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.
Measured as
OTE = base pay + variable pay (at 100% attainment)
Misused when
- 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.
Operator takeaway
- 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.
- Keep OTE (On-target Earnings) consistent by cohort, segment, and period before you use it as a decision signal in planning or reporting.
- Interpret the metric alongside retention, margin, or payback so one ratio does not hide the real operating trade-off.
Next decision
- Quantify the impact with OTE & Commission Rate Calculator if you need to turn the definition into an operating assumption.
- Read OTE (on-target earnings): definition, commission rate, and pitfalls if the decision depends on interpretation, policy, or trade-offs beyond the raw formula.
Where to use this on MetricKit
Calculators
- OTE & Commission Rate Calculator: Compute on-target earnings (OTE), commission rate, and compensation split from base salary, variable pay, and quota.
Guides
- OTE (on-target earnings): definition, commission rate, and pitfalls: Understand OTE, how to compute commission rate from variable pay and quota, and how to avoid common comp modeling mistakes.
- Sales ops metrics hub: quota, pipeline, win rate, and capacity planning: A practical hub for sales ops planning: quota attainment, pipeline coverage, required pipeline, sales capacity with ramp, and OTE math.