#247 LEGENDS | The $1.2B Contractor: How Kelso Built a Billion-Dollar Empire

Over the last five years, Steve Carroll scaled Kelso Industries from zero to $1.1–$1.2B top line with 3,500+ employees across mechanical, electrical, and plumbing (MEP) — powered by 29 acquisitions and an “empowered, decentralized” operating model. In this wide-ranging conversation, Steve and John unpack the Kelso flywheel (construction ➜ retrofit ➜ maintenance ➜ service), how to choose what to centralize vs. decentralize, why leadership pipelines matter more than playbooks, and the realities of integrating owner-led companies at scale. We also dig into data center demand, non-union strategy, and the “survival mode” moments that nearly derailed the journey.

If you’re thinking about multi-location expansion, commercial/industrial MEP, or acquiring while operating, this one’s a blueprint.

What You’ll Learn
-The Kelso flywheel: use construction as an entry point, expand into retrofit, sell maintenance, earn lifetime service

-29 acquisitions without breaking culture: partnering with operators, light-touch integrations, and when to standardize

-Centralize vs. decentralize: cash & risk centralization; empower branches on P&L, customers, and ops

-Building leadership pipelines (trades & military) to keep growth from stalling

-Data centers & industrial demand: where the growth is and what capabilities matter
- How a billion-dollar platform still treats growth like survival

🎙️ Host

John Wilson 

🎙️ Guest

Steve Carroll (Kelso Industries) 

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Jack Carr, CEO of Rapid HVAC

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Chapters

• 1:42 The Kelso Flywheel Explained
• 7:04 Acquisition Strategies and Challenges
• 44:12 Strategic Partnerships and Acquisitions
• 52:48 Building a Career in Construction and Real Estate

Transcript

OAO EP 247 Transcript

Steve Carroll: [00:00:00] We're about 1.1, 1.2 billion. Top line. We just crossed. We just talked. Does that feel cool to say? Yeah. It's like, what am I even that's number's so crazy. So you've done 29 acquisitions. We thought that would be an easy thing to step into and boy were we wrong. But I do highly believe in empowered, decentralized teams.

We learned in that first one, it's just impossible to take over for an owner that's been there forever. I mean, the trade off seems to be less integration, just a lot. To improve upon when you're that big. 'cause it's never perfect. I've taken it very seriously that this is not just a job, this is survival.

John Wilson: Welcome back to Owned and Operated. I am your host, John Wilson. And today on the show I am joined by Steve Carroll. Over the last five years, Steve [00:01:00] has scaled Kelso Industries from zero to over a billion dollars in mechanical, electrical, and plumbing. Today's gonna be a wide ranging conversation as we talk about the journey that they went through and what it looks like to, thanks for tuning in.

Welcome to the show. Thanks for having me. 

Steve Carroll: Excited to be here. 

John Wilson: Yeah, I, I'm excited for this. I think we had, um, like you're our first, well largest guest on the show, so I don't know if you gotta give hats out or something, but that's pretty cool. Uh, but also like big mechanical, like we're talking some big stuff here, uh, which I think just think is really interesting.

I would love to hear a little bit more about what Kelso like tactically does on a day-to-day, and then we can dive through the story. 

Steve Carroll: Yeah. So we call it the Kelso flywheel. We don't shy away from construction. Okay. Again, this is all commercial and industrial type construction. Yeah. But what we're trying to do is we're trying to get an entry point with a customer, and construction [00:02:00] is a good entry point.

So we do new builds, we do data centers, we do all sorts of new opportunities that a lot of competitors shy away from, but we use that opportunity to get a relationship to do the retrofit work. Yes. The remodel work. And then we want to sell a maintenance program, and then we want to have a, a service opportunity.

So we call it the flywheel. Yeah. So this thing. Feeds itself as we serve the client, whether it's a mechanical need, an electrical need, or a plumbing need. 

John Wilson: So, okay, we just did a show with a security and alarm business and it sounded almost like the same thing. 

Mm-hmm. 

Which I, that makes a lot of sense.

Yeah. So, so what they're doing is they're going in, they might do bid, which sounds like you might be doing some bid stuff. Yeah, yeah. You have to usually, yeah. To some degree. So, so they're, and it's the same, it's three things. So it's, they're gonna [00:03:00] do, uh, build projects, they're gonna do service work on those build projects, and then they're gonna do monitored services.

Mm-hmm. So, yeah, really, really similar. 

Steve Carroll: Very similar, yeah. So like 

John Wilson: a land then expand type? Yeah. Okay. 

Steve Carroll: The, the flywheel, you can enter a client at any point. Yeah. You can make a relationship with a client. Selling a maintenance program to them. 

Speaker 3: Yeah. 

Steve Carroll: And then they may need you later on to go expand or retrofit or we, we just want to have a relationship where the client depends on us.

Yes. 'cause we do such an amazing job and we want to be their client for 20 years. 

Speaker 3: Yeah. 

John Wilson: Everyone knows leads are tough to come by, but what if they weren't service? Scalers is the no BS marketing team for contractors and they're running S-E-O-P-P-C, LSAs and Google My business campaigns that actually bring in customers, not just clicks.

They've delivered consistent leads for me, tied to real revenue. And they can do the same for you. Sign a 12 month contract and your first month is free. Click the link below to get started. Service [00:04:00] killers, no bs, just leaves. Who's a, what's an average client? Is this like Walmart? I know you had some like a, some time in your career spent there.

Is it Walmart building new stores? Is it Amazon centers or is it like local florist? 

Steve Carroll: So we, we, it's hard for the local, small company to make sense for us to spend a lot of time into it. So it does end up being hospital chains, universities, Amazon. 

Speaker 3: Yeah. 

Steve Carroll: For all types of things with Amazon, Walmart. Um, but we're also, we're also using an acquisition strategy, and so a lot of our companies that we focus on have relationships.

Speaker 3: Yeah. 

Steve Carroll: And so because we've done so many acquisitions, we have many different types and kinds of relationships and we, we bucket those into three buckets. Our industrial side of our [00:05:00] business is our biggest side of our business. Yeah. We, we include data centers and manufacturing. Mm-hmm. And food and beverage, uh, Lego.

Type of stuff. Lego manufacturing, that kind of stuff is, is in there. Like pure 

John Wilson: aside, that would be fun to visit. 

Steve Carroll: Yeah. I like, like, I 

John Wilson: feel like that'd be fun to visit. 

Steve Carroll: The first US Lego manufacturing plant is coming up very soon. We're doing the mechanical for it. That's amazing. We're excited about that.

Yeah, so that's the industrial side of our business. The institutional side of our business is, that's hospitals, schools really anything that government or there's, you know, some, some sort of municipal element to it. Schools, we, we want to have a nice chunk of our business there. Yeah. Then the other side is a little more commercial in, in the sense that it's, it's not funded by a government and it's not some complex manufacturing plant.

It's [00:06:00] restaurants. We would do a florist, you know, we, we would do a, we would do 

John Wilson: like, you're focusing on the big, I think that's what I was trying to like, get there, because so many of our people that we have on the show are like, like me or like, uh, you know, like, hey, I'm a small either local or midsize local contractor.

So my idea of commercial might be an apartment complex, but yeah, like we're talking about data centers. We're talking about Amazon distribution hospitals, like this is some big stuff. 

Steve Carroll: Yeah. We, we also do fair amount of apartment complexes too. It's just, uh, we don't want to overt index on our, the, the pie of Yeah.

The market that we serve. We want to be more, like, we think of ourselves a little more like an s and p 500 

Speaker 4: mm-hmm. 

Steve Carroll: Or a, a mutual fund almost, where Kelso has all aspects of the market in geographies and customer end markets that we're serving. And as one gets bigger, we work on growing the other part. So it doesn't [00:07:00] ever get out of weight.

Yeah. We're outta balance. 

John Wilson: Yeah. Okay. That makes sense. 

Steve Carroll: Yeah. 

John Wilson: So Kelso, you guys started five years ago? 2021. 

Steve Carroll: We, we officially started the company May of 2021 with our first acquisition. Okay. But I also like to point out, it took me a few years of my own, uh, 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. Yeah. That we got our first one done. So to me it feels much, much longer. 

John Wilson: Yeah. Was this like search fund or were you like, was it raised from the beginning or how, how did this look? Personal, personal search fund. Oh yeah. Okay. So this was search fund turned really big. 

Steve Carroll: Yeah, yeah, yeah.

What we weren't That's amazing. Weren't funded by anyone. Yeah. It was, you know, our own dollars, my own dollars, and trying to convince my now partner, he is our chairman, [00:08:00] who we grew up together. I took me a number of years to convince him to come do this as well, but he's really the brains behind the capital of our journey because he's, he's spent his career in private equity and so we, we benefited from him, but just more him down.

Took me a long time to get him to Yeah. Get excited about it. 

John Wilson: Yeah. Yeah. So can you walk me through, it's obviously a different strategy than what most people are thinking, right? Yeah. So most people over the past couple years have been heavily acquiring. These residential service companies mm-hmm. What you're doing is different.

Yeah. I, I would love to hear like, what's the thesis? Yeah, 

Steve Carroll: yeah. Uh, today the thesis is a little different than if we were to honestly go back. Mm-hmm. Um, but my, my background, I, I got a degree in construction management. I was going into civil and then I, I wanted to do real estate development, so I got into [00:09:00] commercial.

