On-target earnings, commonly called OTE, represents the dollar amount a sales rep can expect to earn if they hit their sales quota. This figure helps commission-based sales reps gauge earning potential for each position they consider when seeking a new role.
Companies often advertise attractive OTEs to secure great reps on their sales teams. However, it’s false advertising if the OTEs aren’t attainable or realistic. Getting it right is essential, or you risk losing top talent.
What is the average OTE of a sales rep?
In this post, we’ll examine this question in more detail by defining OTE, factors that affect it, how to set it, average OTEs by role, interview questions, what else reps can negotiate, and share our free OTE calculator.
Calculate OTE:Quota ratios
Use this free calculator to ensure your reps’ on-target earnings and quotas mirror what they’re bringing in for the business.
Try it NowWhat is OTE?
OTE is defined as a salesperson’s potential total income, including annual base salary plus commissions when they attain quota.
OTE is calculated by adding the annual base salary plus the annual commission earned at 100% of the quota.
Do you require assistance calculating OTE, setting commission rate, or managing sales quota? QuotaPath offers a free sales compensation calculator to simplify the process.
Sales Compensation Calculator
Calculate OTEs, sales quotas, and commission rates to design your sales compensation plans.
Try for FreeFactors that affect OTE
To set an OTE that balances enticement with reality, consider these key factors.
| Industry and company size | Compensation for the same sales role within an industry and a similar size business should be comparable, but it’s common for smaller companies to offer lower OTE than larger corporations. |
| Individual performance and sales quota | OTE is commonly tied to a sales rep’s ability to meet or exceed their sales quota. For example, more experienced salespeople may have a higher quota and OTE when compared to a less seasoned sales rep. |
| Commission structure and base salary | The pay mix influences the OTE. For example, a greater percentage of variable pay can result in a higher OTE, but a higher percentage of base salary offers more stability and a lower OTE. |
| Region | Not only do OTEs vary by industry and company size, but they also differ based on geographic location. For example, OTEs within the same industry at a comparable size company may be higher in New York City versus Oklahoma City, OK. |
How to set your OTE
In addition to the factors that can affect OTE, you must remember that your OTE should be unique to your business model.
Christina Brady, SVP of Sales at Spekit, said, “Standardizing comp plans and OTEs is meant to drive equity and fairness, but the denominator is often not the same. You often can’t look at overall metrics and averages in an industry because what goes into that?”
To tailor your OTE to your specific business, evaluate the following elements:
- Years of experience: More years of experience often yield a higher OTE
- Average deal cycle: Shorter sales cycles often mean more deals closed in a given period and lower OTEs.
- Average sales price: A higher average sales price often equals a longer deal cycle and higher OTEs.
- Region: OTE varies by region. For example, OTE is often higher in San Francisco than in Charlotte.
- Size of quota: Quota impacts OTE and is usually tied directly to company size. For example, larger companies typically set larger quotas compared to OTE.
- Revenue retention rates: If most deals are one-time sales, you’ll typically see higher OTEs.
“Many companies don’t understand the nuance of building a fair and equitable plan. Do the work and don’t look into only what’s fair in general,” said Christina.
Average OTE for Sales Reps
We agree with Christina, but having a starting point to ensure your OTE is at least in the ballpark is helpful. Below, we pulled data on average OTEs for sales reps across industries and how they vary by role and region.
Average OTEs for account executives (AEs) in different industries include:
- Tech: $160,000
- Biotech & Pharma: $165,000
- Financial Services: $137,000
- Health Services: $112,000
- Manufacturing: $141,000
OTE is influenced by how much experience the rep has.
For example, an entry-level AE with 0-3 years of experience receives $140,000 – $200,000 versus a senior-level AE with 3-5 years of experience earns $160,000 – $250,000 OTE.
OTE also varies based on geographic location. An entry-level tech AE averages $150,000 in central and mountain time zones compared to $170,000 or more in New York City or San Francisco.
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Talk to SalesOTE questions reps should ask in the interview process
OTE comparison is only useful if the OTE is realistic and attainable. Asking these questions during the interview helps reps delve deeper into compensation to decide whether the role, pay and employer match their needs.
1. What percentage of your team is achieving their OTEs?
2. What type of coaching do you offer?
3. What is the path to promotion, and what are those OTEs?
4. Can I speak to one of the reps who performed at OTE or higher?
5. What resources are available to help reps hit OTE?
What else can you negotiate in addition to base/variable comp?
You’ll find that some SaaS companies have non-negotiable OTEs and compensation packages to standardize it by role. However, that doesn’t indicate you should accept the offer.
“Companies expect you to negotiate,” according to Alexine Mudawar, CEO of Women in Sales, “If you get an offer, pause and show gratitude, and ask to review the information more closely after the call. Then review the list and see where you can sweeten the deal.”
Here’s a list of items often up for negotiation to consider:
- Equity
- Base Salary
- Variable Comp
- PTO
- Education Budget
- Severance
- Title
- Territory/Account List
- Sign-on Bonus
- Moving Expenses
- Remote Work
“After 10+ years in tech sales,” Alexine shared, “I have yet to hear a single story of anyone losing a job offer due to trying to negotiate.”
Calculate OTE:Quota ratios
Use this free calculator to ensure your reps’ on-target earnings and quotas mirror what they’re bringing in for the business.
Try it NowQuotaPath’s Quota:OTE Calculator
Do you need to check the health of your OTEs? Use our free resource, the Quota:OTE Calculator.
It’s easy to use (there’s even a quick tutorial video to review how it works), and this free tool helps you determine things like:
- Are your OTEs realistic?
- Are they too high or maybe too low based on the historical performance of your company?
- Are your reps paying their way?
Realistic and attainable OTEs
Businesses need to set realistic and attainable OTEs. Deceiving sales reps by advertising inflated OTEs that none of your current reps achieve will backfire when they discover the truth.
Properly set OTEs based on key factors and the specific attributes of your company to help attract and retain top sales talent. Use our Quota:OTE Calculator to check the health of yours or when you’re planning to make changes.
Reps need to remember that OTEs vary by industry, experience, and geography when comparing OTEs between sales roles they are considering, then ask the right questions to deepen their understanding of the reality of the specific role. Once they have an offer, they can negotiate the details to sweeten the deal—it’s expected.
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