Volume 44 Number 1
Nailing It Down with Nelsen Corp.’s Dave Nelsen
The Nelsens of Norton, Ohio's Nelsen Corp., run their water treatment and pump and well supply firm fairly close to home. While doing business nationwide and internationally, salespeople rarely venture far afield from the company's Midwest base, relying largely on word-of-mouth to generate business and good service to keep it. Still, Dave Nelsen sees the tug of opportunity beyond Ohio's borders pulling at Nelsen Corp., even through the recession that's plagued the economy over the past year.
"We've been very fortunate this year," Nelsen said, even since a more severe downturn after the Sept. 11 terrorist attacks. "We thought that was really going to impact the year we were having. We wound up 28 percent ahead in September compared to September 2000. It was just an amazing thing… We've seen some very healthy growth and see 2002 as another growth year."
Since Nelsen joined the family business in 1986, it's quietly built up a customer list of 1,500 dealers, about 60 percent of those in the Midwest. It's also developed a product line of nearly 4,000 items -- keeping assembled units and a number of components in stock to serve other OEMs as well. He sees inventory control as key to a business' success. More personal contact is also important. As such, Bob Matthews -- an Alamo Water Refiners veteran -- was hired recently to refocus Nelsen Corp.'s sales effort to offer existing customers more and help dealers develop additional business in the commercial/industrial sector -- about 15 percent of sales.
The company has good roots. Founded by Dave's father, Ron, and grandfather, Emil Nelsen, in 1954, it began as Century Water Conditioning -- a retail pump and water softener dealer in North Royalton, Ohio, near Cleveland.
Launched from Emil's home, the business moved to a larger rented space two years later. In 1962, another business was started, The Camping Center, which sold camping and travel trailers. In 1964, both businesses moved to Broadview Heights, Ohio. Wholesale operations were later consolidated as Nelsen Pump & Supply and, as its sales overshadowed the other two businesses, they merged or were phased out.
In 1975, the company moved to its current site near Akron, Ohio. A division launched in 1988, Ground Water Supply, was later also folded back into the main business. The operation has grown from 6,000 to 50,000 square feet today. Work was begun in late October on an 11,000-square-foot addition.
In the transition, Nelsen Corp. evolved from a retail business working with end-users to wholesale working with water treatment dealers and well drillers exclusively. About 85 percent of its business is now water treatment equipment such as softeners, reverse osmosis systems and filters vs. 15 percent for well drilling supplies, pumps, tanks, etc.
"Fortunately, for the most part, we've promoted some of the best products available out in the industry. And then we stand behind those products. They're not always the best. We've had a couple vendors slip up here in the past five years, but we make sure our dealers are taken care of," Nelsen said.
Before getting to the interview itself, here are a few details on Nelsen Corp.:
Management: President, Ron Nelsen; vice president, Dave Nelsen; secretary-treasurer, Jeannette Nelsen; office manager, Kim Bell; warehouse manager, Jim Timms, and marketing manager, Ken Luna
Revenue: +$10 million, with growth averaging 20 percent a year
Vendors: Over 200, including Pentair, Fleck, Structural, Osmonics, Autotrol, Clack, Amtrol, AquAmerica, R-Can, Trojan Technologies, Stenner, Pulsafeeder and Flowmatic
And now for the interview:
WC&P: Why don't you start by giving our readers a little background on how Nelsen Corp. got started and what it took for it to get where it is today?
Nelsen: Our company was actually founded by my dad and my grandfather back in the mid-'50s. They previously before founding the company had worked for a pump and water conditioning dealer. Then, they went off on their own as dealers themselves. And later as submersible pumps sort of hit the market, they incorporated those into of course the work that they were doing. As time went on, they evolved from dealer/retail/wholesale to wholesale only. It took several years. The company has moved I think three times since the mid-'50s, essentially moving from a suburb in Cleveland to its present location outside of Akron. City water had quite a bit to do with that. So, as the suburbs of Cleveland began to get city water, there was a greater concentration of what was at that time pump dealers in the Akron area. As I mentioned, we evolved from a combination of retail and wholesale to wholesale only and I think the last time we'd done any retail business was probably about 15 years ago. At that time, it was strictly on a parts basis. So, today, we're strictly wholesale, which is a little unique as an OEM on the water treatment side of things, most of our competitors do have some sort of a retail side of their business. And most of them started as retailers that evolved into wholesalers and they've hung onto that in their local market. About 15 years ago, we serviced our local market with a couple salesmen. They would make their calls in the morning and they would service the area with their van.
WC&P: This is still on the retail side of things?