Yeah. And I was on site processing RFIs and change orders and submittals. And I, I learned, what I was really passionate about was the more complex elements of these projects. Yeah. And that's where, what pulled us into doing mechanical, electrical, and plumbing. Because that to me was just, I, I loved it so much.

Every job I did, whether it was a university or whatever, I, I just, that's where I got excited. And so when the, the strategy was coming together for Kelso, I, I, I pitched everyone, my partner included, on doing hvac. But I, I, I also really made it clear to them, I didn't wanna just do hvac. Yeah. I wanted to do mechanical, electrical, plumbing.

'cause I knew clients, general contractors sometimes, but, and clients wanna make one phone call. 

Yeah. 

They, they don't want to, they don't wanna manage three [00:10:00] or four or five different trades. Every time you retrofit a cooling tower or a chiller or an MEP system, you, it'd be awesome to call one client. And so.

I lived that in my previous life and I wanted to bring that to life here. So that, that was the emphasis when we started. And one, one of the reasons why we called it Kelso Industries. 

Speaker 3: Yeah. We 

Steve Carroll: didn't call it Kelso HVAC Mechanical Yeah. Or Kelso Mechanical. And there was a little bit of pressure early on.

Yeah. So like, why are we calling it industries? We need to be specific. And I was like, no. 

Speaker 3: Yeah. It's 

Steve Carroll: gonna be MEP, we're gonna get there and it's gonna take a little while. 

Speaker 4: Mm-hmm. 

Steve Carroll: But we, we had that, that sliver of a hope that we would get there. And we, we, you can't find MEP businesses to buy very often unless they're huge.

There's very few small MEP on the commercial side business. Like just at all. Or for sale or just, they're not out there. It's just [00:11:00] very rare for a mechanical, electrical, plumbing operation to even exist. Yeah. Inside of the same walls, of the same brand. 

John Wilson: Okay. 

Steve Carroll: So I knew there's, I feel like 

John Wilson: that tracks, there's a huge local one K company.

Do you ever go against them? No. I, I haven't even heard of 'em. I think they're $200 million. Like Yeah, it's, they're crazy. And I think they cover like the east coast. Yeah. It's, it's wild. 

Steve Carroll: It, it is wild. And, but they're pure 

John Wilson: hvac, 

Steve Carroll: like all they do is hvac. Okay. They don't do plumbing or electrical. No. Yeah. I mean, it, it's, it's hard to do that.

Yeah. And so our strategy is to, I call beachhead. We, we go into a market, we start with one of the meps and then we look for a partner. We, these are partnerships. Mm-hmm. Uh, so we look for a partner that this person would wanna work with to start offering meps. And we look to bring them into Kelso. [00:12:00] And then we, we build around that over time.

John Wilson: Can you explain the partnership dynamic a little bit? Is that like we acquire them? 

Steve Carroll: It it is, but I'll, I'll, I'll clarify because when we started the first acquisition we did, the owner, the husband and wife. Mm-hmm. They sold to us on May 28th, 2021. Yeah. And within two weeks they were gone. Yeah. And some, they, they, they, it just wasn't going to be a fit for them.

And they, they were upfront with us. We knew it was happening and we thought, oh, this, this is, this is okay. I'll step in to do operations. Yeah. Yeah. I'm literally counting diffusers and taking off lineal feed of duct work and estimating. And my partner, he was managing the cash in the accounting side of the business.

Yeah. We thought that would be an easy thing to step into. And boy, were we [00:13:00] wrong? Uh, I mean, we could go on and on about what we 

John Wilson: Yeah. 

Steve Carroll: Did or thought. 

John Wilson: How big was that first 

Steve Carroll: one? 17, 18 million? 

John Wilson: Yeah. 

Steve Carroll: Top line. All commercial. Big, big operation. We, there's so much to talk about here, but we, we, we started there, but that's not where we actually thought we would start.

Speaker 3: Yeah. 

Steve Carroll: We, we had a num another business that we were gonna close on, much smaller and so many things didn't work out. We ended up not being able to close on that business. Yeah. Mostly because when it's that small, any one or two things go wrong in the business and it Yeah. Dramatically tanks. Yeah. How, how, what house?

That first one was like 900 grand. Revenue. Oh yeah. That My thought was tight. 

John Wilson: That is tight. 

Steve Carroll: My thought was, I'll start with something small. Yeah. And I I, I've seen that before with people in our industry that think totally I'll [00:14:00] just start small and I'll do it on the side. 

Speaker 4: Mm-hmm. 

Steve Carroll: And man, that's how you can get into trouble.

'cause someone starts doing something different. Yeah. Anything different, you know? Yeah. Maybe not working as hard 'cause you're not paying attention. You know, things, things can go haywire. And that one did and we didn't close on it, but it was very, very close. Yeah. So we, we swung all the way to the other angle of what we could do with an SBA loan.

And this business fit within the box 

John Wilson: of an SBA loan. So you bought, like, this is kinda wild. So you bought this with an SBA loan. I should introduce you. Uh, there's a guy named Logan Leslie. He's not an industry. Good, good friend of mine and his story, it reminds me of this a little bit. Okay. Where like, he was, he just, a guy went and raised like, well, sorry.

He, he like went and bought his first one with an SBA loan. Four years [00:15:00] later he's bought like 130 and it's main street. Oh my goodness. Auto business, like auto repairs. Like, wow, I have a oil change, or Oh my gosh. Wild. That's amazing. It's good. It's well done. But like it started with the SBA. Yeah. Which is like, kind of a crazy way to start What this turned into 

Steve Carroll: it.

It is. And I, and I and, uh, for good or were bad or good or whatever, it's, it ended up not being with an SBA loan. 

Speaker 3: Yeah. Yeah. 

Steve Carroll: But that's what we had spent a few years working on. Sure. And we were gonna, we were gonna buy something. 

Speaker 3: Yeah. 

Steve Carroll: And when it's, when it's that small investor, it's hard to raise money.

Speaker 3: Yeah, when 

Steve Carroll: it's, when it's a, you know, that first one, especially the 900 grand, like if we couldn't fund it ourselves, right? Yeah. We raise, 

Speaker 3: yeah. Yeah. 

Steve Carroll: An SBA loan is really convenient for those type of circumstances. And so that's the way he, we had been going, we found this business in Phoenix and [00:16:00] it was, it fit the box and all the way through diligence and we're, again, we're not very smart with this stuff.

They told us working capital was this much. Yeah. You know, for the audience that can't see a small number. Yeah. And then when we got into it, we realized, oh crap, this is literally 10 times what they said we needed for working capital. 

Speaker 3: Yeah. 

Steve Carroll: And this is part of why doing deals are is so dang hard. Oh yeah.

There's the price and then the working capital and. That made the deal too expensive. Mm-hmm. We, we didn't have enough money to buy this with an SBA loan now. Yeah. Not, not just with an SBA loan. 

Speaker 3: Yeah. 

Steve Carroll: And so we, we, after we had spent tens of thousands of dollars, I mean, flying to Phoenix Yeah. Constantly, and lawyers [00:17:00] and accountants.

And we, my business partner and I, we had, we were up, up, up on a wall of, oh man, we have this thing in LOI, they're expecting us to close 

Speaker 3: Yeah. 

Steve Carroll: In like a couple of weeks. 

Speaker 3: Yeah. 

Steve Carroll: And we had put everything into it, I mean, a lot. And so that, that's when we realized, oh crap, we need to do something different. So that's where my partner's relationships turned out to be really hugely beneficial.

Yeah. And we were able to convince a. PE group outta Salt Lake City called Peterson Partners. Okay. To back us. Yeah. And they, they've been amazing. They're still our partners. So they came in on the first deal. They did. 

John Wilson: Yeah. 

Steve Carroll: Yeah. 

John Wilson: Yeah. That's interesting. Yeah. 

Steve Carroll: We got, we got extremely lucky. And 

John Wilson: still the same partner.

Steve Carroll: Yeah. 

John Wilson: Okay. 

Steve Carroll: Yeah. 

John Wilson: Yeah. That's amazing. Yeah. Do you think, I mean, the answers has to be no, but like, [00:18:00] I gotta ask, do you think you could have gotten anywhere near the scope without that backing? No. I, I don't know how you could've, no way. Yeah. I mean, this is amazing. We, we've, 

Steve Carroll: I gotta give my partner a lot of credit too.

We, we were together over the last couple days here in the area. Um, we were kind of reminiscing as we were going in between meetings and I, I had to give him some kudos. Yeah. Because there were so many moments where. Along this journey where, oh my gosh, if we didn't have a growth mindset from a capital standpoint and a ton of elbow grease knocking on doors, you know, constantly pitching why someone should partner with us, we would've been stuck so many times.

John Wilson: Oh yeah. 

Steve Carroll: And it's, it capital's hard. It's a hard part of the journey. Yeah, 

John Wilson: it is. Yeah, it is. Yeah. 

Steve Carroll: So, yeah, no, a hundred percent without the capital, I mean, we've, [00:19:00] we've raised a lot of capital at this point. Yeah. Debt and equity to keep going. 

Speaker 4: Mm-hmm. 

John Wilson: And I mean, you've done, you know, my notes say 28, but since then you've closed another, so you've done 29 acquisitions and Yeah, that's a lot.

And like big, like today, we, we talked a little bit about origin, but like what is Kelso today? 

Steve Carroll: Yeah. In, in like revenue, size, revenue, 

John Wilson: headcount. Yeah. 

