You just got the offer letter. You're staring at a number that looks incredible, but right next to it are three letters that change everything: OTE. If you’re new to the game, or even if you’ve been grinding in SaaS for years, that acronym can feel like a carrot on a very long, very thin stick.
What does OTE in sales mean? Basically, it's your "On-Target Earnings."
It is the total compensation a sales rep can expect to earn if they hit exactly 100% of their quota. It isn't a guarantee. It isn't a gift. It’s a projection based on your base salary plus the commissions you earn from selling. If you crush your numbers, you make more. If you miss? You might struggle to pay rent in an expensive city like San Francisco or New York.
Let's get real for a second. Companies love to advertise high OTEs because it attracts hungry talent. But there is a massive difference between a $200k OTE where half the team is actually hitting it, and a $200k OTE where the quota is literally impossible to reach. Understanding how this math works is the difference between a successful career and burning out in six months because you can't hit a "target" that was never realistic in the first place.
The Anatomy of the Paycheck
Most sales roles are split 50/50. This is the industry standard, especially in tech. You get a base salary—that’s the money that hits your bank account regardless of whether you sold a single pencil—and then you get the commission side.
If your base is $60,000 and your commission at 100% quota is another $60,000, your OTE in sales is $120,000.
Some companies move the needle to 60/40 or even 70/30 for roles that are more about account management than "hunting" new business. In those setups, you have more security but less "upside." On the flip side, "Full Commission" roles have an OTE that is 100% variable. Those are high-stress. Honestly, unless you're a seasoned pro with a massive network, 100% commission is a tough way to live.
Why Quota Attainment Matters More Than the Number
Here is the secret: An OTE is a lie if the quota is wrong.
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Imagine two jobs. Company A offers a $150k OTE. Company B offers $130k. You’d take Company A, right? Not so fast. If only 10% of the reps at Company A are hitting their "target," that $150k is a fantasy. If 80% of reps at Company B are hitting their numbers, the $130k is actually a safer, more realistic bet.
When you're in an interview, you have to ask: "What percentage of the team hit their OTE last year?" If the recruiter hesitates, run. Serious sales organizations like Salesforce or HubSpot generally have these metrics ready because they know top performers demand transparency. According to data from the Bridge Group, average quota attainment usually hovers around 65-70% across the SaaS industry. If a company claims 100% of their reps hit OTE, they are either lying or their quotas are too low.
The "Accelerators" That Make OTE Explode
What happens if you do better than "On-Target"? This is where the real money lives.
Enter Accelerators.
Once you pass 100% of your quota, many companies will increase your commission rate. For example, if you normally get 10% of every deal, an accelerator might jump that to 15% for everything sold after you hit your goal. This is why you see top-tier Enterprise Account Executives making $500k+ when their OTE was only $300k. They lived in the "accelerator zone."
But there’s a dark side too: Decelerators.
Some stingy plans actually pay you less per deal if you're below a certain threshold. If you only hit 50% of your goal, they might cut your commission rate in half. It’s a "stick" instead of a "carrot." Always check your contract for these. You want to know if you're being penalized for a slow month, especially in industries with long sales cycles.
Recoverable vs. Non-Recoverable Draws
When you start a new job, you have a "ramp period." You can't be expected to close $100k in deals on your first day. To keep you fed while you learn, companies offer a draw.
A non-recoverable draw is basically a gift. They pay you a portion of your OTE commission for the first few months while you train. You don't have to pay it back. It's the gold standard for new hires.
A recoverable draw is a loan.
If they give you $2,000 extra in January because you’re still training, they expect to take that $2,000 out of your future commissions once you start selling. It creates a "debt" to the company. It’s stressful. It’s common in some older industries like car sales or insurance, but it's becoming rarer in modern tech sales because it destroys morale.
Red Flags to Watch For in Your Offer
Don't let a big OTE number blind you. You need to look at the "Capped" vs. "Uncapped" status.
- Uncapped Commissions: This means there is no limit to how much you can earn. If you sell a billion dollars worth of software, they have to pay you the percentage. This is what you want.
- Capped Commissions: This is a red flag. It means once you hit a certain amount, the company stops paying you commission. Why would you keep working after that? It kills motivation and usually suggests a company that doesn't understand sales psychology.
Another thing? Clawbacks.
If you sell a contract and the customer cancels after two months, many companies will take that commission back out of your next check. This is standard to prevent reps from selling "bad deals" just to hit their numbers, but you need to know the window. Is it 3 months? 6 months? A year?
The "O" is for On-Target, Not "Occasional"
You have to be honest about your own skills. If you take a job with a $250k OTE but you've never closed an enterprise deal in your life, you are going to fail. That target is based on a certain level of activity and skill.
Ask about the Average Selling Price (ASP) and the Sales Cycle.
If the OTE is $200k, but the average deal is only $5,000 and takes six months to close, do the math. You’d have to close dozens of deals a month just to stay afloat. That’s a treadmill, not a career. You want a balance where the OTE is achievable through a reasonable amount of activity.
Real World Example: The SaaS AE
Let’s look at a typical Account Executive (AE) role in 2026.
- Base Salary: $80,000
- Variable (Commission): $80,000
- Total OTE: $160,000
- Quota: $800,000 per year
In this scenario, the "commission rate" is effectively 10%. If you bring in $800k in revenue, you get your $80k commission. Simple.
But if you bring in $1.2 million? With a 1.5x accelerator after 100%, you’d make your initial $80k, plus 15% on the extra $400k. That’s another $60k. Your total pay jumps to $220,000.
This is how people get rich in sales. It isn't the base salary. It’s the "over-performance" above the OTE.
How to Negotiate Your OTE
You can't always change the commission percentage—that’s often set in stone by the finance department—but you can negotiate the base.
A higher base salary lowers your risk. If the market shifts or the product has a major bug that makes it hard to sell, your base is what keeps your lights on. If a company is firm on a lower OTE than you wanted, ask for a higher "Sign-on Bonus" or a longer "Guaranteed Commission" period during your ramp-up.
Also, ask for a Quota Relief if you're taking over a "dead" territory. If the person before you burned all the bridges, it’s going to take you longer to hit that OTE. You shouldn't be punished for the previous rep's mistakes.
Actionable Steps for Your Next Sales Interview
When you see a job posting with a massive OTE, don't just apply. Do this first:
- Check RepVue or Glassdoor: Look for actual "Quota Attainment" scores. If the average attainment is 40%, cut that OTE in half in your head. That's your real expected income.
- Calculate your "Break-even": How much do you need to earn just to cover your bills? Ensure your base salary covers this. Never rely on commission to pay for necessities.
- Ask about the "Inbound vs. Outbound" split: If you have to hunt all your own leads (Outbound), hitting OTE is much harder than if the marketing department hands you warm leads (Inbound).
- Read the fine print on "Spiffs": These are short-term bonuses (like $500 for booking 10 meetings this week). They can pad your OTE, but they aren't part of the official calculation.
- Analyze the Product-Market Fit: No matter how good the pay structure is, you cannot hit an OTE for a product that nobody wants to buy. Check G2 reviews. If the customers hate the software, the sales reps are likely struggling.
At the end of the day, OTE in sales is a performance-based metric. It represents a promise of what is possible, provided the company has a good product and you have the work ethic to sell it. Treat it as a guideline, not a guarantee, and always do your own math before signing on the dotted line.