If you see “$120k OTE” in the job posting and are interested and turn to Google to understand what OTE means, then you did a good job. Because it has a direct impact on your earnings and future goals.
Sales is one of the most creative jobs. You have to understand customers’ pain points and emotions to get them to buy your product, and it’s not easy to make someone believe they need something so much that they’re going to buy it – and most importantly, buy it from you. For all this hard work and long sales cycles, what does a person get in return? That’s what we are going to discuss in this guide.
Let’s cut to the chase and understand what OTE means, what OTE is in sales, and what the sales reps and company’s approach should be.
What does OTE mean?
OTE stands for On-Target Earnings. It’s the total compensation (base salary + commissions/bonuses) you earn if you hit 100% of your sales quota.
OTE is divided into two types of salary: Base Salary and Variable Commission
Base salary: Fixed income (you get this even if you miss targets).
Variable Commission: Commissions/bonuses tied to hitting goals.
Pay Mix: The ratio of base to variable pay (e.g., 60/40).
OTE: Total income you generate in the form of pay mix.
OTE: Base salary + Variable commission + upcapped)
100k =60k base + $40k commissions (at 100% quota).
If you fail to meet the quota within the given time, you will lose a chunk of your commission, which will be $40k.
What is OTE in sales?
When it comes to sales, OTE (On-Target Earnings) sets the earnings expectations. Your actual income relies on how well you sell your company’s products or services. Keep in mind, OTE isn’t guaranteed money; your effort and the company’s realistic sales goals determine your paycheck.
For example, if you see a job listing with $200000 OTE, you might get excited and prepare for the interview. During the interview, the employer reveals the base salary is $100,000, and the remaining $10,000 is commission based on reaching your sales targets. If you exceed your goals, you can earn even more.
The payment structure varies based on your job, industry, and the product or service being sold. It can be set up in different ways, such as 0/100 (no base salary, all commission), 50/50 (equal base and commission), or 90/10 (mostly base salary with some commission). Ultimately, the total OTE and how much you can earn will depend on several factors, including how well you meet your sales targets.
Is OTE a realistic figure?
As we discussed earlier, OTE is not a guaranteed income. You won’t automatically get that amount just because it looks good on paper.
To actually earn your full OTE, you need to meet 100% of your sales quota.
But the part to consider is how easy or tricky it can be.
The reality is – These quotas can be pretty tricky to achieve.
Let’s break it down a bit:
What are the Quota Attainment Rates?
In 2024, only about 43% of sales representatives were able to meet their sales quotas, and in the B2B sector, the number dropped to 25%. That shows how tough it can be to reach those targets, meaning achieving full OTE isn’t a piece of cake.
How do companies treat Quotas?
According to Ebsta, some companies have ramped up their quotas by as much as 37% compared to last year. This means the targets are getting more ambitious, which can make it even more challenging to hit your numbers and, by extension, earn your full OTE.
So, while OTE can look like a great earning goal, it’s crucial to consider your company’s sales performance and the current market conditions when figuring out how realistically you can achieve that goal.
How you can evaluate OTE and choose a good job
When you’re thinking about taking a sales job that has an OTE (On-Target Earnings) component, there are some important things you should ask or find out first.
- Ask about historical performance:
Start by asking how many people on the sales team reached their OTE in the last year. This question helps you understand how realistic it is for someone in that role to achieve their earnings goals. If many team members are hitting their targets, it’s a good sign.
- What is their quota-setting process and criteria?
Next, find out how the company sets its sales quotas. Are the goals based on realistic expectations in the market, or are they set so high that they’re almost impossible to reach? Knowing this can help you get a sense of whether you’ll be set up for success.
According to Wall Street Prep, 91% of companies fail to achieve their sales quota due to multiple reasons given below:
Keeping these factors in mind, choose a company that sets realistic expectations for sales representatives and is willing to invest in their sales team training to meet business needs, goals, and quotas.
- What’s their compensation structure
Finally, make sure you understand how commissions work. Ask questions about how they calculate your pay and when you’ll get paid. It’s important to have clear answers so you won’t have any surprises later on.
By asking these questions in a job interview, you can easily understand if this company is suitable for you. Does your earning goal align with the company’s structure, or can you meet the requirements for completing the quotas?
If yes, then go for it; if not, consider other options that better align with your expectations.
How employers should motivate employees by setting realistic OTEs
When setting On-Target Earnings (OTEs), employers should create goals that motivate employees but are still achievable.
Here are some simple tips for doing this:
- Match OTEs with market standards
Before setting goals, check what other companies in your industry are offering. This helps to ensure your OTEs are attractive and competitive, which can attract and keep great talent.
- Use research and data
Using past sales data is a smart way to set fair targets. Look at what your team has done in the past to help you decide what they can realistically achieve. When quotas match real data, employees feel like their goals are reachable, which boosts their motivation.
- Be open and clear
It’s important to be transparent about how OTEs work. Explain the different parts of the earnings and what employees need to do to reach their targets. When everyone knows how their performance affects their pay, it builds trust and encourages them to reach their goals.
