What Is OTE?

OTE stands for On-Target Earnings, which is the sum of base salary and on-target commissions.

OTE is a term commonly used in tech sales because it accounts for potential earnings from commissions (in addition to base salary) when calculating total compensation.

How is OTE calculated?

OTE = Base Salary + On-Target Commissions

For example, if your base salary is $70,000 and your on-target commissions are $70,000, then your OTE is $140,000.

What does “on-target” mean?

“On-target” refers to 100% achievement of your sales quota.

If you achieve 100% of your sales quota, then you would receive 100% of the commission portion of your OTE.

The metric for your sales quota will vary based on your role:

• SDR: sales-qualified opportunities (SQOs) or sales-qualified leads (SQLs) are common quota metrics.
• AE: your quota will almost always be based on revenue sold.
• Sales leader: your quota will also be based on revenue sold and may also include a headcount component (to incentivize you to reduce attrition).

OTE is not guaranteed

Remember, you’re not guaranteed to make your full OTE.

Something that happens way too much to salespeople in the tech industry is that a company will promise a higher OTE than what is realistically achievable. This is especially common for startups because they have limited data on historical sales performance.

An extremely high OTE means nothing if only a small percentage of salespeople at the company are hitting quota.

Be prepared to discuss OTE in your interviews

In order to avoid accepting a tech sales job offer with an unachievable OTE, you’ll want to make sure to ask these questions during your interviews:

• What is the pay mix?
• Can I have a copy of the compensation plan to review?
• What is the average quota attainment for sales reps at your company?
• Is there a ramp-up period?

Asking questions about compensation during the first 1-2 interviews is considered by some to be a faux pas. During your final interviews is a good time to ask the above questions.

Pay mix

Pay mix is the ratio of your base salary to your on-target commissions.

For example, if your pay mix is 60/40, then your base salary accounts for 60% of your total compensation and your on-target commissions account for 40% of your total compensation.

Pay mix varies depending on your role. According to the Betts Compensation Guide, these are the typical pay mixes by role in tech sales:

Job title	Pay mix
SDR	65% / 35%
Account Executive	50% / 50%
Enterprise Sales	50% / 50%
Customer Success	70% / 30%
Account Management	60% / 40%
SDR Manager	70% / 30%
Inside Sales Manager	50% / 50%
Director of Sales	50% / 50%
VP of Sales	50% / 50%

As you can see in the table above, 50/50 is the most common pay mix in tech sales.

Ramp-up period

When a salesperson first joins a new company, they need some time to learn about the company and the product before they can be expected to carry a full sales quota.

This learning time is referred to as a “ramp-up period.”

The length of this period usually ranges from 3 to 9 months. ⏰

During your ramp-up period, you probably won’t be closing any deals, so your employer will usually make a concession in your compensation plan that gives you a chance to still earn 100% of your on-target commissions during this time.

This concession usually takes one of two forms:

1. Your on-target commissions will be guaranteed during your ramp-up period.
2. Your quota will be reduced to an amount that is achievable for a new hire.

Option #1 is obviously better, so ask for this during your interviews.

OTE does not include equity

Your total compensation in tech sales usually has three components:

• Base salary
• Commission
• Equity

OTE includes base salary and commission but not equity.

Equity is another important part of your compensation in tech sales. In fact, equity could end up being the biggest part of your compensation, especially if you join a company in the early days and then it grows significantly.

If you really believe in the future of the company you’re joining, it might even make sense to accept a lower OTE in exchange for more equity.

What is the average OTE in tech sales?

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