What is a Good Quota to OTE Ratio? (And Why You Should Care)

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A perk of working in the sales compensation industry is that I've seen multiple companies experimenting with their sales comp plan- and still getting it wrong. Sales compensation decisions are usually affected by a lot of details such as market trends, deal size, company size, industry, etc. And, even within the same industry, you will most likely not get it right on the first try. Sorry.

All organizations must go through what will feel like a "Why isn't any pay plan working?!" phase. And that is natural. But read on to find all the information you (should) need to better your chances of having adequately compensated and high-performing reps.  

Let's dive in.

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What is the Quota to OTE Ratio?

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Quota to OTE ratio is the sales quota divided by the on-target earnings (OTE) of a sales rep. It is the amount of revenue a company wants its sales rep to generate for every dollar in pay that they receive.

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For companies, it answers the question- "Are we paying fairly for the revenue we expect?"

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And for sales reps, it answers the question- "Am I being compensated adequately for the sales target (quota) I have been assigned?"

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Let’s start with the basics:

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Quota to OTE Ratio = Annual Sales Quota / On-Target Earnings (OTE)

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• Quota: The revenue a sales rep is expected to bring in over a given period (usually annually).
• OTE: The total compensation a rep can earn if they hit 100% of their quota (base + variable pay).

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So, if a rep has:

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OTE = $120,000

Annual Quota = $600,000

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Then the Quota to OTE Ratio = 5:1. You’re expecting $5 in revenue for every $1 paid in OTE.

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Seems fair, right? But this conversation gets more nuanced at this point.

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TL;DR:
The quota to OTE ratio compares how much revenue you expect a rep to generate against what they’ll earn for hitting that target. A healthy ratio sits between 4:1 and 6:1, meaning for every $1 in on-target earnings (OTE), the rep delivers $4–6 in bookings. Too low? You’re overpaying. Too high? You’re under-incentivizing and possibly burning out your team.

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Why This Ratio is a Big Deal

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This ratio tells you:

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• How profitable your sales team is (or isn’t)
• How motivated your reps are likely to be
• Whether your quotas are realistic and achievable
• If your comp plan is attractive in the hiring market
• What kind of growth and margins can leadership expect

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It’s like the ROI of your comp plan — and ignoring it is like ignoring unit economics in a SaaS business. Trust me, I’ve seen companies hire a dozen AEs only to realize their quota-to-OTE ratio was upside-down, and revenue never caught up to comp costs.

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What’s the Right (for you) Quota to OTE Ratio?

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It depends on your business model, and here are the factors you should consider before making a decision:

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• Deal Size: The average contract value or deal size of your deals plays a major role in setting quota.
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  • Larger deals often take longer to close and may justify lower quota-to-OTE ratios (e.g., 3:1 to 5:1).
  • Smaller, high-volume deals can support higher ratios (e.g., 6:1 to 10:1 or more), as reps can close more deals in a shorter time.
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• Sales Cycle Length: Shorter sales cycles allow for faster turnover, so reps can carry higher quotas. Longer or complex cycles require more time and effort per deal, meaning reps should have lower quotas, leading to a lower quota-to-OTE ratio.
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• Industry Standards and Benchmarking: Given below is a general overview of Quota to OTE ratios in different industries/sales models.

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• Role: The type of sales role also matters a lot. SDRs only book meetings, not  revenue, so their comp metric is usually pipeline quota or pipeline generated to ote ratio.
  
  Hunters vs. Farmers: New business roles (hunters) typically have higher quotas and higher quota-to-OTE ratios than account managers (farmers).
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• Complexity of Sale: Enterprise sales with long cycles may justify lower ratios (e.g., 3:1), while transactional sales can support higher ratios (e.g., 10:1).
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• Geography: Mature markets (e.g., North America, Western Europe) often support higher quotas due to higher spend and larger addressable markets. Emerging markets may require lower quotas and lower ratios due to lower average spend, slower decision-making, or cultural buying differences.
  
  Also factor in local salary benchmarks—reps in high-cost regions may need higher OTEs to remain competitive.
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TLDR: 4:1 to 6:1 is the sweet spot for most B2B sales orgs.

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How This Ties Into OTE Planning

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Let’s make this concrete. If you want to offer an OTE of $140K, and you're aiming for a 5:1 ratio:

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Quota = OTE x 5 = $700,000

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That’s your benchmark.

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But it’s not a guess — you need to pressure-test it:
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• Can a rep with average ramp and win rates hit $700K?
• Does your pipeline volume support it?
• Are other companies with similar motions using a similar ratio?

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If you don’t run this check, you risk building a comp plan that looks good on paper but falls apart in the wild.

