A CEO friend of mine raised $40M at $400M valuation.

Two years later, the money’s gone, and his ARR is flat. 

If you asked him what his biggest mistake was, what do you think he would say?

He would tell you… hiring salespeople.

To be clear, it wasn’t JUST hiring salespeople, it was HOW he hired them.

Private Equity Warning

Another founder buddy of mine recently did a Private Equity (PE) round.

His investors were pushing him to grow his team of reps from 5 to 20.

Fortunately, my PE backed friend talked to my CEO friend first.

The Conversation

PE backed friend: We just raised $25m, and they want us to hire a bunch of salespeople.

CEO: Of course, they do. But don’t do it yet. That pressure is EXACTLY what smoked me, wasted 2 years and $40m, and very likely shaved 10 years off my life.

PE backed friend: Ok… well… what do I do?

CEO: Are all of your reps at 100%?

Pe backed friend: Not really. One might be, the rest aren’t.

CEO: Do not hire ONE MORE REP until ALL of your reps are at 100% capacity. If you build a machine that has slack in it already, you will experience all sorts of cultural and motivational problems. The same amount of demos your marketing machine is creating and reps are capturing will go to even MORE people. Your team will miss numbers week in and week out. You will attempt to solve that problem by demanding reps you hired to be AE’s do more and more outbound. That will not work. Your sales leader will probably either quit or be fired, because you’ll have the exact same productivity on 4x the team size.

PE backed friend: That’s terrifying. Especially now that we’re PE backed.

CEO: Tell me about it.

Pe backed friend: What do I do instead?

CEO: Before you hire a SINGLE REP, make sure all of your reps are at 100% capacity. Make sure your marketing machine can actually produce more pipeline. If and when you can actually flood your reps with activity and the entire team is at 100%.

PE backed friend: Then I hire reps?

CEO: NO!!!! Absolutely not. You work on raising the 100% higher. Can you create AI agents that save account research and follow-up time? Can you hire sales assistants to do some of the unavoidable repetitive work? ANYTHING to make your already 100% capacity reps more productive. Then, and only then, do you start slowly adding reps to the team.

PE backed friend: I am so glad I spoke to you before I did anything.

CEO: Me too.

Conclusion

Institutional capital still wants to push founders into rapidly hiring reps to accelerate growth.

While that sometimes works, it’s VERY easy to do it the wrong way.

The Right Way to Scale:

1. Make sure your marketing machine can grow
2. Get all your reps to 100% capacity
3. Raise that capacity as much as possible
4. Slowly add reps to THAT machine

Build your team that way and you can’t lose.

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