Implementing OTE in SaaS: drive growth & retention

In SaaS revenue is recurring, customer retention is mission-critical, and every role plays a part in growth. That’s why implementing the right on-target earnings (OTE) model can be a game changer.

By aligning OTE with Monthly Recurring Revenue (MRR), Annual Recurring Revenue (ARR), and Net Revenue Retention (NRR), SaaS companies can create high-performance compensation plans that drive sustainable results.

For the foundation, start with the OTE guide to understand formula, pay mix, quota connection, examples, and governance before adapting the model to SaaS roles.

Why OTE is crucial for SaaS

On-target earnings (OTE) refers to the total expected pay (base + variable) for hitting performance goals. In SaaS, OTE should not only motivate bookings, but also reflect long-term metrics like:

• ARR (Annual Recurring Revenue)

• MRR (Monthly Recurring Revenue)

• NRR (Net Revenue Retention)

• Customer Retention

OTE should be tied to land-and-expand strategies, not just one-time deals. This means your compensation plans must incentivize not only winning new customers, but also expanding existing accounts, driving upsell and cross-sell opportunities, and increasing contract values over time.

In a SaaS business model, maximizing customer lifetime value is fundamental, so rewarding behaviors that promote ongoing growth within the customer base is as important as celebrating initial deals. By structuring OTE around these expansion dynamics, you encourage reps and customer teams to focus on building long-term partnerships, cultivating renewals, and unlocking additional revenue streams through product adoption, seat growth, or enterprise upgrades. This approach aligns incentives with the recurring nature of SaaS revenue and prioritizes sustainable, scalable growth over short-term wins.

1. Aligning OTE with ARR and MRR

For Sales Roles (e.g., AEs, SDRs)

Sales comp in SaaS often focuses on ARR growth. Here's how to set it up:

• Commission based on contracted ARR, not just deal size

• Incentivize upfront annual contracts over month-to-month deals, as this will strengthen your cash flow

• SDR OTE can include bonuses for generating MRR-qualified leads, or incentives for generating leads that actually converts to revenue

Example:
An AE might earn 10% commission on closed ARR with a base salary of $70K, making their on-target earnings (OTE) $140K.

For SaaS Sales and RevOps teams managing quota, commission rules, crediting, and payout visibility, explore Bentega for Sales and RevOps incentive compensation.

2. Embedding retention into OTE for CS and account roles

For Customer Success Managers (CSMs)

SaaS revenue doesn’t matter unless it sticks. That’s why CSM OTE should be tied to:

• NRR (Net Revenue Retention) - how much revenue coming from existing customers

• Customer Retention rate - the portion of customers renewing their contract

• Expansion ARR - upsells, price increases, cross-sell, etc.

Incentivizing renewals, upsells, and customer health encourages long-term thinking.

Example OTE Plan:

• Base salary: $85K

• $25K bonus tied to renewal rates (60%) and expansion ARR (40%)

• Total OTE: $110K

For Customer Success teams connecting OTE to renewals, expansion, NRR, onboarding, and customer health, explore Bentega for Customer Success incentive compensation.

3. OTE considerations for SaaS marketing roles

While marketing isn’t always variable-comp heavy, modern SaaS GTM teams increasingly tie OTE to:

• Pipeline-sourced ARR

• SQL-to-win conversion rates

• Inbound lead contribution to closed-won revenue

Marketing OTE often includes modest performance bonuses (10–15%) on top of base salary for demand gen and revenue marketers.

For GTM leaders aligning Sales, Marketing, Customer Success, RevOps, Finance, and HR around shared incentive outcomes, explore Bentega for GTM incentive compensation.

4. OTE implementation best practices in SaaS

Here’s how to roll out an effective on-target earnings model in your SaaS company:

Start with SaaS metrics

Build OTE plans around the KPIs your board cares about: ARR, MRR, NRR, and churn. Start by identifying the revenue and retention drivers that are most critical to your SaaS company’s long-term growth and investor confidence.

Shape each compensation plan to reinforce behaviors and results that directly impact these metrics - whether it’s rewarding landing multi-year contracts, expanding seat counts, reducing customer churn, or growing monthly recurring revenue.

By designing OTE structures that are directly tied to strategic company goals, you align every customer-facing role with what matters most for sustainable growth, ensure team incentives are always pulling in the same direction as leadership’s priorities, and support a performance culture built on measurable, board-level success indicators.

Set clear, attainable quotas

No one performs if goals are fantasy. To motivate teams and drive predictable performance, OTE targets must be grounded in reality and supported by clear, data-backed expectations. If quotas are set far above what’s achievable, reps quickly lose motivation and trust in leadership, resulting in disengagement and turnover.

SaaS OTE models work best when 60–80% of the team consistently hits target. This benchmark ensures that goals stretch top performers while remaining attainable for the majority, keeps morale high, and builds a culture of winning. Consistently achievable targets drive focus, reinforce trust in the compensation system, and make high performance feel accessible and rewarding across the team.

Keep variable pay simple

Use clear rules and avoid overly complex payout curves. The most effective OTE plans are transparent and easy for employees to understand, ensuring everyone is clear on what they need to achieve and how their performance will be rewarded.

Especially for SDR OTE plans, simplicity equals motivation - straightforward structures reduce confusion, remove friction, and help reps focus on the activities that drive results. By keeping variable pay formulas easy to grasp, you empower your team to track their progress in real time, build trust in the system, and sustain high engagement as they work toward their targets. Complex or ambiguous payout schedules, on the other hand, can undermine morale and diminish the intended impact of your compensation incentives.

Adjust for role & stage

Early-stage SaaS may favor higher variable to stretch budgets. Startups often operate with limited cash flow and need to maximize runway, so they structure compensation to include a larger variable portion - like commissions, bonuses, in combination with equity - rather than relying heavily on base salary. This approach allows them to attract ambitious, risk-tolerant talent by offering strong upside potential if company and individual goals are met, while preserving capital.

Enterprise SaaS may lean on more stable base-heavy plans. Larger, established SaaS organizations typically possess the resources and predictability to offer higher base salaries and a smaller percentage of variable pay. This creates greater income stability for employees and appeals to candidates who value reliability and long-term security. These companies often use variable components to reward performance, but the overall plan is grounded in a more consistent base that reflects their financial strength and lower risk profile. Tailoring your OTE strategy to both company stage and market expectations ensures you remain competitive and provides the right balance of motivation, retention, and cost management.

As SaaS compensation expands across Sales, Customer Success, Marketing, RevOps, Finance, and GTM leadership, OTE becomes an incentive compensation management challenge, not just a plan-design exercise.

Sample OTE table for SaaS roles

Final thoughts: build smarter OTE around what matters

Your SaaS growth engine thrives on recurring revenue - and so should your comp strategy. Implementing OTE that rewards long-term metrics like A, MRR, and NRR ensures your team is aligned with what drives real value.

With Bentega, you can design compensation plans that scale with your business, motivate your team, and retain your best people.

Explore more

• On-Target Earnings Guide
• Sales Commissions
• Commission Structures
• Incentive Compensation
• Structuring OTE for Different Roles: Marketing, Sales, Customer Success
• Designing Effective Variable Comp Plans
• How to Benchmark On-Target Earnings (OTE)
• Communicating OTE to Employees
• Legal Considerations in OTE Plans
• Integrating OTE with Performance Management
• Adapting OTE During Economic Changes