On-target earnings
oh-tee-EE
The total compensation a salesperson earns if they hit 100% of quota. Base salary plus full variable commission.
OTE is what a salesperson earns when they hit their number. It includes base salary and variable compensation (commission). If a rep has $130k base and $130k variable at 100% attainment, their OTE is $260k.
The split between base and variable varies by role and seniority. BDRs might be 60/40 (60% base, 40% variable). Account executives are typically 50/50. Senior enterprise reps might be 50/50 or even 40/60 in favor of variable to reward performance.
OTE is a planning number, not a guarantee. Reps who exceed quota earn above OTE through accelerators. Reps who miss quota earn below OTE. The actual earnings distribution across a sales team should center around OTE, with top performers earning 1.5-2x OTE and bottom performers earning 0.5-0.7x.
Examples
A sales rep evaluates a job offer.
Offer: $140k base, $140k variable, $280k OTE. Quota: $1.2M. The rep calculates: to earn full OTE, they need to close $1.2M. Average deal size is $60k. That is 20 deals per year, about 5 per quarter. They check if the pipeline supports that pace.
A VP of Sales designs a comp plan.
15 AEs with $250k OTE each. Total sales comp: $3.75M. The team needs to generate $20M in new ARR. Total comp as a percentage of new ARR: 18.75%. That is within the 15-25% range that is standard for SaaS sales.
A top performer earns above OTE.
OTE is $300k. The rep hits 160% of quota. With a 2x accelerator above 100%, they earn $300k base/variable at plan plus an additional $180k in accelerated commission. Total comp: $480k. The company is happy because they earned $1.6M in revenue for $480k in cost.
In practice
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Frequently asked questions
What is a typical OTE for a B2B SaaS AE?
Mid-market AEs: $150k to $250k OTE. Enterprise AEs: $250k to $400k+ OTE. BDRs/SDRs: $70k to $120k OTE. These ranges vary significantly by geography, company stage, and deal size. San Francisco pays more than Austin. Late-stage companies pay more than seed-stage.
What should the base-to-variable ratio be?
50/50 is the most common for AEs. BDRs are often 60/40 or 70/30 because their role has less direct control over closed revenue. Senior enterprise reps may go 40/60 to reward deal closing. The more variable, the higher the risk and the higher the reward for top performers.
Related terms
The revenue target assigned to a salesperson for a specific period. The number they must hit to earn full commission.
The percentage of revenue a salesperson earns for closing a deal. The variable component of their compensation.
The percentage of quota a salesperson or team actually achieved. The scorecard for sales performance.
The salesperson who owns the deal from qualified opportunity to signed contract. Carries a quota and earns commission on closed revenue.
Business development rep / Sales development rep. The people who prospect, qualify leads, and book meetings for account executives.
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