Employer and Job Seeker Hubs | Smoke, mirrors and OTEs

Apr 7, 2022

Daniel Hale

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    The world of OTEs can be a murky one, full of misconceptions, inflated promises and unrealistic expectations. But, on the flip side, a well explained and realistic OTE can be a wonderful advertisement for a company’s commission structure and also a gauge on the value that the business puts on its sales team.

    Simply put, an OTE (on-target earnings) or on-track earnings is the total salary (base + commissions) a sales rep can expect to earn if they manage to achieve 100% of their designated quota/sales target.

    It’s important to remember, however, that OTEs are all relative. 

    For example, if the OTE is advertised as a high number, but the sales target is difficult to achieve, the realistic earning potential for that role is much lower than the OTE advertised. In another example, if the entire team is hitting their target and those targets are relatively easy to achieve, the real earning potential of the role is actually higher than the OTE. In both examples, the sales target might need to be decreased or increased accordingly, and the OTE should then be adjusted off the back of that.

    An easy way to determine if an OTE is achievable is to simply ask what the average commission across the sales team was over the past 12 months and how many in the team are regularly hitting their targets. The type of response that you get to this question will often tell you the real story.

    So, in a world that is becoming more and more transparent, setting realistic sales targets based on achievable metrics has never been more important to attract and retain sales talent. It’s worth putting in the time to dig into the numbers and work out the cost to the business and the profit margins needed while also offering an OTE that stacks up well against competitors.

    Having a simple, easy to understand commission structure is also vital, but that’s a discussion for another day…

     

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