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.
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.
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.
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
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.
Here’s how to roll out an effective on-target earnings model in your SaaS company:
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.
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.
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.
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.
| Role | Base Salary | Variable % | Total OTE | Tied Metrics |
|---|---|---|---|---|
| SDR | $55,000 | 25% | $73,000 | MRR pipeline, qualified leads |
| AE | $70,000 | 50% | $140,000 | New ARR, ACV |
| CSM | $85,000 | 20–30% | $110,000 | NRR, Customer Retention |
| Marketing Lead | $90,000 | 10–15% | $102,000 | Sourced ARR, pipeline targets |
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.
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Bentega helps SaaS companies design data-driven on-target earnings (OTE) models that align with ARR, MRR, and customer retention metrics. Whether you're structuring SDR OTE, CSM comp plans, or marketing bonuses, our platform ensures your incentives fuel growth and reduce churn. Learn more at www.bentega.io.