Deep-dive guide
Sales Team OTE and Commission Simulator: What Your Reps Really Cost Against What They Sell
Executive industry analysis
A sales team is paid to turn pipeline into revenue, and the way it is paid shapes what it does. On-target earnings, the sum of base salary and commission at full quota, is the figure most often discussed. It is also only part of the cost. Reps need employer taxes, a CRM, data, travel and events. They need managers, operations support and coaching. New reps cost almost the same as experienced ones but deliver a fraction of the revenue for months. The real question is what the whole team costs against what it brings in.
The structure of the problem has three levers: how much each rep can sell, how much they are paid, and how many of them are productive. Revenue is reps times quota times attainment, reduced by ramping reps. Sales cost is base, commission, burden, tools and management. Gross profit on the revenue must exceed all of it. Commission is a variable cost that rises with revenue, while base, tools and management are fixed. That mix decides how much profit moves when attainment moves.
The domino cascade starts with productive capacity. A larger share of ramping reps means fewer fully productive reps. Fewer productive reps lower revenue per rep, which raises the on-target earnings as a share of what each rep brings in. Cost of sales rises as a percentage of revenue, and the net contribution falls. A plan that looks fine at eighty percent attainment can lose money at fifty, because the fixed pay does not move while revenue does.
The iceberg shows what the compensation plan hides. Above the waterline sit the base salaries and commission payouts, the figures in every offer letter and payroll report. Below it sit four costs that rarely appear in the plan: employer taxes and benefits on all pay, the tools, travel and data each rep needs, the managers and operations staff who support the team, and the base pay of reps who are still ramping and produce a fraction of the revenue.
Formula and methodology blueprint
The model works per month. Team revenue is reps times quota times attainment, reduced because ramping reps deliver only a quarter of the output of a ramped rep. Gross profit is a fixed share of revenue. Costs are base salaries, commission on revenue, employer burden on both, tools and travel per rep, and one sales manager with support for every eight reps. The monthly result is gross profit minus the total cost of the sales team.
- Productivity factor
- f = 1 − ramp share × (1 − 0.25)
- Ramping reps deliver a quarter of full output, which lowers the output of the whole team.
- Revenue
- Rev = reps × quota × attainment × f
- Monthly revenue booked by the team.
- On-target earnings
- OTE = base + commission rate × quota
- Monthly pay of one rep at 100% of quota.
- Sales cost
- S = (base × reps + Rev × commission) × 1.2 + 900 × reps + reps ÷ 8 × 9000
- Pay with employer burden, tools and travel per rep, and management per eight reps.
- Net contribution
- Net = 60% × Rev − S
- Gross profit on booked revenue minus the cost of the sales team. The breaking point is the attainment where it reaches zero.
Cascading elasticity
Attainment is the most elastic input because it moves revenue while most of the cost stays fixed. Ramp share acts through productivity and is strong in fast-growing teams. Quota matters in the same way as attainment, but only if it reflects real potential. Base pay and the number of reps are fixed costs and set the revenue bar the team has to clear, while commission scales with revenue and is the safer cost.
Three real-world case studies
Bootstrapped starter
Three reps and a founder-led pipeline
A young company has three reps, two of whom are still new, modest quotas and a low base. Attainment is decent. The team just covers its costs. Load it to see how little revenue it takes to turn a small team negative.
Scaling mid-market
A mature thirty-rep team
A larger team with thirty reps, a stable ramped base and a tuned commission plan delivers healthy attainment. Management and tools are spread across many reps. Load it to see how scale and discipline lift the contribution.
Black-swan crisis
High pay, low attainment
A team pays a high base and generous commission, but half the reps are new and attainment is below half of quota. Revenue is a fraction of the plan while fixed pay continues. Load it to see why attainment matters more than the payout rate.
Industry benchmark matrix
| Metric | Danger zone | Industry average | Top 10% elite |
|---|---|---|---|
| Quota attainment of ramped reps | Below 60% | 70–90% | Above 100% |
| OTE as share of revenue per rep | Above 45% | 20–35% | Below 20% |
| Cost of sales as share of revenue | Above 50% | 30–40% | Below 25% |
| Time for a new rep to ramp | Over 9 months | 4–6 months | Under 3 months |
| Reps per sales manager | Above 12 | 6–8 | 5–7 |
Variables and levers
Number of reps
Quota-carrying sales reps in the team, including those still ramping.
Lever: Add reps only when territories and pipeline can fill their quota, since each new seat costs before it earns.
Monthly quota per rep
Revenue a fully ramped rep is expected to book in a month at 100% attainment.
Lever: Set quota from real territory potential and past conversion, not from a target worked backward from the plan.
Quota attainment
Share of quota that a ramped rep actually delivers, on average.
Lever: Fix lead flow, qualification and coaching first, because attainment drives revenue without adding fixed cost.
Base salary per rep per month
Fixed monthly pay before commission.
Lever: Keep the base at a level that attracts talent but leaves the variable share large enough to reward results.
Commission rate
Share of booked revenue paid to the rep as commission.
Lever: Pay commission on margin or on collected revenue, and cap or tier it so growth does not outrun profit.
Share of reps still ramping
Part of the team that joined recently and delivers only a fraction of full output.
Lever: Shorten ramp with structured onboarding and stagger hiring so that fewer reps are new at the same time.
How to use this simulator
- 1Start from the realistic preset or enter your number of reps, quota and current attainment.
- 2Enter base pay and commission exactly as in your plan.
- 3Set the share of reps who joined in the last few months and are still ramping.
- 4Press Find my breaking point to see how low attainment can fall before the team stops paying for itself.
- 5Compare the current plan with the variable-heavy plan over 24 months in the Parallel universe tab.
Mistakes to avoid
- Judging the plan on OTE alone. Burden, tools, management and the pay of ramping reps often add as much again to the cost of a rep.
- Setting quota from the revenue target instead of from territory potential. An unrealistic quota lowers attainment and morale and does not raise revenue.
- Hiring many reps at once. They all ramp together, so for months the team costs a full payroll and delivers a fraction of the output.
- Paying generous commission on low-margin deals. Revenue grows while gross profit does not, and the plan rewards the wrong behaviour.
Frequently asked questions
What does OTE mean?
On-target earnings are the total pay a rep earns at 100% of quota: base salary plus the commission earned at that level. It is the figure used to compare offers and plan compensation.
Should commission be a share of revenue or of margin?
Revenue is simpler, but margin protects profit when discounts or low-margin deals are common. This model uses revenue, so think about whether your plan needs a margin-based variant.
Why do ramping reps matter so much?
They cost almost as much as ramped reps but produce a fraction of the revenue. A team growing quickly can have a large share of ramping reps, which lowers revenue per rep and raises cost of sales.
How should I set quota?
Base it on territory potential, win rates and deal sizes, and compare with the quota attainment your ramped reps achieved last year. A quota that nobody reaches is a cost, not a target.
How do I find the breaking point?
Press Find my breaking point. The tool pushes each input to its worse end in small steps and reports the value at which the monthly net contribution reaches zero.
How accurate is this?
It is an educational planning model with the assumptions stated above, not compensation, legal or financial advice. Replace the inputs with your own figures and check local employment rules.
This is an educational planning model with stated assumptions. It is not financial, tax or legal advice. Replace the inputs with your own figures and verify important decisions with a qualified professional.