Nelsen: This is strictly on the wholesale side. It as, like I said, there was a little bit o parts business that was retail and I don't even think it accounted for 5 percent of our business. But as we started to build water conditioning equipment, we slowly evolved and expanded our markets to include surrounding states. And today, our primary market is here in the Midwest, but we're servicing dealers all over the country, portions of Canada, Alaska and a number of dealers overseas. Presently, we don't have, as a rule, sales staff on the road. We recently hired a sales manager who is out both calling on key dealers in the marketplace and he's also developing our internal salespeople. Today, to give you an idea of the mix in our business, I would say probably 80-85 percent of it is now water treatment with the remainder being the water systems side of things.
WC&P: Define the difference for me, if you could.
Nelsen: Well, water systems would include well drilling supplies, pumps, tanks and all the related equipment. And then on the water treatment side of things, we would have anything from residential softeners and filters to drinking water and commercial equipment.
WC&P: How much is the split between commercial and residential?
Nelsen: Within water treatment?
Nelsen: Oh, I'd say commercial probably makes up about 15 percent of our business?
WC&P: Are there niches that you've seen as particularly attractive for Nelsen Corp.?
Nelsen: In commercial?
Nelsen: No. We've talked about different niches we could pursue and that's probably where we'll focus our attention to reach the goals for growth that we've got for 2002-2003. We're working on defining those now and concentrating on them. Right now, that 15 percent of our business in commercial, I would think is done in a variety of niches. A little bit is in car wash, a little bit in schools or factories. Basically, as I said, we're only wholesale to the dealer, so it just depends on where that dealer of ours gets that particular job.
WC&P: Do you do any direct sales to corporations or other customers that are looking to work with a manufacturer directly?
Nelsen: We get a lot of inquiries from large corporations and so far we've tried to steer away from those and work through our dealerships. They're the ones best equipped to handle that type of business and service and installation.
WC&P: How many dealers do you have?
Nelsen: I would say it's probably somewhere around 1,500 active customers.
WC&P: Is it about a 20-80 percent split on the core of those in terms of moving product?
Nelsen: Sure. There certainly are 20 percent of that 1,500 makes up about 80 percent of our business. I think that's a fair comparison. I know they're commonly used percentages, but that's pretty accurate.
WC&P: When you mentioned how the company started, you'd said your father and grandfather previously worked for a pump and water conditioning dealer -- who was that dealer?
Nelsen: Oh, that's going back 50 years...
WC&P: Was it a local Culligan guy or Lindsay or ServiSoft dealer?
Nelsen: No, actually, I think it was an individual. It wasn't an affiliate of any sort. And I think he was more into the old working head pumps, jet pumps, a little bit of water conditioning work, but mostly what he did was water wells.
WC&P: It sounds like your company concentrated or concentrates more on well water supplies as well?
Nelsen: That's where the business was. Fifteen years ago, we were purchasing from Artesian out in western Ohio and we had a competitor start up here in Akron on the water conditioning side of things and really went at it hard. We had to make a decision as to whether we were going to allow them to take our business or we were going to get into it in a big way. Fortunately, we made a decision to get into it in a big way and they're no longer around. It was a good move and we've been very successful in the water treatment business.
WC&P: So, you guys have evolved from doing retail to doing wholesale -- what's all in your product line?
Nelsen: In our product line, we have almost 4,000 line items. The largest category would be something like residential water softeners, including Fleck and Autotrol control valves, Structural tanks and the various medias that go along with that, chemical feed pumps, UV equipment, retention tanks...
WC&P: Is it all assembly work that you're doing from components that you buy?
Nelsen: Yes. The water softeners and filters are all assembled here in our production department. We assemble ROs. We do offer one or two completed systems from different manufacturers in the industry, but primarily all the RO equipment that we do sell is built right here in our production department.
WC&P: How big a facility do you have?
Nelsen: Our present space is somewhere in the neighborhood of 50,000 square feet and we're putting up an 11,000 square foot addition right now. That work actually started about two weeks ago.
WC&P: What's the reason, just general growth?
Nelsen: Yes, we've been very fortunate this year. We've seen some very healthy growth and we're looking forward to 2002 as another growth year.
WC&P: What sort of growth have you guys seen recently?
Nelsen: We're running about 16 percent of last year.
WC&P: Wow, that's kind of funny because we've heard some people indicate that they've been down for the year or that it's fluctuated. The first few months of the year were down. And since Sept. 11, with the tragedies in New York and Washington, D.C., it's dropped off again. How has the economy treated you and what have you seen in the marketplace?
