Podcast Summary

Podcast: Owned and Operated – A Plumbing, Electrical, and HVAC Business Growth Podcast
Episode: #247 LEGENDS | The $1.2B Contractor: How Kelso Built a Billion-Dollar Empire
Host: John Wilson
Guest: Steve Carroll, CEO of Kelso Industries
Date: October 2, 2025

Main Theme Overview

This episode features an in-depth conversation with Steve Carroll, the CEO and co-founder of Kelso Industries, who scaled the company from zero to $1.2 billion in revenue within five years by acquiring and building commercial, industrial, and institutional service companies in the mechanical, electrical, and plumbing (MEP) sector. The discussion is a masterclass on scaling through acquisition, the complexities of integrating large service organizations, leadership lessons, and Kelso's unique "flywheel" business model.

Key Discussion Points & Insights

1. The Genesis of Kelso Industries (00:51 – 08:00)

• Steve Carroll's Background: Started in construction management with a passion for the complex challenges of mechanical, electrical, and plumbing work (08:42).
• Founding Kelso: Officially launched in May 2021 with the first acquisition, after years of failed attempts and search-fund style efforts (07:09–07:59).
• Early Funding: Bootstrapped at first; later involved Steve’s childhood friend and now partner with private equity experience (08:00).

"It took me a few years of my own agony of messing up and spending dollars on trips and lawyers trying to get a deal done. And it wasn't until May of 2021 that we got our first one done." – Steve Carroll (07:15)

2. The Kelso "Flywheel" Business Model (01:41 – 04:46)

• Flywheel Concept: Entry via construction projects (new builds, data centers), then transition to retrofit/remodel, followed by establishing maintenance programs and ongoing service relationships across MEP trades.
• Market Focus: Core business is industrial (data centers, manufacturing), with significant institutional (hospitals, schools) and commercial (retail chains, restaurants) presence (05:12).
• Customer Scale: Focuses on large-scale clients (Amazon, Walmart, hospital chains), not small local businesses (04:15).

"What we're trying to do is we're trying to get an entry point with a customer. And construction is a good entry point... then we want to sell a maintenance program, and then we want to have a service opportunity. So we call it the flywheel." – Steve Carroll (01:53)

3. Acquisition and Integration Strategy (09:00 – 44:56)

• Acquisition Growth: 29 acquisitions in five years; targets robust, often stand-alone, platform companies, less focused on small "add-ons" (19:06, 45:30).
• First Acquisition Lessons: Started with a $17M commercial company after a failed attempt at acquiring a much smaller operation — learned the risks of small business deals (13:33).
• Deal Funding Evolution: Sought SBA loans initially, but ultimately partnered with Peterson Partners (PE) for major capital needs (17:29).
• "Partnership" Model: Many sellers/owners stay after acquisition with significant equity in Kelso. This approach fosters continuity in relationships, culture, and performance (41:14).

"It's just impossible to take over for an owner that's been there forever. And us being the new guys have it work out very well." – Steve Carroll (38:53)

• Integration Style: Purposefully light-touch; keeps acquired companies' operations, brands, and teams largely intact. Focus is on integrating only essentials like cash management, insurance, and bonding, to preserve relationships and momentum (43:03).
• Decentralization vs. Centralization: Believes strongly in empowered, decentralized teams. Corporate functions are focused mainly on things like cash management, insurance, HR support, and access to capital (30:44, 34:19).

"I do highly believe in empowered, decentralized teams." – Steve Carroll (31:08)

4. Organizational Structure and Leadership (20:42 – 26:56)

• Structure: Kelso is divided into five divisions (by geography and specialty), each with its own leadership and key functional support. Most locations are largely autonomous (25:04).
• Size: 3,500 employees, 30+ offices, $1.2B annual revenue.
• Growth Challenges: Communication, culture diffusion, and leadership development are ongoing challenges at scale. Steve emphasizes regular meetups, internal communication strategies, and the importance of local leadership (21:38, 24:19).

"I'm trying to learn every day about how to be a better leader... At this level, most of the people don't ever see me." – Steve Carroll (21:11)

5. Value Kelso Brings to Partner Companies (47:21 – 49:04)

• Cross-Selling: Leveraging the flywheel to expand service across the MEP trades for existing customers.
• Shared Resources: Improved insurance rates, access to large-scale bonding, ability to bid on larger projects, and career advancement for local teams.
• Corporate Support: "Slight improvements" rather than wholesale changes – preserving what works locally.

