FA-301d · Module 1

OTE and Quota Architecture

3 min read

On-Target Earnings (OTE) is the total compensation a rep earns at 100% quota attainment — base salary plus variable. The ratio between base and variable signals what you value: a 50/50 split is standard for quota-carrying Account Executives, a 60/40 split for more strategic or complex roles, and a 70/30 split for roles where relationship continuity matters more than individual deal velocity. The base/variable ratio is the first financial decision in comp design — it determines how much of your sales cost is fixed versus performance-linked.

Comp Plan Financial Framework:
──────────────────────────────────────────────────────
Role            OTE      Base/Var  Quota    Q:OTE Ratio
──────────────────────────────────────────────────────
AE (MM)        $180K     50/50    $720K      4.0x
AE (Ent.)      $250K     50/50    $1.0M      4.0x
BDR/SDR        $100K     60/40    $320K*     3.2x
CSM (upsell)   $130K     70/30    $520K      4.0x
──────────────────────────────────────────────────────
*BDR quota measured in qualified meetings/pipeline

The Quota-to-OTE Ratio (Q:OTE):
  Revenue quota / OTE = cost efficiency
  4x means you pay $1 in comp for every $4 sold
  Below 3x: comp is too expensive for the revenue
  Above 6x: quotas are unrealistic, attainment drops
  Sweet spot: 4x-5x for AEs

Do This

Set quota-to-OTE ratios between 4x-5x for AEs based on deal size and cycle time
Adjust base/variable split by role complexity — more complex = higher base percentage
Validate OTE against market data — off-market comp either overspends or loses talent

Avoid This

Set quotas independently from OTE — the ratio determines your sales cost structure
Use the same comp plan for all sales roles — BDRs, AEs, and CSMs have different incentive needs
Set quotas to match the company target without checking rep-level achievability