# Sales Compensation Calculator

Generating sales quotas, commission rates, and on-target earnings can be a chore with different formulas and variables. Figure out how to pay your salespeople with three inputs in this simple-to-use Sales Compensation Calculator.

## Definitions to know

#### Quotas

Quotas are targets set for sales reps. Quotas are most often a revenue goal.

#### Commission rate

The commission rate is the percent of every closed deal that a salesperson receives.

#### Variable comp

Variable comp is the total annual commission earned if a salesperson hits their quota.

#### Base salary

Base salary is a flat rate earned by a salesperson regardless of their performance.

#### On-target earnings

On-target earnings (OTE) is the total amount a salesperson can expect to earn (base salary + variable comp) if they hit their quota.

#### Period

Period is used to refer to the duration of time a salesperson has to hit their quota. The most common periods are monthly, quarterly, and yearly.

## Tips for setting SaaS sales quotas

#### Sales reps should pay for themselves

While this may seem very basic, it’s important that salespeople have a quota that is high enough to pay for their base salary, benefits, etc. and produce profit for your company. A generally accepted rule of thumb is that a sales rep’s quota should be somewhere between 3x and 5x their on-target earnings (OTE).

#### Decide if you want a monthly, quarterly, or yearly quota

Depending on the length of your sales cycle, your average contract value, and your company stage, you’ll want to have a quota that is either monthly, quarterly, or yearly. If your sales cycle is longer than 45 days on average, you should probably use a quarterly quota. If your sales cycle is shorter than a month, you should probably use a monthly quota. If your company sells mainly high dollar, several month-long sales cycles, you can consider a yearly quota.

#### Make the quota achievable

Nothing is more demoralizing than a salesperson who always misses their quota. While it would be great to have a quota that is 15x OTE, it’s most likely not realistic for the salesperson to hit that number month after month. If your reps can’t hit a quota that’s only 3x OTE, then consider a larger, more sweeping change: pricing, sales methodology, or base salary, to name a few.

### Other sales compensation plan components to consider

Not every compensation plan is as simple as a single rate commission. And while simplicity is important when building a comp plan, sometimes you need to add a little complexity. With QuotaPath, you can enter your entire compensation plan and automate your commissions.

#### Non-revenue targets:

For roles like Sales Development Reps (SDRs) where you’re tasked with setting meetings or making calls, reps are often compensated based on a number, rather than a commission rate.

#### Accelerators:

Many plans have accelerators, which pay a higher commission rate for overperformance. These can incentivize quota carriers to continue selling once they’ve hit their target and are a useful tool.

#### Bonuses:

Whether single rate or multiple rate, bonuses are a set amount of money paid to a rep for accomplishing a specific task. For example, a \$1000 bonus for hitting a quarterly quota or a \$500 bonus for every multi-year deal sold.