Nelsen: Well, when Sept. 11 hit, our phones stopped ringing and, basically, this country went into a state of shock. It was interesting because we come in and work hard every day, but that particular week, it didn't even bother me that things had dropped off. Like I said, I think I was in a state of shock along with the rest of the country. Things started to pick up again about a week to a week and a half later. We thought that was really going to impact the year we were having. We wound up 28 percent ahead in September compared to September 2000. It was just an amazing thing. I really attribute that to the fact that, as a company, we really do want to grow. I realize that sounds like a statement that just about any business could make, but I look at the OEMS and -- from what I hear from many of the vendors that call on us -- a lot of people would like to grow, but they don't really structure their businesses to achieve that goal. It's nice to want to do that, but your people still have to be compensated based on growth. They have to be led in such a way that they know that company is on that particular path. Our warehouse people, their bonuses are based on our monthly increases. In addition to that, we take a look on a regular basis at just about every aspect of our business to see if there might be a way to improve it, to cut costs, to deliver our products faster and do it more competitively. The other thing that I think we recognize and results in our growth is we attempt to do what is right for our dealers. That's one of our goals. That's not always profitable. And, once again, that's another statement that…
WC&P: In the short run, it may not be profitable, but…
Nelsen: Exactly. We, as a family owned company, don't have to answer to a group of stockholders that are looking at the numbers on a weekly or monthly or quarterly basis. We know that if we make a decision that's for the dealer that may cost us in the short run, one, it's the right thing to do and, two, it ends up being a profitable move in the future. So, there's a lot of reasons for our success. Now, as far as the economy is concerned, I personally had some reservations about doing a warehouse addition. It was a process that we started probably a year ago…
WC&P: Doing the planning for it?
Nelsen: Yes, the planning, beginning to work on the financing. We were really looking forward to things starting to improve economically last quarter of this year (2001). That probably won't happen now. The recovery may get pushed back to the end of the first quarter, beginning of the second quarter of 2002.
WC&P: I think it may be more likely to occur earlier than later because gasoline prices have fallen and indications are they will continue to over the next few months. In the same sense that it provided the initial stimulus for retraction in the economy, it may provide the reverse now. I just heard it had fallen to 97 cents a gallon in Atlanta.
Nelsen: You know the thing is we've grown during downturns before. They're haven't been a large number of them during the past 15 years.
WC&P: The industry is somewhat insulated just because of the perceived need for better water, correct?
Nelsen: I think so. I think that, while the media tends to hype different issues that send a bit of fear and panic into people's minds, there has been a slowdown. I know a number of people who have been laid off. If I know a few people, there are a lot of people out there that have been laid off. That's got to affect their purchasing habits. A lot of times with water conditioning, I don't know that they have a lot of choice as they would on some of the consumer products they may want to go out and buy, but… We've also figured that if we've weathered it and continued to grow on a monthly basis through November, then we're probably going to be OK. Our financial statements are very healthy.
WC&P: Let's talk a little bit about some of those numbers and then go into some things about maybe challenges you have faced over the years and how you may have overcome those. What are your finances? How big a company are you revenue-wise? You can speak to this in a number of ways if you're reluctant to give raw figures.
Nelsen: Well, I don't know that I want to give you specific numbers.
WC&P: You can give me some general numbers though, I imagine. You made this amount so many years ago and it's been such and such percentage growth since then, etc.?
Nelsen: I can tell you that about 12 or 13 years ago, we were between $900,000 and $1.1 million a year.
WC&P: Is this about the same time as you came on board with the company?
Nelsen: No, that was in 1986. We've seen on average about 20 percent growth per year since 1987-88. That should give you an idea.
WC&P: So, I take it that today you're at least better than $5 million or so.
Nelsen: It's actually much better than $10 million.
WC&P: And how many people do you have on staff?
Nelsen: About 30.
WC&P: As compared to -- considering that same time period -- 12 or 13 years ago?
Nelsen: Then it was probably eight.
WC&P: And how are the 30 people you have on staff split up as far as your set-up?
Nelsen: We have six salespeople. We'll be adding a seventh at the first of the year. One sales manager. Production department has about five people working in it. And then we have, of course, a counter salesman. The office staff is three or four. Shipping is another three. Then we have a warehouse manager. We also have a fellow that handles a lot of our marketing for us and our catalog internally; he also handles some of the purchasing. The balance of the folks are doing general assembly of components for stock, picking up orders… and that should about round it out.
WC&P: Who's the new sales manager that you just brought on?
Nelsen: His name is Bob Matthews. Bob actually was a dealer at one time, a customer of ours several years ago back in the late '80s, early '90s. And then he was hired by Alamo to work with them in their Greenville, Pa., branch. Later, he was promoted to run the Florida operation for Alamo. He was there until about June of this year (2001) and then we picked him up.
WC&P: There are a lot of good people out there with experience that have been moving around and helping different companies out in the industry.