Steve Carroll: Yeah. We're, we're about 1.1, 1.2 billion. Top line we just crossed. That's great. We just, does that feel cool to say it's it feels goofy actually. Yeah. It's like, what am I even that's number's so crazy.

Um, but we did just cross that on like a 12 month trailing 12 months basis. Yeah. A couple of months ago. Yeah. Really, really excited that we got there. I'm really excited because I've been telling my partners for a few years that we'd get there and they would usually laugh. Yeah. They'd be like, haha. Yeah.

Steve, maybe. Maybe. But we, we did, we [00:20:00] got, there we're 1.1, 1.2. We're, uh, we're about 3,500 employees. Mm-hmm. With, with, uh, the companies that we have. And, um, yeah, the flywheel is, is real for us. Um, mechanical, electrical, plumbing. Mm-hmm. We, we, like, we love to cross sell 'cause a lot of companies focus on a part of the flywheel and just because someone only does service or only some, someone only does construction, doesn't mean they can't serve a customer.

Yeah. In the flywheel. And that's where the partnership gets really special 

Speaker 3: Yeah. 

Steve Carroll: Is they can bring another kelso partner to the table to serve a customer. 

John Wilson: When you, I'm, I'm trying to visualize in my life, going from maybe not zero, like you've led teams, like you were doing big stuff 

Speaker 4: mm-hmm. Uh, 

John Wilson: in, in a previous life, but going from like zero to 3,500 employees in five years, [00:21:00] I don't, I don't even know, like, what does that look like As a personal development, a professional development, how do you brace yourself for impact?

Steve Carroll: It's, I'm, I'm trying to learn every day Yeah. About how to be a better leader. Um, there's so many things that I'm not good at and I, I, I know I need to work on. Um, one of those things is I communicate pretty well with enough of our team, but at, at this level, most of the people don't ever see me. Most of our teammates don't see me enough.

Yeah. 

John Wilson: I mean, you probably worked with like six people. 

Steve Carroll: Yeah. I mean, yes. And, and people at our corporate office. I see. I, I try to pop into our companies every now and then, so, you know, that stuff helps. But there's certainly a lot of areas to improve when you're highly distributed like this. We have over 30 offices all over.

Yeah. And [00:22:00] one of the areas I'm excited to improve on is to bring more communication deeper into the organization. Yeah. And show them I'm excited for what they're doing. And that I, I don't speak to them enough, but I care about what they're doing. 

Speaker 3: Yeah. 

Steve Carroll: And so there, there is areas for improvement. I'm willing to admit.

We got, we've grown so fast, we don't have a good internal way to do that. 

Speaker 3: Yeah. 

Steve Carroll: LinkedIn is one of the ways I do that. Yeah. Um, I try to be pretty active on there. We've got about a third of our workforce force on LinkedIn. Mm-hmm. Or at least connected mm-hmm. To us somehow through our companies or through me.

And, um, yeah, just a lot to improve upon when you're that big. 'cause it's, it's never perfect, it feels like. Yeah. 

John Wilson: Yeah. That'd be a lot. And that's a complicated problem. I mean, he, um, we, Chad, uh, Peterman from Peterman Brothers started a podcast and it was an internal podcast. [00:23:00] He, he later ended up publishing, uh, live, but the, that was his original goal.

I think there are 10 or 12 locations now, and it was the same thing. They're distributed. I see these guys once a month. How do we still spread culture? How do we talk about what I'm doing? How do we talk about like, Jimmy's amazing Five Star review? How do we still do the small but really important stuff?

Spot on. 

Steve Carroll: I, I love the podcast idea. We we're exploring a few other mediums. What's also pretty cool is some of our companies have already got. Mechanisms where they, they do it within their company already. Yeah. And so most of the companies have some sort of connection already, at least to their, 

John Wilson: which is probably what matters the most.

Yeah. I would imagine like the people you see every day eye to eye. 

Steve Carroll: I, I would agree. I want our teams in the field to know they're part of a [00:24:00] local organization that cares about them. Yeah. I care about them deeply, but I don't get a chance to see them all the time. Yeah. So the leadership in whatever local organization or opco, it really matters to me that that person takes this seriously as well.

Speaker 3: Yeah. 

Steve Carroll: And I get to see them more. Like we're all gonna be together next week. 50 or 60 people from around the company are flying in that all run p and Ls and are. Local leadership. Yeah. And we're building that culture. Yeah. Twice a year, see each other at least four times a year for various things. But this meeting is a real culture.

We focus on culture there so they can go back and at least impart some of the care that we have for them through them as the leader that's locally 

John Wilson: there. Yeah. Can you like, walk me through a little bit of the org structure? So there's 30 locations. 

Steve Carroll: Mm-hmm. 

John Wilson: Each one has a branch president [00:25:00] or branch GM or something.

What, what's the smallest location? What's the biggest? 

Steve Carroll: It's a range. Uh, we we're, we're, we've combined kind of some of the smaller ones. So really when you look at the small ones that are like 15 million roughly. Yeah. Our biggest ones in the high two hundreds. Yeah. So there's range. Yeah. It's big. But what we've done is.

We've created divisions, so we have five divisions. We have a west division, a northeast division, a southeast division, an industrial division, and a service organization, service organizations, national industrials, national. Those other three are regions of the US and so we have leadership in those divisions as well as key team members for those divisions as well.

Yeah. HR leader, recruiting, finance, safety in, in each [00:26:00] service for each division. 

John Wilson: Oh, okay. 

Steve Carroll: And these are 

John Wilson: like regionalized de department? Yeah. 

Steve Carroll: The, for the three that are regionalized, they're, they're, um, they're regionalized. The other two that are national have kind of a customer focus. Yeah. And industrial customer focus.

There's a HR leader for that. There's a finance leader for that. There's. Couple operations leaders, there's a leader and a, you know, a vp. And so we, we've developed a, um, a part we, we've sized part of our business. So they're all roughly the same size. 

Speaker 3: Yeah. 

Steve Carroll: And they all can, um, 

John Wilson: like they each have roughly the same headcount, like total reporting?

Is that what you meant? Roughly. 

Steve Carroll: Okay. Roughly, yeah. It's hard to revenue and profitability and everything like that. So the leaders that run those divisions are running a sizable business with the local leaders Yeah. That are boots on the ground? Yes. 

John Wilson: [00:27:00] Okay. 

Steve Carroll: And we, we think that's. That's relatively new for us.

Not that long ago, it was me and my partner. Yeah. I mean, I'm, I'm 

John Wilson: everywhere. I'm, I'm like listening to what you're saying and I'm like, the org, the amount of changes you must have made in like a five year period to nail down org structure and still a moving target 'cause you're still acquiring companies.

But 

Speaker 3: yeah, 

John Wilson: it'd be a lot. I mean, I just think about what we've done in a one location, you know, not that big business and we've gone through a lot. I, you know, I'm trying to envision that it's over 30 

Steve Carroll: locations. It's, it's super interesting because when we started, I was the president, CEO of one Opco. 

Speaker 3: Yeah.

Steve Carroll: And that, that the one, the first one in Arizona. 

Speaker 3: Okay. 

Steve Carroll: That, that was my job was to survive. Yeah. Yeah. Collecting payments from customers, getting bids, hire fires, hiring, firing, and, and that business when we bought it, didn't even have a website. 

Speaker 3: Okay. [00:28:00] 

Steve Carroll: So we, we've learned, we've, we've had to evolve constantly.

Yeah. I mean, I, I came from Walmart. I was an, an executive at Walmart before I came over to this job. Yeah. And it was, it was a culture shock because I got used to the big company benefits. Post a job, you get 1,000, 200 people applying for that job. 

John Wilson: Yeah. 

Steve Carroll: Come to this little opco with no website. Yeah. No social media presence.

Nobody hardly knows who they are, but they still do 17 million per year of revenue. 

Speaker 3: Yeah. 

Steve Carroll: And I would post a job for a project manager and no one would apply. Yeah. Literally no one would apply. I remember, I remember getting a guy to, to, I talked to him on the phone mm-hmm. And he was gonna come in, I was gonna interview him, he was gonna come in.

And I remember sitting in the lobby for an hour after the time that he said he was gonna be there thinking, oh, he's gonna show up. [00:29:00] He's gonna show up. Never showed up, literally multiple times this happened to me. So there, there was a lot of learnings when you talk about org. I mean, that, that was like my challenge not that long ago.

Speaker 3: Yeah. 

Steve Carroll: To now what we're, what we're dealing with. It's just totally different. Yeah. Environment. Do you think this is easier for me? 

John Wilson: Yeah. 

Steve Carroll: Way easier. Yeah. A million times easier. Yeah. 

John Wilson: Yeah. I would, I, I would imagine so. So we're getting ready to go multi-location and likely multi-state will be our first like, new location.

So like, as I'm thinking about. I, I'm, I'm thinking about the next six months of my life and I'm, you know, I'm thinking about the last five years of yours and how I think about org structure. Like what should I be doing every day? I'm not as in the weeds as you were, but like, not long ago, like three years ago you probably were Yeah, yeah, totally.

At some point, yeah. In [00:30:00] 2022 I was helping pick up the phone 'cause we accidentally turned over our whole call center, like, you know. Yeah. So you do what you have to do, you do what you gotta do. Uh, but yeah, I'm, I'm thinking about that and I'm thinking about all of the decisions that you've probably gone through, like what should be centralized, what should be decentralized, and what I seem to have landed on in theory, but obviously I haven't executed on anything, is like centralize almost nothing.

