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OTE Formula:
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On-Target Earnings (OTE) represents the total annual compensation a sales professional can expect to earn when achieving 100% of their sales quota. It combines base salary with potential commission earnings at target performance.
The calculator uses the OTE formula:
Where:
Explanation: This calculation provides sales professionals with a clear picture of their total potential earnings when meeting their sales targets.
Details: Understanding OTE helps sales professionals evaluate job offers, set income expectations, and plan their financial goals. For employers, it's crucial for designing competitive compensation packages.
Tips: Enter your base annual salary and the commission you would earn at 100% quota achievement. Both values should be in the same currency for accurate results.
Q1: What's the difference between OTE and total compensation?
A: OTE represents target earnings at 100% quota, while total compensation may include additional bonuses, benefits, and over-performance incentives.
Q2: How often is commission typically paid out?
A: Commission structures vary but are commonly paid monthly, quarterly, or annually, often with a smaller base salary and larger variable component.
Q3: What is a typical base/commission split in sales roles?
A: This varies by industry and seniority, but common splits range from 50/50 to 70/30 (base/commission) for most sales positions.
Q4: Should I negotiate base salary or commission rate?
A: Ideally both, but prioritize securing a livable base salary while ensuring the commission structure is achievable and rewarding for over-performance.
Q5: How does OTE differ from actual earnings?
A: Actual earnings may be higher (with over-performance) or lower (with under-performance) than OTE, which represents the target at 100% quota achievement.