault and Cottonwood. His two sons, my dad Richard Johnson and my uncle Tom Johnson, eventually took over, and they split the business. My dad took the Fairmont location. After college in 1992, I moved back to work with my dad and learn the business. Then in 1997, I bought him out, and he retired. So I’ve been 31 years in the business.
Dave: Rich and I’ve been friends our whole lives. My professional experience was in the corporate world, most recently as CEO of Kahler Automation. But I always had an interest in doing something on my own, having ownership and equity in something meaningful. That was my true passion. So over the years, Rich and I would meet, and we’d talk about opportunities. Rich always asked, “If we could buy some more dealerships someday, would you be interested?” And I’ve always said absolutely. I’m all in.
Years went by and I thought the likelihood of us doing something had past. Then in January of 2020, Rich called and said,” Hey, are you still interested?” The Mankato Culligan dealership group was potentially for sale. It included five locations: Mankato, Madelia, Redwood Falls and Jackson, plus a water bottling plant in Madelia. Its rare in this industry to have several local, well run dealerships available. So, it was a great opportunity. We made a run at it, and we ended up with this dealership network.
Rich: We took ownership on April 1, 2020. It was right when the pandemic hit. Literally, the day we bought it, they were shutting everything down. We looked at each other and thought, “What are we doing?” We’d just made a sigficicant investment.
Dave: We threw all the chips in. I knew if I didn’t do this, I’d be regretful and remorseful that I didn’t take the shot someday. So, we did it. We created a company called Healthy Water Solutions, LLC.
How’s it been going?
Rich: Three years ago, we had one location with six employees. Now we have 13 locations and 40 employees. After we purchased the Mankato dealership group, another opportunity came along to buy three more dealerships. I knew a fellow that was getting close to retirement. He called and said, “You guys interested in these?” So, we thought, why not? So, we ended up buying Marshall, Slayton and Tracy.
Dave: Next, we added Sleepy Eye and New Ulm in August of 2022, and we then purchased Luverne and Pipestone on November 1, 2022.
Rich: It’s been crazy how quickly it has grown. I knew one sale would lead to more opportunities because everybody is at retirement age. I knew them all, and I’ve always talked about buying them, but I never thought it would actually happen. You’ve got to grab them when they become available because they’re all contiguous to our territory. We definitely want to thank our lenders for all these opportunities. Chris Pierce and Andy Noll of First Farmers and Merchants Bank in Fairmont have been with us along our journey and are a huge part of us getting this all done.
Dave: That is huge. With inflation being what it is, its hard to keep up with our pricing so finding efficiencies is a must. But having contiguous territories as we do allows us to share resources and vehicles. That’s a big part of the “why” behind our acquisitions.
Can you explain the relationship between your various companies?
Dave: Our parent company is Culligan Water of Southern Minnesota, which encompasses three companies. Richie Water was the founding business within our organization, and Rich is its sole owner. We formed the second company, Healthy Water Solutions LLC, together when we purchased the Mankato dealership group and added New Ulm and Sleepy Eye into it, with the plan that I will eventually purchase Rich’s shares and be the sole owner. A third company, Prairie Water LLC, is also jointly owned by Rich and me and Suzy Dahlke which we plan to keep a joint venture.
Together our partnership includes Culligan franchises in 13 locations: Fairmont, Jackson, Luverne, Madelia, Mankato, Marshall, New Ulm, Pipestone, Redwood Falls, Slayton, Sleepy Eye, Tracy, and Windom. There is also the bottling plant in Madelia. It produces five-gallon jugs of filtered water, which are all returnable and reusable.
What products or services do you offer?
Rich: We rent, sell and service bottled water, water coolers, iron filters, water softenerss and reverse osmosis drinking systems. We’ll come out, test your water, and give you an idea of what it’s going to take to fix it; then, we’ll come back and install it. We pride ourselves on same-day or next-day service.
Dave: We’re unique in that we sell new equipment, rent new and used equipment, and refurbish equipment. Water softeners are our number one product both in units sold and revenue. We are fortunate as we are able to tout the fact that we have the most efficient softener in the world, using less salt and water than any other on the market today.
Rich: Currently, we have about 8,500 reoccurring revenue customers. Our company contracts a lot of recurring delivery/rental accounts. About 60 percent of our recurring business is residential; the remaining 40 percent are commercial customers.
Dave: Equipment sales are more focused on the residential side, with about 90 percent residential and a growing 10 percent being commercial business. We are creating a business plan around the commercial products we have available as we look to continue to provide best in class soluitons to commercial level customers. . There are many different industrial applications, each with specific water requirements. My background with Kahler Automation plays well in this space for us.
It sounds like your different skill sets complement each other well.
Dave: We make a great team. Richie’s got three generations of Culligan prowess and experience with dealership management, while I bring my corporate background. It’s a great relationship.
Rich: A lot of underlying things go into running a Culligan business: knowing the routes and the guys, dealing with the trucks and service and scheduling and day to day activity. I’ve been doing it for so long – I grew up in the business. As a kid, I helped on routes, painted tanks and cleaned floors. After I finished college, I came back to learn the business. I started as a service guy, then moved into sales, bought the business, and shifted into owner/management.
Dave: Rich understands the inner workings of the dealership business and how to keep it all together. I bring to the table higher-level experience as CEO and president at several companies. I contribute more to the visionary side of things.
How do you manage your rapid growth?
Dave: I brought the Entrepreneurial Operating System (EOS) system to our management team. I was introduced to the EOS model when I was at Kahler, and I saw its value. So, we brought that into our business right away. The problems of running a single dealership are more easily contained, however when you have multiple locations the issues quickly grow.. We’re at 40 employees now, with 20 trucks on the road every day, and all those problems become magnified. So EOS was a way for us to bring it back down to a manageable level and contain it. It really keeps all of the massive things in front of us while keeping the smaller, weekly “to do’s” in check as well.
