The first deals: broken deal and pivot to larger SBA targets

Steve Carroll is the CEO & co-founder of Kelso Industries, a national MEP services platform uniting HVAC, mechanical, plumbing, and electrical companies.

In just a few years, Kelso went from a gritty, nearly-broke first acquisition to 29 acquisitions and $1B+ in revenue.
Steve breaks down the bruises and the blueprint: why their first year almost killed the business (including a single job that wiped out a year of profit), the switch from “buy and replace” to a partner-and-keep-the-owner model, how they finance growth without overpaying, and the operating system (recruiting, cash, WIP discipline) that lets local brands scale without losing their soul.

Sponsors
This episode is brought to you by CapitalPad. A marketplace that connects acquisition entrepreneurs who need capital with investors who want exposure to small-business deals. Standardized terms, governance, and distributions included. If you’re raising for a deal - or want to back operators - check out https://capitalpad.com/

Our sponsor Spacebar Studios builds and runs your newsletter so you stay top-of-mind with founders, brokers, LPs, and talent - without adding to your workload. HoldCo Builders listeners also use their two-week free trial. Go to https://www.spacebarstudios.co/inquire and get started for free.

Timestamps
00:00 Intro
00:34 Steve’s background
01:56 Early thesis: from marketing & home services lead gen to HVAC focus
03:54 Bootstrapping experiments, agencies, pest control—what worked/what didn’t
04:58 Personal runway & the real cost of chasing deals while employed
06:00 Broken deals, travel, and swallowing $100k–$200k before first close
06:16 Meet the co-founder: lifelong friend Steve Nicholson; Kelso name origin
08:32 First near-deal dies; deciding to swing at the largest SBA-sized deal
10:26 Finding a commercial HVAC business in Arizona
13:11 Sponsor: CapitalPad
18:23 Survival year: no new acquisitions, just fixing ops and cash
19:13 The unlock: partnering with an Idaho operator who stays on, not exits
20:21 Bringing in a PE partner (Peterson Partners): why working capital blew up the SBA plan
24:26 How the PE check actually changed things (and what it didn’t)
28:29 Sponsor: SpaceBar Studios
29:32 Scale after deal #2: ~$40–50M revenue; raising the bar to $30–40M targets
30:50 Handing Arizona to Poncho so Steve can live on planes finding partners
33:22 Hitting $10M EBITDA in 2 years and setting the $1B revenue goal
34:32 Reaching $1B TTM four years after launch
36:25 Structure: Kelso buys 100%, owners stay, roll equity, 3-year earnouts
37:48 Why this is a relationship business (and why replacing owners destroys value)
43:10 Liquidity: horizon to public markets or new capital partner—patient equity model
46:59 Building the corporate engine: legal, HR, recruiting (15 in-house), finance, insurance
49:06 Project businesses need WIP discipline; dashboards and tighter forecasting
49:57 Footprint today
51:05 Centralized cash & working capital management
52:36 Post-close uplift: many ops 2–3x EBITDA with branch and service expansion
54:27 Financing new deals mostly via lenders + internal cash; no overpaying
56:24 Succession planning at every level; why this creates employee confidence
59:42 Example: ex-owner now building Kelso’s national service platform
1:01:10 Why Kelso hasn’t sold any companies (and likely won’t)
1:02:58 Steve’s evolving role: firing himself from jobs, hiring an exec team

Support our Sponsors:
CapitalPad: https://capitalpad.com/
SpaceBar Studios: https://www.spacebarst

This podcast is for informational purposes only and should not be relied upon as a basis for inve