This is why OTE is pointless

Great article about pay ranges. In Sales you may have a base of $1 but an OTE of $1,000,000...so what?!


IMO - you need to figure out the value you are bringing to your employer and negotiate from there.


"On Target Earnings" is what they expect to pay you IF you hit quota. How attainable is that quota? Is the widget you're selling even viable? If you have a base of $1 and a widget which doesn't sell - you just made a whole dollar. Probably less though since you won't be there long enough to collect.


Just something to think about when a company flashes you a fancy OTE when you current OTE looks so plain.

https://www.wsj.com/articles/job-postings-with-broad-pay-ranges-leave-applicants-guessing-in-nyc-11667777350?mod=business_lead_pos3 Job Postings With Broad Pay Ranges Leave Applicants Guessing in NYC Some companies stretch salary ranges to hundreds of thousands of dollars as the firms comply with New York Cityโ€™s pay-transparency law.
๐Ÿ’ฐ Compensation
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TennisandSales
Politicker
9
Enterprise Account Executive
this is true! exect when your OTE effects your vairable comp:

I was at a company where the comp was (for sake of easy math) $200KOTE 50/50 split. so $100K base and $100K variable.

Lets say the quota was $1MM.

if you closed a deal for $100K that is 10% of quota.
So you made 10% of your Variable.
10% of $100K = $10,000

so in this case your OTE was actually important because it effected how much you made on each deal.

It was complicated as fuck but it did matter.

This is NOT common though so.....yeah
JustGonnaSendIt
Politicker
7
Burn Towns, Get Money
This is the comp strategy my company uses.

I was just informed my quota may go up by almost 30%...

So naturally I inquired about my OTE going up commensurately.

New boss had the gall to say with a higher quota, I'd sell more, and thus make more. Dude clearly doesn't get it lol.
Sunbunny31
Politicker
1
Sr Sales Executive
When a dollar in sales is worth less to some reps than others closing the same exact deal...
Sunbunny31
Politicker
3
Sr Sales Executive
It's not uncommon.

If my OTE is the same as yours but my quota is $1.25 million, my % pay out is less. And it happens all the time.
ThatNewAE
Politicker
1
Account Executive - SMB
This is good information to have ! Thanks Sunbunny!
Sunbunny31
Politicker
2
Sr Sales Executive
I know it confused the heck out of me when I first had it - took a while (longer than it should have, lol) for the light bulb to go on.
BourbonKing
Valued Contributor
7
VP of Sales
As you noted, OTE is only pointless if quotas are unrealistic. If quotas are realistic (not a lay-up, yet attainable with reasonable skill & effort) then OTE is what you will earn for delivering 100% of quota (the target).

This is why it's so important that job seekers ask: what percent of reps last year finished <90%, between 90%-110%, >110% of quota? It should be roughly 20%/60%/20% if quotas are set correctly.

The appropriate follow-up question then is: What was the difference in those sellers who missed so badly and those who crushed it?

If 50% of reps finished below 100% of quota, then their advertised OTE is, in fact, pointless.
Blue_Turtle
Opinionated
1
SDR
I really love this 20/60/20 comparison and Iโ€™m going to have to write it down. Itโ€™s a great thing to know even just for internal moves.
CuriousFox
WR Officer
6
Senior Account Executive
Thank you for posting this article. I'm sure it will help the rush of newbies in here.
Mendizo
Executive
6
Sr. Director
Lots of great comments here; one thing I would also ask (in addition to quota attainability), is around ICR (Individual Commission Rate). That basically means "for every dollar that I sell, how much commission do I get?". This is a quick way to gauge the relative amount you will receive, and is hard to give a muddled answer to (unless they are outright hiding something).

For example, let's take an OTE of $300k, with 50/50 base/variable. If your quota is $1M, then your ICR is 15%. For every $100 you close, you get $15.