Like, 'cause if I, the more I centralize, the harder my life is gonna be because then I have to. Frankly do more versus like, people wanna know, they wanna be eye to eye with their, the people in their branch that, like, that's who matters to them. Like, I don't matter to them in Cleveland. If somebody else is in Pittsburgh, like nobody gives a shit about John.

Right. Yeah. And they shouldn't, they shouldn't give a shit about me. Yeah. Like, I'm not in their life very much. Right, right. 

Steve Carroll: Yeah. It's, it's a difficult thing to say what, what it should be. Yeah. For you guys or, or even for us. 'cause it, it's a moving target a little [00:31:00] bit. Yeah. But I do highly believe in empowered, decentralized teams.

Speaker 3: Yeah. 

Steve Carroll: To a degree they should have autonomy to make certain decisions. Yeah. They should have autonomy to, you know, drive the p and l. Yeah. And are there things that that person wants to do? And are there things that that person doesn't wanna do? And I think the decisions of what. Corporate does is is gonna be unique for each Yeah.

Individual in each company. But I think generally speaking, the person that's gonna drive the best p and l for you doesn't wanna manage insurance. 

Speaker 3: Yeah. 

Steve Carroll: And doesn't wanna manage for us bonding and 

Speaker 3: Yeah. 

Steve Carroll: Um, employee renewal, you know, insurance renewals and a lot of the back office stuff. Yeah. So, so there is parts of this that I, [00:32:00] that, that I think you can get to where a new branch, probably we want them to be empowered, but we don't want them to be bogged down, completely bogged down with the overhead stuff that doesn't drive any revenue or profit.

John Wilson: Yeah. I think that makes sense. Yeah. That's kind of how I've, you know, so for me, I'm, I'm really curious what your, like corporate. Staffing looks like, but for me, the way I've thought about it, again, like much smaller scope for us, but we'll be like 45 million or something next year. It's not, so for me, I think that like my corporate staffing is two people, like it's me and a CFO and maybe an assistant.

Okay. Like that is it? Yeah. And that feels like enough. Yeah. But I, I don't know. Like what does yours look like? Well, different scopes. I, I'm just curious what this looks like at scale. 

Steve Carroll: Yeah. And, and we're, we're constantly listening to our partners. We're constantly evolving and trying [00:33:00] to get this right.

'cause I don't think there is a one size fits all strategy here. Yeah. What we've done up until recently is we've been, me and Steve and all of the opcos are kind of on their own. We did have a CFO early on and he, you know, you do need to aggregate data up at the highest level. Yeah. And so for quite a while we were, we were more of a hold company Yeah.

Holding this company. Right. And at a certain point we started to realize, man, I can't pick up the phone fast enough to help one, one, one of my partners needs help figuring out how to get a truck from the enterprise program that we have, or somebody, you know, this thing happened and somebody needs a bandaid or 

Speaker 3: Yeah.

Steve Carroll: Like stuff that, it just changes a little bit when they're a part of something else, they partners wanna do the right thing for not only for [00:34:00] them and their employees, but their other partners. We start to realize, man, I, we need, we need more resources to help make sure that our teams can focus on revenue generating activities.

It's hard to know what those are until you've got enough people that are asking for help. 

Speaker 3: Yeah. 

Steve Carroll: And so over time we've realized we need to offer more help in insurance, which we've talked about cash management, cash management's done at the corporate level. That feels like 

John Wilson: mandatory 

Steve Carroll: to me. It it has to for we have bank debt.

Yeah. So we, we have to, it has to be all, 

John Wilson: even just like risk and like, I think there's a super strong argument for HR for risk, but like cash at Yeah. Yes. Yeah. You gotta do cash. Yes. 

Steve Carroll: Absolutely. Absolutely. And, um, we we're, we're actually able to bring other value that a lot of our [00:35:00] Opco presidents. Bore all of the burden themselves for years.

Yeah. Like for example, HR issues, we, our HR team at Kelso's became becoming a business partner to help, yes. With reviews and, um, surveying to try to understand sentiment, how can we improve the overall morale of the team recruiting? 

John Wilson: I'm gonna clarify on that really quick. Yeah. Because HR business partners a very specific titling for hr, right?

Is that what you meant, meant by that? Or you just meant like they're more in operations? 

Steve Carroll: Well, I, HR to me is, it's kind of misunderstood because HR sometimes is only deemed as the person who manages onboarding and payroll and firing. Firing, right? Like. Yes, that is, that is hr. But HR has more to bring to the table if you invest in it.

Yeah. And it, they [00:36:00] can, HR can be a business partner and listen to the needs of the organization and bring people skills to solve problems in the organization, whatever that might be. And so I've, I've really appreciated that team. Oh yeah, yeah, for sure. Because there's, there's, we are people, we have a lot of people That's a lot to support.

Speaker 3: Yeah. 

Steve Carroll: And as we've gotten bigger, we've, I've seen the value in investing there. Finance is a really, really important thing to get right. Especially in commercial. Yeah. You've got. 90 days of ar. Yeah. Working capital has to be like its own, it's massive situation. It's absolutely massive. 

John Wilson: D does each and every branch have a, like a corporate controller or is it like regionalized or?

Steve Carroll: Yeah, so we, we we're, we try to be entrepreneurs, so we don't have a specific requirement [00:37:00] when a company joins us of who we love for it to be the team that's already there. And that the, the accounting team? 

John Wilson: Yes. Oh, that feels really different. Yeah. I feel like usually when I hear about PE coming in the first high, like big aggregator, so I'm not trying to label USP, but big aggregator's coming in.

The first transition is accounting. They need their own, they wanna trust the numbers. 

Steve Carroll: Yeah. And to us it's a, it's a partnership, right? Yeah. So we're, we're not only partnering with the owner or the owners. We're listening to the needs of the organization. Yeah. And if there's a great. Team there. We'd love for them to be a part of our finance organization.

Yeah. And that's kind of what happens. Yeah. Is they're, and it's also really cool because when they join the bigger organization, their career ladder becomes different. 

John Wilson: Sure. 

Steve Carroll: There's an opportunity to be involved in more things and grow where normally [00:38:00] if you're only in a local branch, you can only grow as far as the finance need is in that local branch.

Speaker 3: Yeah. 

Steve Carroll: So we, we, we try to be good partners. We're, we're not a, we're not a, a acquire partner and fire Yeah. Organization. That's not what we do. We look for companies that are awesome as they are and look for ways to augment the careers of the folks that are there. 

John Wilson: Yeah. That's interesting. Yeah. For the partnerships, can you walk me, we're using the word partner a lot, so I just wanna make sure I understand the deal structure.

Mm-hmm. Sounds like owner stays on. 

Steve Carroll: Yeah. So like 

John Wilson: a role of some type? 

Steve Carroll: Yes. So what what we learned from, and, and I'm glad we went back to it, thank you for bringing us back. 'cause I was, I remember I got off track, but we were Yeah. You 

John Wilson: talked about that first deal. Yes. That's what I was thinking about. And we keep talking about part, I'm like, I, I'm missing something on the, on the acquisition front.

Steve Carroll: Yes. Yes. So we learned in that first one, it's just impossible to take over [00:39:00] for an owner that's been there forever. And us being the new guys have it work out very well. 

Speaker 3: Yeah. 

Steve Carroll: So in, in trying to figure this out, I'm running this opco, this first business, and my partner, he's a, he's got a PE background. Yeah.

So he's bringing me these ideas that we should buy this and let's go meet these people. And I'm just like, dude, I'm working a hundred hours a week. I live here. Let's this Yeah. What, what do you want me to do? 

Speaker 3: Yeah. 

Steve Carroll: And we tried it for a while and just was never gonna work. Yeah. And. I remember when we were in, uh, we were in Arizona and we, we ended up talking to someone in Idaho that owned a business two or three times bigger than us.

At least two times bigger. Yeah. And we were going through the motions that, uh, Steve, my business partner, wanted us to do of we wanna buy your business. Two, two Steves. 

John Wilson: Yeah. We're both Steve. Yeah. You said Steve and me earlier. And I was like, [00:40:00] okay, our, I, I flagged it. I was like, are we, is this third person?

Okay, two Steves. 

Steve Carroll: I know there's, and there's a story there too, maybe we can get to at some point, but, uh, we, we've been friends since fourth grade and before that, our parents knew each other before we were even born. So there's, there's a lot. That's awesome. There's a lot there. Um, but we, we, you know, we're going through the motions.

Hey, we wanna buy your business. And he is like, nah, I don't wanna sell. I'm in my late forties. I love what I'm doing. This is this, these are my people, this is my family. 

Speaker 3: Yeah. Yeah. I 

Steve Carroll: don't wanna go sit on my couch. I, I don't have any interest to sell. I remember thinking, oh, well that's this interesting.

He's talking to us like, yeah, maybe there's something here. And Steve Nicholson, my partner, pitched the idea of, to me, of why, why don't we partner with him? Meaning we, this is the value of his business. We're gonna offer this in Kelso equity to him. Yeah. At close. Yeah. And only this much, you know, in, you know, figurative terms that he would get in cash kind of a thing.

Yeah. And, [00:41:00] um, we went to him and I, I pitched it to him. I remember being in his truck and I remember him looking over at me this up in Idaho. I remember him looking over at me and say, yeah, I'll do it. And I remember thinking like, holy shit. Really? Oh my God. Oh my God. He doesn't think we're complete idiots.

