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Determining OTE:
OTE can be a fixed, lump payment, a specific commission percentage, or a combination of both. A good general guideline is to base OTE on one-fifth of the annual sales quota or 6 to 8 times the sales quota, but you can vary these guidelines based on the competitiveness of your industry, the experience of your salespeople, the complexity of your sales process, and your company's maturity, revenue, etc.
OTE should be one number that all parties understand and agree to. You can base your OTE on the reality of a candidate's established W2 earnings, but allow some growth to entice potential candidates. It is important not to inflate the OTE number during the hiring process and then lower it after a candidate has accepted your job offer, as this would be unethical. Using a realistic OTE will motivate and engage your employees and reward them for the work they have done.
OTE Breakdown:
- Sales OTE = base salary + projected commissions from sales.
- Executive OTE = base salary + likely bonus.