OTE (On-target Earnings)

Definition

OTE (on-target earnings) is total sales compensation at 100% quota attainment: base pay plus target variable pay.

Formula

OTE = base pay + variable pay (at 100% attainment)

Example

If base is $80k and variable target is $80k, OTE is $160k at full attainment.

How to use it

• Use OTE and quota to estimate a simplified commission rate (variable / quota).
• Keep time units consistent (annual OTE with annual quota).
• Use OTE to quota ratio as a quick sanity check on plan generosity.
• Model accelerators separately; they change total earnings above quota.
• Review OTE against market benchmarks to stay competitive.

Common mistakes

• Mixing annual OTE with quarterly quota (unit mismatch).
• Ignoring accelerators/decels when comparing comp plans.
• Assuming every rep hits 100% attainment.
• Setting OTE without validating affordability in the unit economics.
• Comparing OTEs without verifying quota definitions.

Why this matters

This term matters because small changes compound in SaaS metrics. Use consistent definitions by cohort and segment so you can diagnose retention, payback, and growth quality.

Practical checklist

• Write a 1-line definition for "OTE (On-target Earnings)" that your team will use consistently.
• Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
• Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
• Use a calculator that references this term (e.g., OTE & Commission Rate Calculator) to sanity-check assumptions.
• Read the related guide (e.g., OTE (on-target earnings): definition, commission rate, and pitfalls) for context and common pitfalls.

Where to use this on MetricKit