Must Read: What is OTE? 

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Here is a good method to determine whether your quota to ote ratio is right:
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• Are 2/3 of your reps able to meet quota?
• Are your top reps consistently earning high figures, above OTE, and is it sustainable?
• Does the quota-to-OTE ratio ensure acceptable cost of sales and profit margins?
• Does it take a normal ramp-up time for your reps to start meeting quota?

If your answer to the above questions is 'yes' then you've mostly got it right. Fine tune it further according to your desired revenue per dollar spent, sales rep motivation, and overhead costs, and you've got yourself a great comp setup.
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How the Ratio Shows Up in Board-Level and CRO Conversations

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This isn’t just an ops metric, it’s a boardroom topic. I’ve seen CFOs and CROs ask:

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• “How much are we paying for each dollar of revenue?”
• “Is our quota coverage model scalable?”
• “Why are we growing headcount but not bookings?”

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The quota to OTE ratio often reveals the answer.

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Essential board-level use cases:

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• Planning headcount for next year’s growth
• Evaluating CAC and sales efficiency
• Justifying rep productivity assumptions in forecasts
• Benchmarking comp strategy vs. competitors

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If you want to speak the language of growth and margin - this ratio is the Rosetta Stone.

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How to Diagnose and Fix an Unhealthy Ratio

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Let’s break it down based on the direction of the imbalance:

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Too Low (e.g., 2:1 or 3:1)

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• Check if quotas are unrealistically low
• Look for gaming behavior (e.g., sandbagging)
• Evaluate whether base salary is disproportionately high
• Revisit performance distribution — are too many reps coasting?

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Too High (e.g., 7:1 or more)

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• Reps likely feel quotas are unreachable
• High turnover = huge hidden costs
• Look at hiring profile: Are you under-hiring for the target?
• Reassess territory saturation and inbound volume

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Fix Strategies:

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• Adjust quotas based on real rep performance bands
• Rebalance pay mix (e.g., 60/40 instead of 50/50)
• Segment roles more clearly (e.g., hunter vs. farmer)
• Use SPIFs and accelerators to balance risk in early-stage roles

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Real-World Examples (With Outcomes)

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✅ Well-Balanced Plan

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B2B SaaS, Mid-Market AEs

• OTE = $120K
• Quota = $600K → 5:1
• 75% of reps hit quota
• High engagement, low attrition

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❌ Burnout Plan

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Enterprise Tech, Poor Support

• OTE = $150K
• Quota = $1.5M → 10:1
• 20% of reps made quota
• Churn spiked. Hiring costs ballooned.

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⚠️ Overly Generous Plan

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VC-backed startup

• OTE = $130K
• Quota = $400K → 3:1
• Easy to hire reps. Hard to keep margins.
• Board forced comp restructuring in 6 months.

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Final Thoughts: Why This Ratio Deserves Your Attention

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If you’re building comp plans, managing reps, forecasting revenue, or trying to align GTM with finance, the quota to OTE ratio is your best friend.

It’s not just a back-of-the-napkin metric. It’s a diagnostic tool, a planning lever, and a way to align reality with expectation. Done right, it helps you:

• Keep reps motivated
• Hit your number more reliably
• Justify comp structure in hiring and retention
• Scale efficiently without overpaying or under-delivering

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Ignore it, and you’ll be wondering why your pipeline is full but your revenue team is empty. Visdum is a sales commission software that helps you manage quota, territories, payout cycles, and allows you to move away from complex spreadsheets to clean and reliable sales compensation.

Get in touch with us now to experience automation that gets reps raring to go.

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FAQs

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What is a typical quota to OTE ratio in SaaS?

Most SaaS companies aim for 4:1 to 6:1, depending on deal size and cycle length.

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Can a quota to OTE ratio be too high?

Absolutely. Anything over 6:1 or 7:1 starts to strain rep motivation, especially if there’s no support, no pipeline, or unrealistic territory expectations.

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Does this ratio apply to SDRs?

It can, but for SDRs, you often use pipeline quota rather than revenue. Some companies use quota-to-variable-pay instead of full OTE for SDRs.

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Should the ratio vary by market segment?

Yes. SMB reps usually work more volume-based motions and can support a lower ratio. Enterprise reps often justify higher ratios due to deal complexity.

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How do I benchmark my ratio against peers?

Look at public comp data (like RepVue or OpenComp), or reverse-engineer it from job postings: If a company lists OTE and quota, you can calculate the ratio.

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What if I’m launching a new product with no sales history?

Start conservatively, aim for a 3:1 or 4:1 ratio, and adjust as you learn. You’ll need to fund early adoption and compensate for risk.

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