OTE stands for On-Target Earnings — the total annual compensation you'll receive if you hit 100% of your sales quota. It's the most important number in any sales job offer, and understanding it is critical to evaluating your true earning potential.
How OTE Breaks Down: OTE = Base Salary + Variable Pay (at 100% quota). Example: $80K base + $80K variable = $160K OTE. The base is guaranteed; the variable is earned through performance. Common splits: SDRs get 70/30 or 80/20 (more base). AEs get 50/50 or 60/40. Enterprise roles: 50/50.
What Happens Above and Below Quota: Below 100%: you earn a proportional commission. Hit 80% of quota = roughly 80% of variable pay. Above 100%: this is where it gets exciting. Most companies offer accelerators — higher commission rates above quota. At 120% attainment, you might earn 1.5x the standard rate. At 150%+, some plans pay 2-3x. This is how top reps earn $300K+ at roles with $200K OTE.
Evaluating OTE Realistically: The most important question: 'What percentage of reps hit OTE?' If 60-80% hit target, the OTE is achievable. If only 20-30% do, the company either has unrealistic quotas or is using inflated OTE to attract candidates. Always ask this in interviews — it's the single most revealing compensation question.
OTE vs Actual Earnings: Company-reported OTE is a target, not a guarantee. Your actual earnings depend on: quota realism, territory quality, ramp time (most companies offer reduced quota for new hires), market conditions, and your skill level. Budget based on 80% of OTE for financial planning; treat anything above as upside.
Red Flags in OTE Offers: Very high OTE with very low base (signals commission-only risk). OTE that seems too high for the role (inflated quotas). No clarity on commission structure (they're hiding something). Monthly or quarterly quota resets with no rollover. Clawback provisions on churned customers.
Negotiating OTE: You can negotiate both components. Higher base provides stability; higher variable provides upside. You can also negotiate: guaranteed first-quarter commission (draw), ramp quota structure, accelerator thresholds, and equity. The best negotiations address all components, not just the headline OTE number.