Nelsen: There's no doubt about it. Business is about change. It's just a matter of taking advantage of the opportunities that come along and be willing to take those opportunities.
WC&P: What do you see Bob doing? It sounds like you're gearing up heavily with your dealer program?
Nelsen: As far as Bob is concerned, we've operated with internal salespeople for the past 10 years I guess. That is essentially attempting to cultivate new sales over the phone, trade shows, that sort of thing. We haven't had anybody on a regular basis out actually in the office of the dealer, toe to toe, and developing that business. Part of that will be Bob's responsibility, to get out there and see our larger accounts, to meet with potential accounts… He also brings an understanding of the industry into our company that some of our salespeople don't have. And the reason they don't have it is they haven't been necessarily out…
WC&P: …broadly exposed directly to different levels of the industry and the dealer network…
Nelsen: Yes, that isn't the only reason. When you sit here in the office and you just talk to dealers and maybe have been to only one trade show, it's a little difficult to maybe understand the scope of the industry. Bob's been with a major competitor. He's seen how they operate. He's been to the trade shows on a regular basis. He knows the vendors. And he also brings an ability to sell.
WC&P: Are there certain aspects that provide a rationale for hiring Bob at this particular point in terms of just competitiveness in the market? Has it picked up? Or are there other issues that might come into play as far as how the industry has changed?
Nelsen: No, not really. We've been looking for the right individual for probably 18 to 24 months. You're right. There are a lot of good people out there. It's a matter of finding somebody that would work well with our people. We didn't want somebody to come in kind of like a bull in a china shop and try to change things dramatically.
WC&P: Personality is extremely important to a good working environment. People don't give as much credit to that as they should at times.
Nelsen: We were in a situation where this was a new position for us. I've handled a lot of that myself. This was a new position where somebody from the outside was going to be coming in and one of the things brought to the table was his willingness to travel. We've got people here who do a great job day in and day out, but they're accustomed to doing that on a 7-to-5 or 8-to-5 schedule and being at home with their families at night. Bob's accustomed to that travel and accustomed to calling on dealers and developing those relationships. He's done a nice job of bringing the type of personality we've been looking for into the company.
WC&P: So, what's the goal there? Are you planning on solidifying the people you have and maybe offering them better service -- or expanding?
Nelsen: There are a certain number of dealers out there who the only way we're going to earn their business is to really be in their place of business, working with their salespeople. We knew that we were leaving quite a bit of that business on the table. So, that, Bob's going to at least be there to work with them on a consistent basis and, hopefully, turn more of that business our way.
WC&P: What percent of your business would you say is concentrated there in the Midwest?
Nelsen: I would say probably 60 percent.
WC&P: So, you've got a pretty good base outside of the Midwest.
WC&P: That's where I assume his travel will come into play mostly?
Nelsen: Yes. But even his travel around the state of Ohio and surrounding states here in the Midwest is going to be beneficial. We were rarely getting out as a company and as a sales team really beyond a 50-mile radius. So, it's not easy. You take an individual who's been selling over the phone and it's a different sales call to actually go out and walk into a dealership and work with those folks face to face. Bob's got quite a bit of experience as far as that's concerned.
WC&P: And he'll be working with your staff to help train them there also, I assume.
WC&P: Tell me how did you get into the business yourself? I know it's a family business, but what was your experience?
Nelsen: It was one of those things where the company had been around for so long. My father, my grandfather were involved. There were a lot of times on a Saturday, I'd be into the office with my dad when I was a kid. A lot of that time was spent back in the warehouse playing around with all the plastic pipe. And then, the way things used to be done -- at least on the water well side of things -- the vendor representatives, the sales reps that worked for the vendors, tended to stay at the companies for quite a while. And they actually became friends with the family. They came over for dinner. And it wasn't every time they made a call. But every six months or so, they'd come out to the house for dinner. You'd really get to know them. We attended the Ohio water well show back when my sister and I were kids and we'd run around the floor there and collect all the goodies. So, you know, the business has always been a part of my life. When I got out of college and made the decision to go to work on a full time basis, I'd already worked summers in college here and different places. Back in '86 is when I actually joined full time.
WC&P: Where'd you go to college?
Nelsen: Miami (University), outside of Cincinnati.
WC&P: The Redskins.
Nelsen: That's what they used to be called.
WC&P: What are they called now?
Nelsen: Redhawks. It wasn't politically correct to call them Redskins anymore.
WC&P: Well, I used to be a reporter at the newspaper in Richmond, Ind., which is about a half an hour away from Oxford, where Miami is. I had a roommate who went to school there. It's a nice school. What did you get your degree in?
Nelsen: I actually got my degree in marketing and had minors in international business and political science.
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