A well-structured OTE not only helps improve employee performance but also lowers turnover rates. By setting clear expectations and realistic goals, you create an environment where employees feel valued and motivated to do their best.
How to calculate OTE based on your role
OTE = Base Salary + (Commission Rate × Quota)
Account Executive:
Base: 70k ∣ Quota: 500k/year | Commission: 8% → OTE = 70k+(500k × 0.08) = $110k
SDR:
Base: 45k ∣ Bonus: 25/meeting (100 meetings/year) → OTE = 45k+(25 × 100) = $47.5k
Sales Manager:
Base: 90k ∣ TeamCommission: 51.2M → OTE = 90k+(1.2M × 0.05) = $150k
Things to consider before accepting a specific job offer
Before accepting an offer with an OTE, demand clarity on quotas, pay mix, and ramp time.
Ask the following questions:
1- If their Job description matches their words – Inflated OTEs
When companies advertise On-Target Earnings (OTE), they often present big numbers that can be misleading. For example, a company might say, “You can earn $200,000 OTE!” This sounds amazing at first, but the reality can be quite different. Many times, the quotas they set are so tough that only about 10% of the sales team manages to meet them. So, before you get excited about that big number, ask yourself: “What’s the average quota attainment for the team?” Getting a clear picture can help you understand what’s realistic.
2- What is the ramp time for new reps
When a company hires a new sales rep, they typically give them 3 to 6 months of ramp-up time to learn the job before meeting full quotas. This time is important for getting comfortable in your role. If you find yourself in this situation, consider negotiating for a non-recoverable draw – a guaranteed paycheck that you won’t have to pay back. This can help you manage during your learning phase without financial pressure.
3- Capped vs. Uncapped Commissions
Capped Commissions:
Limited commission. This means there’s a limit on how much you can earn from commissions, regardless of your performance. In many regulated industries, these limits are standard. Even if you exceed all expectations and meet your quotas, you won’t earn more than that set amount.
Uncapped Commissions:
With an uncapped structure, there’s no limit on your commission earnings. This is perfect for motivated individuals who work hard to exceed their targets. This way, you can earn much more, making it a great option to achieve success.
| Capped OTE | Uncapped OTE |
| Predictable for employers | Motivates high performers |
| Limits earning potential | Can lead to aggressive sales |
| Easier budgeting | Higher risk for employers |
When you’re considering a job with an OTE, don’t just look at the big earnings figure. Ask the right questions about quota attainment, understand how ramp time works, and know whether you’ll be under a capped or uncapped commission structure. Being informed will prepare you for a more successful sales career.
How can you ask for a higher OTE?
1- Discuss base salary
If you work in an industry with a long sales cycle or when it is difficult to predict when sales will close, don’t hesitate to ask for a higher base salary. A solid base can provide you with more security.
2- Request accelerators
Ask for accelerators in your compensation plan. For example, you could say something like, “I’d like a 15% commission after I hit my quota of 100%.” This means that once you’ve met your sales goals, your commission rate increases, and you can earn more.
3- Use data for support
It can be helpful to use information from websites like Glassdoor or RepVue. These platforms give insights into what others in your position are earning. You can use this data to show that your request for a higher OTE is reasonable and in line with industry standards.
With these simple negotiation strategies, you can make a strong case for why you deserve a higher OTE.
When does OTE work, and when it doesn’t
| OTE works well for | OTE doesn’t work well for |
| Motivating reps with clear earning potential | Start-ups with shifting goals (unstable quotas) |
| Companies needing predictable budgeting | Roles with little control over outcomes (e.g., long sales cycles) |
Conclusion
Understanding OTE (On-Target Earnings) in sales is really important when you’re choosing a job offer. You don’t want to end up in a position where your skills are being wasted, and you’re getting paid much less than what you’re worth. Sales might look glamorous, but closing a deal takes a lot of hard work. However, the potential for big commissions can be a great motivator.
For employers, OTE can make it easier to attract top talent, but it also comes with the risk of losing them since companies compete for the best people. That’s why, from an employer’s perspective, retaining your sales team is super important. You can do it by creating an attractive and competitive OTE package that’s hard to match by others.
FAQs
Q: What is OTE in sales?
OTE stands for On-Target Earnings. It’s the total compensation (base salary + commissions/bonuses) you earn if you hit 100% of your sales quota.
Q: What is remp up Time
It’s a time given to new sales representatives that typically lasts 3-6 months, during which he/she is not expected to close sales and is totally dedicated to learning about the company’s products or services.
Q: What is draw in sales job?
In the OTE perspective, draw is a consistent and guaranteed income given to sales representatives in a ramp-up period to ensure him/her that they will get a proper commission when they start generating sales. It’s a way to motivate sales people.
Q: Is OTE negotiable?
Things like base salary and commission rates in OTE can usually be talked about and adjusted depending on your experience and the industry you’re in.
Q: Do I receive OTE if I don’t meet my quota?
No, OTE means the potential money you can earn if you hit your targets. If you don’t meet your quotas, you usually earn less.