He thinks we're complete idiots. At least enough to be partners with us. Yeah, yeah, yeah. He's way smarter in HVAC than I'll ever be. And I, I love that about him. He's an amazing partner to this day. Still runs that business. One of our. Trusted partners rely on him heavily for a number of things. But that's when we realized, okay, maybe there's something here.

And as time went on, he continued to run the business and he continued to do a good job. Yeah. And he continued to help us with other things. He helped us with the one in Arizona and Yeah. Helped us with other things with his team. And we started to realize, okay, if we find companies like this where there is a [00:42:00] opportunity to partner with someone.

Speaker 3: Yeah. 

Steve Carroll: You don't have to start over with relationships with customers. Employees, yeah. Vendors. And the momentum keeps going. There's something special there versus the one, the way the We did the first one. 

Speaker 3: Yeah. 

Steve Carroll: And so from there, that was the, the beginning of how we were able to grow. And we, we, it's just the first, I mean, it speeds it up.

It does. Yeah. You mean a lot? We, we would not be where we were at Becausecause. You don't have, yeah, I mean, you 

John Wilson: don't have to. Well, I, there's a trade off and I'll ask about it, but it seems like, yeah, you can just keep going. Which that, that does make it great. I mean, the trade off seems to be less integration, right?

Like these are going to be differentiated brands, I'm assuming. Mm-hmm. Uh, probably like a longer integration instead of like six months, three years or something to like fully. They're in our buying system, [00:43:00] they're our insurance. Is that kind of the trade off? 

Steve Carroll: Yes. And early on we were just a a hold co.

Right. So we didn't really do a lot of integration. Right. We just integrated cash and 

Speaker 3: Yeah. 

Steve Carroll: Then we realized we had to integrate insurance and then we had to integrate bonding. Yes. And then we had, there were certain things that we've realized we don't have a choice. Yeah. And over time we've also realized it would be nice if we did X, Y, Z.

And so our integration playbooks evolved. Yeah. And, um, it, it's ultimately, it's the integration strategy is still, I think, very light. Yeah. A lot of, lot of organizations rip out the back office Yeah. And change everything right away. And there's people there the day after close. I mean, that's how we would do it.

John Wilson: But we're buying smaller companies. Correct. You know, if I'm buying, you know, our target's gonna be like a three to 5 million. I have to, the owner's not [00:44:00] staying on. Yes. And we, because we're so small and we're, we're privately, uh, like funded, like it's me. There's no room for a big J curve. Right. Right. Like, this is my balance sheet.

Right. So you got a sprint. 

Steve Carroll: Yes. And that, that's totally fair. If it is that type of an application, I, I think of add-ons and I think of platforms. Yes. Yeah. And partnerships. Yeah. Add-ons are not necessarily what I'll always do this partnership model for we, if it's that small, you probably need to add it onto just 

John Wilson: whatever you have right there.

Yeah. I 

Steve Carroll: I, if you think it'll work, 

John Wilson: yeah. 

Steve Carroll: And if not, then you gotta really. Think about, is this something worth acquiring if it can't stand on its own? Especially if it can't stand on its own. So to us, there's a big differentiator there. 

John Wilson: Totally. What's, what's the size difference for, for you and [00:45:00] mechanical?

Uh, between the two? Yeah. Like what, what? I mean I said 5 million and that was an add-on. Yeah. So is a platform 20? Is it 30, 50? 

Steve Carroll: I think of it in terms of employees. Okay. And it's about a hundred employees. If it's less than, we're starting to think about can it stand on its own. In commercial though, you can get down to much smaller and it can stand on its own.

But that's really the thing is can this stand on its own? 

Speaker 3: Yeah. 

Steve Carroll: Or do we need tons of resources Yes. In this thing to make sure it continues to be successful. 

Speaker 3: Yeah. 

Steve Carroll: We tend to. Purchase partner acquire with much less add-ons at this point. There's just so much opportunity for us to focus on single standing platforms.

John Wilson: That's interesting because 

Steve Carroll: our strategy is to offer an MEP solution. I don't want to do tons of add-ons. 

Speaker 3: Yeah. 

Steve Carroll: I'll do it if a partner in a market says they want [00:46:00] it or they need it for their MEP strategy, but it's, it's rare. 

John Wilson: So how big was your corporate, like staffing, corporate headquarters staffing?

Steve Carroll: It's pretty small. I mean, we're probably 50 Kelso employees at this point. It is small. 

John Wilson: Yeah. So that's like a one and a quarter percent. Yeah. Not even, am I doing that right? Uh, 

Steve Carroll: yeah, it's, it's over. Yeah. It's a little over 1%. Yeah. One and a quarter one. Yeah. Yeah. It's, it's small because our companies in the field are mostly self-contained.

Yeah. We, we have multiple companies at, above, around a hundred million of revenue Yeah. That are part of Kelso. Yeah. They don't need much from us. Yeah. We don't, they don't, I imagine We don't need to do a lot for them. They don't need a lot from us. They've got most every function already built into their business.

And what we're trying to [00:47:00] do is look for ways to make slight improvements in that business. Mm-hmm. Not massive changes. And maybe it's, you know, their, even a hundred million dollars business can benefit from being a part of a bigger balance sheet for winning big opportunities and bonding. Like 'cause of 

John Wilson: Yeah, I was gonna say 'cause of bonding or like, what, what, what can you bring?

I'll give my example 'cause I think it's very different. Mm-hmm. So we're looking at these acquisitions small, right? So like 5 million bucks and under. It is a totally different thing that we bring to the table than I think what you guys bring to the table. Like for us, like we're gonna reduce their cogs by half, but you're not gonna do that to a hundred million dollar company.

No. We're gonna reduce their software by like 80%. You're not gonna probably do that like a hundred million. Like they, they've gone through a lot of the cost saving gyrations. May, maybe you'll get another percent or two or I How do you think about that? 

Steve Carroll: There there's, there's a few things you can work on [00:48:00] there and what's great is these are awesome companies, so we don't, there's not like a we need to do this now kind of a thing.

Yeah. And so a lot of times it's just us listening Yeah. To what, what the company feels would be beneficial. And maybe it is an acquisition, maybe it is. Um, access to a bigger balance sheet. Maybe it is, uh, savings on insurance because it's insurance with the whole organization. Yeah. Maybe it's, uh, winning some customers that another bigger company has a relationship with.

It's doing a project locally. 

Speaker 3: Yeah. 

Steve Carroll: Cross-selling a lot of companies. A lot of a hundred million dollar companies do a trade in the MEP Yeah. Element. And so finding another partner in the MEP flywheel to then go after other clients that maybe are being pitched by general contractors or kind of a laundry list.

It just, it could be a [00:49:00] number of things. Sometimes just cross-selling is, is all we do. 

Speaker 3: Yeah. 

Steve Carroll: Just depends on what the needs are of the, the business. 

John Wilson: That is interesting. Mm-hmm. That's fascinating. 

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John Wilson: Yeah, I [00:50:00] don't know how you can move fast if you have to get in and operate. Everything doesn't work. Yeah, it doesn't.

Wouldn't seem to. Mm-hmm. I mean, that's a big concern that we have. So, uh, I'm trying to remember who runs Apex, Alpine. Mm-hmm. Yeah. Have you? Yeah, 

Steve Carroll: yeah. We know them. We know them quite well. In fact, 

John Wilson: yeah. 

Steve Carroll: One of the founders of Apex was an intern for my Oh, yeah. Success partner at their PE firm. 

John Wilson: Yeah. He, he did a, he did a show on, uh, invest like the Best.

Mm-hmm. It's, it's a good interview. Yeah. Um, but obviously there's, he is very smart. Yeah. He's a smart guy. Yeah. But, uh, I mean, his staffing is really interesting. 

Steve Carroll: Yeah. 

John Wilson: Like he, he's probably one, he's probably the case of like, Hey, you actually can replace quite a bit. But like, you know, it's uncommon and arguably it doesn't work that well, but he at least has a funnel and there.

They're moving. I think they're [00:51:00] still doing two deals a week. Like it's still crazy. 

Steve Carroll: They, they are extremely busy at Apex. Yeah. Alpine also has a commercial platform too. Yes. Orion. 

John Wilson: Oh, is it a direct competitor? 

Steve Carroll: Like commercial service on certain deals. Okay. So we, our flywheel to us, we're happy to do all of it.

We wanna do all of it. They're only focused on the service and maintenance side of it. Yes. Yeah. We might compete with them sometimes on deals that might do some construction, but they really want to go after service and maintenance. And so I do compete with them for acquisitions usually. Yeah. In that part of the flywheel, which, you know, is fine.

There's a lot of PE that is focused on that. It just makes it a little hard to scale. 

John Wilson: Yeah. 

Steve Carroll: But we do, we do compete against them for sure. 

John Wilson: Yeah. They ha they're, they're probably the big, unless you can think of another one, they're probably the bus biggest example of like, they really do come in and just.

Steve Carroll: They run it. Yeah. They, they are [00:52:00] using their playbook of, it's 

John Wilson: a full integration in like two weeks. 

Steve Carroll: Yes. Like, it's crazy. Yes. It's, it's a lot. I think it's hard to do in commercial. Yeah. I think they would even argue it is harder to do in commercial. It's, it's so relational. So much relationships. 

Speaker 3: Yeah. 

John Wilson: Yeah.

We experienced that. We, we bought a commercial business and we ended up like shutting that all down 'cause we're like not our strong suit. 

Steve Carroll: Mm-hmm. 

John Wilson: And it is very relational. 