The next question is around accelerators. Assuming that the quotas are achievable, your biggest earnings would often come from accelerators, which can be 2x, 3x+ your normal rate. For example, if a plan has accelerators above 100% attainment (including different tiers), you may see an ICR of 20%, 25% or more if you hit that. This will let you see how much more you could make for every dollar you close above quota.

Obviously, it all comes back to how realistically the plan is built to hit quota, and companies won't generally make it super easy. But, ask for ICR as one of the metrics for an 'easy' way to get a view. This also helps balance out any silliness with quotas and/or OTE's changing around, etc... it's one number that takes both of those into account (so if your quota goes up but OTE stays the same, your ICR drops).
SaaSsy
Politicker
5
AE
Good article, curious to see how this continues to play out. You absolutely nailed it with the mystery of OTE - had to learn the hard way myself years ago to ask lots of details about % at quota, tenure, etc., etc. and not just take the โ€œX is bringing home $750k this year!โ€
ChumpChange
Politicker
5
Channel Manager
The OTE charade. Only matters if the current staff is hitting quota consistently. Another thing to call out is to ask if there's a RevOps department at the company you're applying for. RevOps is the team that builds ATTAINABLE targets without Finance pricks chiming in. Finance will ALWAYS be on the pay them less and ask for more mindset. From what I've seen RevOps should model out quotas with a 60/40 or 70/30 quota attainment goal. If that team doesn't exist then buckle up for the shitshow of having goalposts moved.
UserNotFound
Politicker
5
Account Executive
I got a case of OTE fever and it led me to a role that did more harm than good... will never consider OTE before I know percentage of reps hitting it again. Rookie mistake!
BlueJays2591
Politicker
4
Business Development Manager
I had a company offer 2.5x what I was making as a BDR manager. I was excited at first until I questioned why they were willing to pay that much. Didn't take the job and I don't think they're around (austin based start up)
alonzoharris
Politicker
1
Channel Account Manager
I'd love to hear what their response was
Sunbunny31
Politicker
3
Sr Sales Executive
Great article, and very valid points! Thank you.
jefe
Arsonist
3
Head of Sales
Paywall for me, but based on your post and what I know, you're 100% right. OTE can be a pie in the sky to hook people and reel them in.
StalledDeal
Contributor
2
Enterprise Account Executive
OTE and Base are worth nothing if you donโ€™t sell. Always have in mind that you will sell - having judged Product Market Fit, Pipeline, Lead inflow etc.

Being on a 250K OTE with 50/50 split and hitting 50% of quota brings you 125+67.5=187K

Being on a 150K OTE with a 50/50 split but hitting 300% earns you 75+225=300K plus club and assuming commissions are linear. In most cases there are accelerators in place that bring a bigger number.

So agree on OTE being pointless to a point where your ability to sell and transact consistently through the quarters and overachieve quota is more important.
Blue_Turtle
Opinionated
0
SDR
Fair point on the math comparison. So basically OTE is less important than looking at: quota, % commission from each sale, number of reps hitting vs not, etc.
activity
Valued Contributor
1
VP, Business Development
Yes, a ton of questions you want to ask when employers flash large OTE's. What % of their SF is hitting quota, what does the product/market fit look like, what are competitive advantages, how competitive is the space, etc. Sometimes, it's easier focusing on a less sexy space if the market fit fantastic and competition is not a fierce.
sketchysales
Politicker
1
Sales Manager
For anyone unsure of their value in sales, a good rule of thumb is the GP you produce should be 4 times the salary you generate. So If you bring $400k GP to your company, your salary should be circa $100k. At least that's what I go by.
Pachacuti
Politicker
0
They call me Daddy, Sales Daddy
until you get into big ticket items. My quota is $5m...my pay isn't $1.25m
sketchysales
Politicker
1
Sales Manager
You generate 5 mil gross profit for the company? Or 5 mil revenue? Big difference in most businesses
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Quota to Base (or OTE) ratio?

Question
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4

What % of OTE should be variable incentive and base?

Question
12
59

What is your OTE?

Discussion
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