We also created a strong leadership team that’s been instrumental in our success and in determining where we’re heading. Rich once again used previous connections and brought in Suzy Dahlke who he knew and worked with for many years. Suzy is in a vital role as our customer experience manager and given her 31 years of experience in Culligan dealerships, we are fortunate to have her. I was fortunate enough to bring in in Angie Dietz to be our general manager/controller. Angie and I had worked together for 20 plus years, so I knew her value. With a master’s degree in IT and accounting she was perfect for this key role. Rounding out the team is Heather Harris who works as operations manager with nearly 20 years experience in Culligan. The last acquisition we made happened in four weeks. It was two dealerships. The gentleman was ready to sell. So having the experience as a group allowed us to quickly get in, assess and sift through all the data, put an offer on the table, and close the deal in 3 to 4 weeks.
What changes have you made in the business since you acquired it?
Dave: The most significant changes have been in technology and equipment. Wonderful people owned the businesses we purchased, but they were nearing retirement, so technology and reinvesting wasn’t their focus. We updated trucks, computers, hand held technology software and GPS tracking, allowing quicker customer response times. ’Efficiency in our people has gone up significantly. Systems are working, and information is entered in real-time instead of written down manually and transferred later. Everything’s right in front of us.
Rich: We’ve also remodeled our buildings and had all the trucks wrapped as we wanted to continue to build our brands locally We want everything to look nice, to show that we’re a company that’s a going concern and we’re here to stay. It’s also good for our employees. They all have a nice vehicle and a nice office to work in. We even updated our company clothing.
Speaking of employees, what are you doing to attract and retain employees?
Dave: It’s hard to attract good help, and it’s hard to retain that good help once you have them. So, we talk about it regularly. We’re trying to be creative. We’re a very family-first organization. If one of our customer service reps says, “Hey, my daughter’s got a hockey game.” We’ll tell her: “Go to the hockey game!.” We do that without question, and we figure it out from there. We’re also doing profit-sharing across the businesses. We’ve introduced a 401K plan with an aggressive company match. Of course, we also offer paid holidays, and we’ve added to that breadbasket. We now offer paternity leave. With these key additions to our portfolio, we have had good fortune in hiring some great new employees.
Rich: We’ve also increased pay. Plus, someone on the management team travels to every location weekly. We always said we didn’t want to be one of those owners who don’t show up. It means a lot to employees that they are not left alone on an island. We’re happy to have some very long-term employees. Many of my people have been with me for 15 years or longer. One of my guys has been with me for 26 years. We want people to stay and work in our company for a long time and have some fun. So we always try to make sure it’s fun.
What makes a good Culligan employee?
Rich: We look at personality a lot. You’ve got to be able to talk to people because you’re in people’s homes. You’ve got to get along with them, and you’ve got to be very personable. ’
Dave:. We have honest, hard working employees with good values and ethics. Rich mentioned going into homes which we take very serouisly. We have keys to thousands of homes, and customers are not always home when we come in.
What do you love about your business?
Rich: I love my employees. I also love the ownership part of it. You control your own time and business- the harder you work, the more you’ll get out of it. I’ve loved being in the water business and growing the family business.
Dave: I love the fact that we’re dealing directly with customers. I used to sell through distribution networks. I was corporate, and my customers were two or three times removed. So, I love that we interact directly with our customers, whether residential, commercial, or even industrial.
Rich: I also love seeing the end result. Solving peoples’ water problems is huge. It’s fun to hear both commercial and residential customers say they love the water. You know you’ve taken care of the customer.
Dave: Our business has been wonderful and challenging at the same time. The best part is, it’s built on a foundation of family and friendship. We’re both family men, married with children. My wife of 26 years Karen has been super supportive, as well as my son Mathew, a junior in high school who has interest in the business, and my daughter Logyn who is 25 and creating her own brand and business. Rich and his wife Stephanie of 26 years have two boys , Jaxon, 19, and Jayden, 21. Both are at Augustana University this year. So family is a focus for us both. The kids help with the business sometimes, and we hope someday they’ll become a part of it, too.
Why do people need your services?
Rich: There’s lots of hard, rusty, bad-tasting water in our region. We have a lot of iron and a high degree of hardness.
Dave: We love being in the rural markets where agriculture is a significant part of the families we serve. However, this also creates the need for oversigh on the water we consume. Water in our area has been known to have arsenic, nitrates, and other potentially harmful minerals in it. We have lending institutions call us to say they can’t close on a home until we test and improve the water quality for their lender. That’s how serious this can be.
I think the pandemic opened people’s eyes to these things. They’re at home more because they’re working remotely. And they started asking themselves, “What am I putting in my body today? Is my water good for me?” Unexpectedly we had an uptick in business because of COVID. We saw a general increase in concern about the quality of the water that people consume.
And what makes Culligan water so popular?
Rich: Culligan Water is a name that everyone knows. Culligan Water is the name they think of if they want good quality water in their homes. Other companies may be good, but people know Culligan has great equipment, quality, service and corporate support behind us. If you’re going to buy something, you want to buy or rent from a company that’s been around a while and will continue to take care of you in the long run. We’ve seen so many companies come and go.
Dave: Culligan equipment doesn’t last just three or four years. Commonly we have equipment in service for more than 25 years with some in for more than 40 years. So these older units have been in play for decades with the help of the local Culligan dealership. That’s what we do, and that’s what the company was founded on. Culligan International is 87 years old this year largely due to the local service and support we offer.
Culligan Water of Southern MN
Address: 723 Front St, Mankato
Phone: (507) 388-2971