Steve Carroll: It's, it's extremely relational. And that, that's why our first core value and why I say it so much is partnership. Yes. It starts at my level.

Yeah. All the way down into the field. Yeah. That we have to partner with our clients and our teammates and our vendors. It, it really matters. 

John Wilson: Yeah. 

Steve Carroll: A lot. 

John Wilson: Yeah. Before you got into. Building a billion dollar mechanical contractor. Uh, you like, what were you doing prior? You spent a life at Walmart and 

Steve Carroll: I, [00:53:00] I, so I grew up in Oregon on a tree farm.

Okay. You and Taylor Swift. Yeah. That's funny. Um, yeah. So I grew up driving the Kubota tractor Yeah. And pulling weeds and planting and yanking out and selling trees. That's what, that's how I got my, my interest in the blue collar Yeah. World. And I, I thought I would do that forever. And then my parents decided to move and sell the farm.

And so I, I, my career changed and I realized what I, what at that time made sense to me was I like being outside. I'll get into construction. Yeah. This isn't gonna be great. I'm gonna be outside all the time. I realized I'm in the office a lot for construction. Once I got into career, my career and it was like project 

John Wilson: management and Yeah, yeah, yeah.

Yes. You can be So can like managing new Walmart builds or the retrofits or both? 

Steve Carroll: Oh, so good question. So I, I did, I didn't go straight to Walmart. Okay. I went to work for [00:54:00] all sorts of types of builders. I did heavy civil for a while. I did asphalt for a while. I did underground utilities for a while, RCP pipe installations.

Uh, so Kelso's kind of bringing 

John Wilson: home a lot of the stuff 

Steve Carroll: for that. You started your career for me. Yeah. That's 

John Wilson: really cool. 

Steve Carroll: Yeah, for sure. For me it is. Yeah. And when I graduated took me a long time to get my degree. Mm-hmm. But when I graduated, I wanted to be a real estate developer. Yes. And graduate in 2008.

John Wilson: Oh yeah. 

Steve Carroll: No real estate development anywhere. Yeah. And so I had to go get a job with a gc 'cause that's where the jobs were. And I, that's where I learned how to do commercial construction and I was the lowest guy on the gc Yeah. Job site for years. 

Speaker 3: Yeah. 

Steve Carroll: Doing everything from the bottom and then working my way up to running jobs.

Speaker 3: Yeah. 

Steve Carroll: And learned a ton. But, uh, [00:55:00] that's, that's where my passion for the mechanical, electrical plumbing came from is equipment Set day was amazing. My favorite part of the job. Commissioning and startup and yeah. Just all of the elements of bringing a building to life. You can't bring it to life without electricity.

Yes. And water and cool clean air. And so I just brought this excitement to me. If I'm gonna pick a career, that's where I'm going. Mm-hmm. And. Liked. Liked the construction career path, but it felt like there was a lot of people above me and it was gonna take me forever. Oh, sure. To just keep climbing that ladder.

Especially during the 8, 9, 10, 11, 12 timeframe. Yeah. Yeah. Lot of my friends were without a job. 

Speaker 3: Yeah. 

Steve Carroll: And I had a job, but there was a lot of people 'cause of all that. Yeah. 

John Wilson: Things were clogged. That's where my career started too. [00:56:00] Okay. Like different, I was a service plumber, but it's, it was weird. It was weird.

Steve Carroll: It to me, it felt like I'm gonna be doing this forever. I'm gonna be the bottom guy forever if I don't make a change. Yeah. And some of my friends, they made it work by moving and going to other parts of the country where there was more opportunity and I, my wife and I had an opportunity to move to Florida and it.

That didn't work out. Mm-hmm. Uh, we personally, it wasn't gonna be a good fit at that time for us. And so again, it was like, we have to do something. And so I went to graduate school and I went to, so I went and studied business and I thought, well, I, I got here and this could be a slog. Eventually I could be here or here, here, but it's gonna take a long time.

So I totally pivoted. Went to graduate school and I, when I went to graduate school, I was like, I will do anything. Mm-hmm. I love learning. I'm gonna just find all the [00:57:00] opportunities I can, wherever that ends up being. So I got involved in a lot of things and then I ended up at Walmart and Arkansas. I thought I'd be there one year.

Yeah. And stayed for seven years. Yeah. Stayed for seven years and I loved my time at Walmart. Yeah. Amazing. Um, we, we saw so many different things go on while we were there. The e-commerce. Boom. Oh yeah. While we were there. Yeah. I mean, when I got there, no one knew what Amazon was. 

Speaker 3: Yeah. 

Steve Carroll: That's amazing. As, as amazing as that is.

Yeah. And within a few years, everyone was talking about Amazon in every meeting. 

John Wilson: Yes. 

Steve Carroll: And so had a lot of fun being a part of that and some different roles. And about halfway through I started to realize there is a game in corporate. Mm-hmm. And the game is how much impact can you make? How much risk are you willing to take with your career?

Yes. Personally and professionally, you're, you might get fired if you make someone look bad [00:58:00] above you or you, you, you just may not be able to work there anymore if you push too hard. And so I, I did a few moves and one didn't work out as well, but I made a lot of progress in a, in a. Part of their business.

And then I found another opportunity with a boss that was willing to push as hard as I wanted to. In fact, he probably pushed harder than I do. 

Speaker 3: Yeah. He's 

Steve Carroll: an executive at Walgreens now. Crushing it. And we had a ball, we had absolute ball. We spent three years, we built a business that was 15 million in revenue forever, all the way up to 2200 80 million of revenue and 275 million of EBITDA we built.

We crushed that thing. That's crazy. We did 

John Wilson: like, what was it, are you allowed to say? 

Steve Carroll: Yeah. Yeah. It's, it's a, it's a, a media business. 

John Wilson: Yeah. 

Steve Carroll: So running ads, sponsored products and banners, and it's a hell of a thing. It's [00:59:00] especially 

John Wilson: when you have a website like whatever, like Walmart or just anything that they own under that.

The amount of traffic. Yeah. The traffic was 

Steve Carroll: insane and no one was monetizing it. Yeah. And, and what we were doing specifically at the end was Sam's Club. 

Speaker 3: Yeah. 

Steve Carroll: And Sam's Club was under monetized. And it was just the, a heck of a journey. I could, I thought it would be so much fun. It was so much fun. I, I loved it.

It's just because like the 

John Wilson: traffic's there and it's like millions of visitors. Millions of visitors. That's crazy. That's, well, and that was like peak, if there was a time to monetize like a website. Uh, I feel like it's dropped off quite a bit in the past couple years. It, but I mean, Walmart, that's Walmart, right.

You know, or Sam's or Lowe's or what, you know, whatever. Like Yeah, there's a ton there. 

Steve Carroll: It's definitely a under monetized, it was an under monetized opportunity. 'cause there, there is a certain point where you can't monetize anymore. Yeah. And your advertiser doesn't get enough clicks or enough leads. I mean, you're a big [01:00:00] advertiser.

There is a point where the CPMs too much or the cost per clicks too much or whatever. And so. I, I loved this. IWI spent all of my time doing side hustles. Yeah. And advertising and e-commerce. Yes. And then I came to work and I just, one plus one equaled three so many times. 'cause I was able to know things and say with confidence how things work on Amazon.

So I'm selling stuff on Amazon and when I came to Sam's and Walmart I could say, this is how it works and we should do it this way. Nobody else had that experience. So it was really fun for me. But what happened was, I, I, I wanted to be an entrepreneur. I loved my time at Walmart. It, it was something was gonna have to change and I was tired of Amazon literally shutting down all of my businesses.

Or Facebook. Yeah. Or Google. You name it, they changed the algorithm this much and the [01:01:00] whole like the side hustles freaking thing. 

Speaker 3: Yeah. Yeah. 

Steve Carroll: I mean, some of my side hustles did millions in revenue 

Speaker 3: Yeah. 

Steve Carroll: But also went to zero. Yes. With small tweaks. Yeah. On Amazon's algorithm or Facebook's lead gen algorithm.

And so I tried so many different things and one thing that worked forever was lead gen on Facebook. Yes. And so I developed a book of business of customers that I generated leads for and they paid me for. 

Speaker 3: Yeah. 

Steve Carroll: And that was in the pest control space. 

Speaker 3: Oh yeah. 

Steve Carroll: And I was really good at it. In fact, I did it for a while after we bought our first business and eventually had to go to my customers and be like, dude, I can't do this anymore.

You're on your own. Mm-hmm. I just gave them my whole system. I gave them my whole workflow. Yeah. My Zapier workflow. I should, I gave them access to all of our ads. I just gave it to 'em and said, hopefully you can figure this out. So I tried to not put anybody in a bad spot. Yeah. But I thought I could use that to go into [01:02:00] hvac.

Mm-hmm. So that was, that was the evolution of how this evolved. Yeah. And I ended up buying a commercial HVAC business. Yeah. Yeah. So I haven't hardly done any of it. 

John Wilson: Yeah. But the side hustles, like, were, were any of them affiliate? Yeah. Yeah. Because I would imagine, like, that's most of you, you take a little bit of that to a walmart.com, like, yeah.

I couldn't, I couldn't, I'm just imagining how much fun that would be. 

Steve Carroll: Oh, I, I had a ball. Yeah. I had a ball. I didn't quite figure out how there, there's this, this, uh, honor code, if you will, at, at Walmart. You can't cross. Pollinate your side hustles and you can get fired for having dinner with a vendor. So you're, you're, there's, there's very clear lines.

