Definition: OTE is an acronym for on-target earnings and is used mostly for sales roles. OTE refers to the total expected income a salesperson can earn if they meet all of their sales performance targets.
This figure typically includes a base salary and additional commissions or bonuses that are earned upon achieving specific sales goals or quotas. In the United States, sales OTE is often a 50/50 split where the base salary is 50% of earnings and the salesperson is expected to make the rest of their income from variable compensation (commissions).
In hiring, a prospective sales hire would be wise to ask what OTE is for their role and what percentage of the current staff achieve it. SDRs, BDRs, and AEs should ask this question. If they are the first hire in that position, just understand that the stated OTE is likely a guess.
OTE in sales being stated incorrectly causes a couple of challenges post employee screening phase:
- When OTE is stated as a market or attractive number, but no one can realistically hit the number, the sales team will likely start to distrust management and the best folks will leave for firms where variable comp is achievable and they can exceed OTE projections.
- When the base salary component of OTE is too high, salary squatting may ensue. The company may start to attract unmotivated sales professionals who are really just collecting a salary and not even concerned with making their variable comp portion.
The best sales people, who will eventually go on to become team leaders or high-ticket closers are not satisfied with just achieving OTE. To them, it’s the median outcome and they will able make double, triple, etc.
Having great CRM hygiene and strong sales leadership such as Chief Revenue Officer in place can help the team towards OTE. In smaller companies, a Head of Growth may fill this role until the company can hire full-time senior sales leadership.
Use It In a Sentence: When Jane accepted the new sales position, she was excited about the On Target Earnings of $80,000 per year, knowing that reaching her sales targets could significantly boost her income beyond her base salary.
More Definitions: CAC Definition, CRM Hygiene Definition, NRR Definition, ROI Definition, KPI Definition, CRM Definition
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