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In the lucrative world of tech sales, understanding On-Target Earnings (OTE) is crucial. It's not just a figure on your job offer – it's a reflection of your potential earnings and a key factor in making a career decision. So without further ado, let’s dive into what OTE is, and see how it can shape your career in tech sales.
OTE Explained: The Big Idea
OTE stands for On Target Earnings, which is your projected total salary, combining a guaranteed base salary with potential commissions. This compensation structure is essential in sales roles, where performance directly influences earnings. It's important to note that OTE can be either capped, with a limit on commission earnings, or uncapped, offering unlimited earning potential based on sales success.
Calculating Your OTE
Calculating OTE isn't just about adding two numbers. It involves understanding market norms, the complexity of the sales role, and aligning with the company's expectations. For instance, it is common for a US based Account Executive to receive a 50/50 split in their base salary and commission. This means half of the OTE is base salary, and the other half is expected commissions. However, it is important to note that this can vary greatly depending on the role and industry.
Why OTE Matters in Sales Jobs
In sales, motivation, and performance are intrinsically linked. OTE acts as a powerful motivator, aligning a salesperson's earning goals with the company's targets. It incentivizes performance and rewards those who reach and exceed their quotas, especially in roles with uncapped OTE. This structure is crucial in driving sales productivity and retaining top talent.
OTE For Different Sales Jobs
Different sales roles come with varying OTE structures and dollar amounts. For example, a mid-level sales rep may have a low base, with a high commission structure, resulting in a high OTE. But on the other hand, a sales manager may have a high base salary, with a low commission structure, that results in the same OTE as the mid-level sales rep.
Our friends over at RepVue use real data they collect to find what the average tech sales rep can expect to make in different roles. Let’s take a look at the median OTE for some of the most common sales roles in the tech industry.
Sales Development Representatives (SDR) can expect an average base salary of $55,000 with an OTE of $80,000, and top performers have the potential to reach $130K OTE.
On average, account executives can expect to $95,000 in base salary with an OTE of $180,000. However, if you’re a top performer, you can expect to make up to $450,000 per year. But there’s also bad news… over the past year, only 42% of Account Executives have reported they’re hitting quota. Ouch.
The median base salary for a sales manager is $135,000, with a median OTE of $250,000. Top performing Sales Managers can reach an OTE of $487,000, and 45% of Sales Managers have reported hitting quota this year.
OTE and Quota Attainment: A Major Consideration
When considering a job offer in tech sales, OTE will be a major factor in your decision-making process, but shouldn’t be the only one. It's essential to look beyond OTE, and understand a sales team’s current quota attainment. If a sales rep doesn’t reach their quota, they will not make their OTE.
Many companies will advertise very high OTEs to attract applicants, but please be aware. It if important to understand the sales team’s current quota attainment to understand if sales reps at the company are making the advertised OTE.
For example, a company may advertise a $150K OTE with a $50K base salary and $100K in expected commission. If each sales rep is only hitting 50% of their quota, this means that actual earnings will be much closer to $100K.
To avoid this common pitfall, make sure to ask the hiring manager what a sales team’s current quota attainment is. Additionally, if you can, ask a sales rep who is currently on the sales team. They’re much more likely to give you the real answer.
In Conclusion: Navigating OTE in Tech Sales
OTE in tech sales is a multi-dimensional concept, blending guaranteed income with performance-based earnings. Its calculation, impact, and implications vary across roles and companies. As you navigate your career in tech sales, let OTE guide your decisions, but also consider the broader context of the job, including benefits, growth opportunities, and company culture. Remember, in the lucrative world of sales, your earning potential is only capped by the opportunity and your performance. There’s always room to grow.