You don't cross. Yeah. So I was, I was always very careful to be, to have a clear conscience. Yeah. Um, but I still learned from [01:03:00] both and my, my, my, my personal benefit was great. Both, yeah. In both cases. But yeah, I did affiliate. I, I learned how to generate leads from Facebook, um, optimize Google business profiles.

This, 

John Wilson: this is hilarious. Um, I think, 

Steve Carroll: yeah. I mean, all the stuff that you probably spend a lot of your time on, that's what I was doing on the side for these pest control companies. Yeah. And I did a few in other industries, and it was, it, I realized it works better for certain industries and pest control is just really, really good.

Yeah. That model was working really well. I built a website for my friend mm-hmm. Who started a pest control company from scratch. And that turned into a massive lead source for him. I built his Google business profile. I did all of his Google, uh, lead gen and all of his Facebook lead gen, basically for free.

'cause I wanted to learn how to do it. Yeah. And he thought he was gonna start his business and knock doors for the rest of his life. Yeah. [01:04:00] He only knocked doors for one month. 

Speaker 3: Yeah. 

Steve Carroll: And all of that stuff started to massively take off. 

Speaker 3: Yeah. 

Steve Carroll: That's why I was like, okay, there's something here. 

John Wilson: Oh yeah. Yeah. I, I, uh, when I was like, you know, early 2010s, I wanted to run a content affiliate business like so bad.

Oh, really? Okay. Oh, like, well, all these like, uh, I didn't, I didn't, I went to college for like, intermittent periods, but I didn't finish any degree and I learned a lot from reading, like avid reader my whole life. So. Early 2010s peak blog, right? Yeah. So like all these financial blogs like Mr. Money Mustache and Financial Samurai, and, uh, they changed my life and I always wanted to like build this like content, like, you know, thing.

'cause it's fun and Yeah. And, uh, like a month ago, my wife and I were talking, I don't even, you know, we've been married for 10 years, so I think we were just like talking about the journey of being married for 10 years and it, it randomly snuck up on us [01:05:00] that it was like, oh my God, I did end up building a content business.

Like you're a media machining here. This Right. Apparently. But it was funny to, to, so, so maybe, yeah. Maybe you're a, uh, it will come back around 

Steve Carroll: on for Kelso. I, I still have five websites that I make a couple pennies on every month from affiliates. It's, it's, uh, it's, 

John Wilson: well, I feel like it teaches you so much.

I mean, sort of the breadth, I've thought about that a lot over the years as I'm. Really actively building two very different businesses. Mm-hmm. Uh, like owned and operated in Wilson. There's definitely correlation, uh, but a lot of stuff different. But it has taught me a ton. 

Steve Carroll: It's, it's powerful stuff, man.

Like learning how to rank and Google. Yeah. Learning how to put content out there and be brave enough to put yourself on video. Yeah. And it helps. Yeah. I'm sure people follow you [01:06:00] or recommend you guys, or I'm sure it helps to some degree for Wilson. Mm-hmm. Being able to do owned and operated, and I don't know if Kelso would even be here if I wasn't doing those other side hustles because.

Getting email started. Yeah. Getting a website started. Yeah. Um, my LinkedIn, like, it's a lot of skills. 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 Yeah. 'cause of LinkedIn. Yeah. And, um, they, they joke with me about it, but it's powerful.

It's real. Yeah. The, the Digi we're meeting today because of the digital work. Twitter. Yeah. Right. A hundred percent. 

John Wilson: Yeah. It, yeah, we, we talk about that a lot here. How, you know, five years ago I did my first tweet and like it changed the scope of our business forever. In, like, in, in all the best ways. 

Steve Carroll: Yeah.

John Wilson: But like, you know, hey, we learned about how to really like run through acquisitions. We learned how to onboard, we started hiring people directly. Like our director [01:07:00] of sales was a connection that I made from a connection on X. No way. Which like, that's amazing. And he's amazing. That's awesome. 

Steve Carroll: And I, I think it gives confidence to the people that wanna apply.

Yeah. Because they know you're investing in it. Yeah. And you're doing podcasts and you care about it. And you're, you're not just gonna sit at home and put your feet, you know, in the sand. That does sound nice. But No, I'm, 

John Wilson: that does sound nice. 

Steve Carroll: At least that's what I tell what I tell myself. Yeah. 

John Wilson: Yeah. So that, that was, I mean, that's fast.

That's amazing. Like, uh. That was, that would've never been the background that I would've expected, and I loved it. I think that's hilarious. I 

Steve Carroll: wasn't expecting to talk about it, but that's, let's go. That's, that's fun about this. Let's, 

John Wilson: yeah, so 28, 29 now acquisitions. Mm-hmm. What do you guys, what are you guys looking for as you're thinking about new acquisitions for Kelso?

Steve Carroll: We're, we're really focused on building the Kelso flywheel. Yeah. [01:08:00] And we, we have a map on our website and I go look at it all the time, and I'm like, it's like March. Yeah. Yeah, yeah. 

John Wilson: That's cool. 

Steve Carroll: I go look at it all the time and I'm like, oh man, there, we're missing 

John Wilson: Colorado. Missing Colorado. 

Steve Carroll: We're missing here.

We're missing there. Yeah. So many different spots we're missing even just a part of the flywheel and that gets me fired up every single day. Mm-hmm. I love the opportunity to meet entrepreneurs that built these great businesses and. Sometimes it's just an entrepreneur that gets to a point of, man, I could use a partner that could help us think differently.

Yeah. Or maybe I do wanna retire someday, but I don't know how to take care of the business. Or, it's gotten so big that I'm worried. All of those are reasons for someone to talk to us and I'm not afraid to, to be blunt and offer mm-hmm. What we do, and it doesn't work for everyone, but we spend a lot of time explaining partnership as we've [01:09:00] discussed today.

Yeah. We spend a lot, a lot of time explaining the Kelso flywheel and why someone should consider joining us and the value we can offer, not only to them selling part of their business or selling their business to us and buying Kelso equity, um, selling the vision of what Kelso, what I believe Kelso can become.

There's a competitor of ours that just. Uh, got invited or, or inducted into the s and p 500 that Wow. Would love to emulate them. Yeah, I mean, this is a massive, massive business. We've got a long ways to go. Um, a billion's not even scratching. They probably don't even know who we are, this business. Um, but there's a few of them like that 

John Wilson: mechanical's wild, you know, off camera we talked about Moss.

Mm-hmm. Uh, or, or the, you know, the folks I brought up around here. I mean, it, it is amazing how big, big some of these businesses can get. I, I heard of one a couple months ago. [01:10:00] I wanna say it's Gem and they're in the northeast, like Maine. They're $190 million. I had never, I had never heard of them in my life.

Steve Carroll: It's fascinating to me too. Uh, we, we. Paid for, took a cost, a lot of money, but we paid a one, a big research firm, a lot of money to research how big the MEP market is, both residential and commercial and industrial. And the number came back for 2023 was 500 billion in the us. 

John Wilson: Wow. 

Steve Carroll: Service, maintenance and construction.

And that's including construction's concluding, 

John Wilson: like my section, like the resident. Okay. Yeah, 

Steve Carroll: it does. It includes, it includes all of it. Yeah. And of course we're not doing all of it. We're also a hundred percent non-union, so. 

John Wilson: Oh, I was gonna ask that actually. Yeah. Yeah. That's in, I feel like that's differentiated.

Yeah, it is. Are you missing the union? Because some cities, like you're just not gonna have a choice. I mean, if you were in Boston, like there can't be a single non-union. You would think. [01:11:00] You would think. I would think 

Steve Carroll: there, there, there, there are a lot of unions there. I've looked at. Three or four in Boston that are non-union.

I, I, I didn't end up getting those companies, my, some of my competitors did. Mm-hmm. But, um, there's a place for it in the cities. It is harder. Yeah, for sure. Yeah. Um, we are, we're just focused on non-union for, we, we feel it's, it's a good strategy for now and that allows us to be friendly with a lot of the union organizations too, because they have their space and we have ours and there's a lot of.

Um, there's a lot of room for everyone to go win. Yeah, for sure. Yeah, same thing. A hundred million's. Crazy. Same thing with residential. Yeah. I don't feel the need to go do residential service and compete against you guys. And you're, you're more of an expert than we'll ever be, but the commercial industrial stuff that's [01:12:00] out there, it's, it's wild.

I mean, the data center space 

John Wilson: Oh yeah. Insane. I, I mean with all the AI stuff that has to be just like explosive 

Steve Carroll: right now. It is. It's exploding. It's, one of my friends is one of the top, um, a guys at a very large GC that has the Facebook account in the Google account. Yeah. And he developed the Google account there from scratch.

But he spent his entire career, we did our undergrad together. He developed the Facebook account over many years and has lived all over the world doing data centers for Facebook. And he came back and helped grow the Google business and told me the other day that all these companies. Are doubling their spend year over year.

Oh yeah. Or the next three years. 

John Wilson: Yeah. 

Steve Carroll: At least. 

John Wilson: Yeah. I, well, I read about that with, with Facebook and it was, it was interesting. I mean, half the, I'm curious what the take is here, but half the problem seems to be water. Like don't they consume like just [01:13:00] copious amounts of water? 

Steve Carroll: Uh, well, they're, if, if you're cooling with evaporative cooling, you've got some challenges there.