"...even $100 million business can benefit from being a part of a bigger balance sheet for winning big opportunities and bonding." – Steve Carroll (47:57)

6. Deal Structures: Partnership vs. PE Buyouts (75:25 – 80:29)

• Operator vs. Investor: Explains the difference between selling to a PE investor (likely highest price, but more hands-on oversight, especially if things go wrong) versus Kelso’s operator model (less upfront cash, but with equity in Kelso’s future and ongoing support).
• Pitch to Sellers: Kelso often isn’t the highest bidder but is more likely to close and offers ongoing role, partnership, and the opportunity to be part of a much larger vision (78:49).

"The other side of it, selling to an operator or partnering with an operator... you're betting on us that your rollover is going to turn into something special." – Steve Carroll (77:18)

7. The Scale and Nature of the MEP Market (69:46 – 74:33)

• Market Size: U.S. MEP market is $500 billion (2023), with Kelso entirely focused on non-union work.
• Data Centers & AI: Huge expansion in data center demand due to AI, requiring massive power and sophisticated cooling (72:03).

8. Steve Carroll’s Entrepreneurial & Corporate Journey (52:59 – 67:06)

• Roots on a Tree Farm: Instilled blue-collar values.
• Construction, Tech, Walmart: Experience in ground-level construction, then climbing to an executive role at Walmart, where he learned about scaling, systems, and the dangers of being at the mercy of massive platforms (59:45).
• Side Hustles: Ran digital marketing/affiliate efforts and learned valuable lessons in SEO, lead gen, and e-commerce, which translated to business-building skills at Kelso.

"I don't know if Kelso would even be here if I wasn't doing those other side hustles because getting email started, getting a website started... LinkedIn. Like, I spend a. I've spent a lot of effort over many years to build up my LinkedIn. And yeah, some of our best acquisitions came from building a relationship with someone because of LinkedIn." – Steve Carroll (66:18)

Notable Quotes & Memorable Moments

• On Reaching $1B in Revenue:
  "It's not. It feels goofy actually... that number is so crazy." – Steve Carroll (19:32)

• On the Partnership Model:
  "He doesn't think we're complete idiots. He thinks we're complete idiots at least enough to be partners with us." – Steve Carroll (41:14)

• On Challenges of Scale:
  "I've got all of the emotional war wounds of running out of money to make payroll next week or in like three days and realizing, oh, crap, I need to go sit in my customer's office to get that AR check today so I can make payroll." – Steve Carroll (82:44)

• Advice to Sellers:
  "If your goal is to make the most money today, you should probably sell to someone else. ...But I'm also going to offer what I know I can close on. ...You're betting on us." – Steve Carroll (78:18)

Important Timestamps

• 00:51 – 08:00: Kelso’s founding story, initial struggles, and partnership beginnings
• 01:41 – 04:46: Explanation of Kelso's Flywheel business model
• 19:20 – 20:37: Scale as of the episode: 29 acquisitions, $1.2B revenue, 3,500 employees
• 21:11 – 24:19: Steve’s leadership and approach to culture/communication
• 34:19 – 36:26: What functions get centralized versus decentralized
• 41:14 – 43:03: The first true “partnership” deal and its impact
• 45:30 – 47:21: Acquisition criteria: platforms vs. add-ons, size thresholds
• 47:57 – 49:04: How Kelso improves acquired companies
• 52:59 – 67:06: Steve’s career journey, side hustles, and building transferable skills
• 75:25 – 80:29: Advice for sellers, operator vs. investor partnerships, and acquisition dynamics
• 82:44 – 84:05: Real talk on survival and the emotional costs of rapid scaling

Closing & How to Connect

• Steve Carroll is active and responsive on LinkedIn and, more recently, on Twitter/X.
• For more on the flywheel concept, partnership opportunities, or to get in touch, search for Steve Carroll or Kelso Industries.

"If you just want to connect and ask for advice, usually try to respond and be helpful." – Steve Carroll (84:49)

For more information and future episodes:
Visit ownedandoperated.com.

Summary Takeaways

• Kelso’s radical growth was built through strategic, people-first acquisitions, strong decentralization, and a unique “flywheel” model tailored to commercial/industrial MEP contracting.
• Partnering with sellers and keeping them engaged post-acquisition proved to be a key accelerant for success.
• The company’s structure, balancing empowered local operators with limited but strategic corporate support, is highly differentiated versus most large aggregators.
• Steve’s career journey highlights the unique value of operational grit, digital marketing acumen, and adaptability—lessons relevant to any ambitious service business owner.

This is a must-listen episode for owners serious about scaling in the service industry, considering acquisition as a growth strategy, or curious about the business mechanics behind billion-dollar contracting empires.