But a lot of technology now is closed loop and also, uh, liquid to chip, closed loop. So there's, you're, you're, you're not having the same water issues as much as you're having power issues Now, most, most of these like 

John Wilson: consistency of grid. 

Steve Carroll: Well, consistency, yes, but just sheer volume of power. Yeah. They need.

They, they measure these data centers by the amount of megawatts, not how much it's gonna cost. Or like, I, I would ask him how big is this thing he's building? And he'll tell me, oh, this many megawatts. And I'm like, what does that even mean? 

John Wilson: Yeah. I, I, I read that the other day. It, it was, I don't know if it was seven or three, it was some number, but it was, yeah.

That's how they referred us to it. And it was like, okay. 

Steve Carroll: And that's the [01:14:00] way he's been talking for 10 years. Yeah. He'll, he'll say, oh, I've got this remodel I need to do. It's this mounted megawatts, or I don't even gigawatts. That's not my specialty. Yeah. Yeah. I have people in our company that that is their specialty.

And that's something I'm really excited about because 18 months ago we were doing zero effectively. Zero, 

Speaker 3: yeah. 

Steve Carroll: Data centers and now we're hundreds of millions and Wow. Pricing, billions. Just in mechanical and we're, we're working on adding electrical capabilities there too. 

John Wilson: That's amazing. Yeah. 

Steve Carroll: From, from nothing effectively.

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Finally a supplier who actually gets it. What, uh, what advice do you have out there for someone who's thinking about partnering up with a firm like. What do you think that looks like? 

Steve Carroll: Uh, I, I think it, it, it's a big humongous decision for anyone who's thinking about partnering. There's, there's a lot of ways you can partner depending on who you are.

If you can partner directly with an investor, that's a totally different ball game. Mm-hmm. You can partner with a operator and, uh, you can, you know, I guess just sell your business, but to me there's a very different flavor for you as someone considering, or anyone who's considering what's [01:16:00] next. If you, if you think partnering is what your long-term vision is and your goal for your business, it's those two investor or operator.

Some people call it strategic or financial. Yeah, yeah. But investor operator are the two. The way I think about it, selling to an investor directly. Means they're going to look to you or someone in your business, or they'll need to hire someone that will be their liaison every day. And it's, it is an every day kind of a thing.

They might say they only wanna talk so often if things go down, they're going to be in your business every day. Yeah. It's just how that works. They are usually, you know, from New York, they're, yeah, they're, it's a different thing and that's what their model is. They're going to invest and they're gonna invest in multiple things.

So that's one path folks should [01:17:00] think about because they can usually get the most amount of money doing that. 

Speaker 3: Yeah. 

Steve Carroll: Should that investor get a deal done with you? You can usually make the most money, but there's trade offs. Like, like 

John Wilson: immediately? Yes. Because I think a part of the advantage of yours is there's a role component.

Steve Carroll: Absolutely. So the other side of it, selling to an operator or partnering with an operator, generally speaking, I don't offer the most money. Mm-hmm. I, I tell people up front, I'm like, if your goal is to make the most money today, you should probably sell to someone else. 

Speaker 4: Mm-hmm. 

Steve Carroll: I, I'm gonna offer a lot, and it's gonna be more than any SBA or any, any other group out there.

But I'm also gonna offer what I know I can close on. 

Speaker 3: Yeah. 

Steve Carroll: I know what's gonna be good for the rest of my organization. I know it's gonna be good for you, and I'm offering you equity in a business that hopefully is a $10 billion business in 10 years or 15 years. [01:18:00] This other group, there's no way they're gonna get there.

I don't even, I don't know who it is. I don't care. They're not gonna get to 10 billion in the next five to 10 years, but we will. So you're putting a little bit into the future. You're betting on us that your rollover is gonna turn into something special. You're, you're betting that we've kind of know what we're doing too.

And so if things are up or down, we're not gonna freak out. We know jobs push, sometimes we know somebody leaves and stuff happens. We're, we know how this business works and so we're gonna be more reasonable. We've also got resources to completely surround you with on a positive light. And you can pull from as you need, help with things.

Yeah. Whatever it is. There's somebody in our company that can be of service. 

Speaker 3: Yeah. 

Steve Carroll: Sell to an investor. You don't get any of that. 

Speaker 3: Yeah. 

Steve Carroll: But you might get the most money today if they can close. So that, that's, that's one of the [01:19:00] biggest pitches I make is I've seen it now and part of my strategy is I don't offer the most money someone else offers the most money and then they usually can't close.

Speaker 3: Yeah. 

Steve Carroll: And I'm still there. 

Speaker 3: Yeah. And 

Steve Carroll: I'm still arms out. I love you, man. Let's do this. Come on, let's go. Come in, let's go. Come in, man. Let's go. I've been saying I wanted to do this all along. Yeah. Probably half of our deals have ended up that way. Yeah. 

John Wilson: Yeah. I think we, we deal with that a little bit. Uh, specifically with Apex.

It, it's hard to, it's a hard act to follow. Um, yeah. But there, there was, even if they don't close, it's still a hard act to follow just because of value expectations. Absolutely. We, we had one, uh, a couple years ago. It was a million of ebitda, uh, 6 million of revenue that were offered $14 million. Like, my goodness.

No one, no one can follow that deal. No, that's so, so now they're like, well, we can't sell for under $14 million. And it's [01:20:00] like, no one can buy you. So I don't know what they're gonna do. I mean, four, four or five years later, they're still holding 

Steve Carroll: at the same amount of profit. Still, I don't It's 

John Wilson: grown at all.

Yeah. Wow. Yeah. 

Steve Carroll: Yeah. I mean, look, those guys have a different model. Yeah. They, they see 6 million and they see a million of overhead that they don't need. Yeah. And maybe you can get that, maybe it's a six times for them, maybe after all the synergies. It is a six times thing, and that's probably fine. Yeah.

For Apex. Yeah. It's, it's different for the employees though. Totally. It's different for the owner. And an owner that cares about the future may prefer to choose you. Yeah. Or a group that thinks of partnership differently. Yeah. 

John Wilson: This was an awesome conversation. I feel like, uh, I got a, I got a wide ranging lesson here and scaling through acquisition, uh, and it was fun to hear about origin story too.

I, yeah. I don't know a lot of like, Hey, I. [01:21:00] Red Walker, DIBELS, buy, then build and, and then, you know, built a, uh, that's funny. I read it. Yeah. Yeah, I know you did. Uh, but yeah, it, it is, that is funny. Um, uh, I mean, it is something small turn big. 

Steve Carroll: Yeah. Yeah. We, we, I was just talking again with my business partner yesterday and I told him, have you watched the Jerry Jones documentary on Netflix?

Have you seen it yet? I have not. No. It's so freaking good. Okay. Anyway, um, you don't have to care about the Cowboys to love it. Yeah. But there's a couple moments where Jerry Jones says, along this journey, everyone looks at us and says, oh, it's been, they're this multi-billion dollar thing. Yeah. And the, they could do no wrong.

They won the Super Bowl a long time ago, but won the Super Bowl under his tenure. But it was really cool in a, in a moment of humility, he says. The business to him felt [01:22:00] many times could be, could have been completely different based on how the wind blows. 

Speaker 3: Yeah. 

Steve Carroll: And or how it blew. And that could cause them to have, and even talks about in the documentary, he could have lost the business.

Yeah. To this reason or that reason or this reason. And for us, someone can look at us and say, oh, that was a smooth ride to where you're at. And for me, I've got all of the emotional war wounds of running out of money to make payroll next week. Mm-hmm. 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.

Yeah. So I can make payroll. Yeah. Or vendors calling me constantly. Early on, we, we didn't have this figured out. Yeah. We made tons of mistakes. So the, the, the journey to, to where. It might seem we're at today has been, [01:23:00] uh, I, I've had lots of lessons. 

John Wilson: Yeah. Yeah, I'm sure. I'm sure. But you survived and you got there.

I feel like a lot of the, uh, a lot of the, you know, over a long enough period of time and yours is short, but over a long enough period of time, like survival is, if you survive, you'll probably get big. Now, granted you did in five years, but survival is like the game. 

Steve Carroll: Survival is, is very, is huge. Yeah. And, uh, just in a few markets that I, I'm really close to, I live in Phoenix, but a few markets I'm close to.

A few of my competitors and even some companies that were for sale are closed. Yeah. Shops closed. Yeah. And very, very similar to us early on. Yeah. So. I feel it in my bones. And some of these shops were part of huge companies and some of 'em were part of investors and some were parts of various structures.

And I've, I've [01:24:00] taken it very seriously that this is not just a job. This is survival. 

John Wilson: Yeah. If people want to get ahold of you, how can they find you? 

Steve Carroll: LinkedIn? Best place to find me 

John Wilson: recently on Twitter. 

Steve Carroll: I, I am new to Twitter if you wanna find me, me on Twitter. Well, to the fuck or don't Thank you. Yeah, man.

You can get sucked into Twitter. Yeah, you can. It's its own thing. Yeah. It'ss own thing. I'm having fun checking two platforms now. Yeah. Uh, but you can, you can find me in either place just. Google, Steve Carroll or Kelso Industries that should pop up. Yeah. At least my LinkedIn should pop up, but I try to reply to everybody that's not spamming selling me something amazing.

So if you just wanna connect to and ha ask for advice, usually try to respond and be helpful. Awesome. 

John Wilson: Well thanks for coming on to this was Aton of fun. Yeah, thanks 

Steve Carroll: for having me. 

John Wilson: If you like what you heard, make sure you check out owned and operated.com.