You're about to hire your first Account Executive (AE).
You know roughly how much they should make ($80K–$150K depending on your stage), but you're unsure how to structure it.
- Is it 50/50 base-to-commission? 60/40?
- What's a reasonable OTE for your product and stage?
- How do you avoid hiring an AE, then telling them month 2 that they can't actually make the money you promised?
Let me walk you through the exact process I use to build first-AE comp plans.
Step 1: Determine Your AE's OTE (On-Target Earnings)
Formula: What should an AE earn if they hit 100% quota?
Starting with OTE instead of base salary forces you to think about the total value proposition, not just the cash outlay. Experienced AEs evaluate offers by OTE first — a high base with no variable is actually a red flag to quota-carrying reps.
Start by benchmarking. Your AE's OTE depends on:
- Your product ACV (Average Contract Value)
- Your industry (SaaS, sales-enabled, enterprise, SMB)
- Your geography (SF vs. mid-tier city)
- Your stage (seed, Series A, Series B)
Typical SaaS benchmarks (2026):
- Seed/Pre-Series A ($20K ACV): $80K–$100K OTE
- Series A ($50K ACV): $100K–$130K OTE
- Series B ($100K+ ACV): $130K–$180K OTE
Why ACV matters:
- If your ACV is $20K, a $150K OTE AE means quota is $600K–$900K (30–45 deals). Achievable? Maybe not.
- If your ACV is $100K, a $150K OTE AE means quota is $600K–$900K (6–9 deals). Way more achievable.
Regional adjustments:
- SF / NYC: +25–30%
- Austin / Seattle: +10–15%
- Mid-tier city: Baseline
- Remote: –10–15%
Example: You're Series A, $50K ACV, hiring in Austin.
Baseline AE OTE: $110K. Austin adjustment: +12% = $123K.
Not sure what OTE to set? See what AEs at your stage actually earn — benchmarks by stage, deal size, and team size.
Step 2: Choose Your Base-to-Commission Split
For your first AE, I recommend 60/40 or 65/35, not 50/50.
Why? Because you don't know if your sales process actually works with a single rep. You need insurance.
60/40 split example (OTE = $120K):
- Base salary: $72K
- Target commission: $48K
- Total OTE: $120K
65/35 split example (OTE = $120K):
- Base salary: $78K
- Target commission: $42K
- Total OTE: $120K
65/35 is slightly safer because the rep still has upside, but if your quota is misset or your sales process breaks, they're not devastated.
Not sure which split is right? See our full breakdown: How to Choose the Right Sales Commission Structure.
Step 3: Set Realistic Quota
Formula:
Quota = OTE × 4 (for 60/40 split) or OTE × 3 (for 50/50 split)Why this formula?
- You need commission cost to be 15–20% of revenue (not 40%+)
- If an AE earns $120K OTE and closes $400K, your commission cost is $48K / $400K = 12%
- That's sustainable. If quota is $200K, commission cost is 24%—unsustainable.
Example (65/35 split, $120K OTE):
Target quota: $120K × 4 = $480K ARR. If your ACV is $50K, that's ~10 deals. If your sales cycle is 60 days, that's ~2 deals per month. Is that achievable? Depends on your lead quality.
Step 4: Add a Ramp Period
Your first AE doesn't hit full quota on day 1. They're learning your product, your process, your customer base.
Typical ramp structure:
- Months 1–2: 0% quota (learning phase)
- Months 3–4: 50% quota (ramping)
- Months 5–6: 75% quota (almost there)
- Month 7+: 100% quota (fully productive)
Important: During ramp, they still earn something. Most commonly: a draw.
Step 5: The Draw (Optional but Recommended)
A draw is a minimum guaranteed commission payment during ramp.
There are two types: recoverable (advance against future commission) and non-recoverable (yours to keep). For your first AE, go non-recoverable. It signals confidence and prevents resentment if your quota turns out to be off.
Full breakdown with month-by-month examples in our guide: Sales Commission Draw Structures Explained.
The Complete First-AE Comp Plan (Real Example)
Scenario: Series A SaaS company, $50K ACV, hiring first AE in Austin.
The plan:
OTE: $125K (60/40 split) | Base: $75K | Target commission: $50K
Annual quota: $500K ARR (~10 deals) | Draw during ramp (months 1–3): $4K/month (non-recoverable)
Accelerator (100%+ quota): 1.5x commission rate
| Quota Attainment | ARR Closed | Commission | Total Earnings |
|---|---|---|---|
| 60% ($300K) | $300K | $30K | $105K |
| 80% ($400K) | $400K | $40K | $115K |
| 100% ($500K) | $500K | $50K | $125K |
| 120% ($600K) | $600K | $75K | $150K |
| 150% ($750K) | $750K | $112.5K | $187.5K |
Why this works:
- AE has safety ($75K base) but strong upside (can earn $187K if they crush it)
- Quota is achievable (4x OTE rule)
- Draw keeps them alive during ramp
- Company's commission cost stays at 8–15% of revenue (sustainable)
Common Mistakes Founders Make
Mistake #1: Setting quota too high
AE earns $75K base, quota is $1M, average deal is $50K. That's 20 deals per year = nearly 2 per month. With a 60-day sales cycle, AE needs 120 prospects in pipeline at any time. If your marketing only generates 20 leads per month... quota is impossible.
Result: AE quits month 6, you blame them, next AE faces the same impossible quota.
Mistake #2: Paying commission-only for new AE
You offer 100% commission, no base. AE panics, takes job at competitor with base + commission. You hire desperately, get a weaker AE. Result: slower ramp, lower revenue.
Mistake #3: Changing comp mid-year
You hire AE on $75K base, then realize you can only afford $60K. Or you promised 60/40 split, now you "need" them to accept 50/50. AE feels betrayed, leaves. You lose 4–6 months of ramp.
Make the comp plan BEFORE you start recruiting. Get it right, commit to it, and stick with it for 12 months minimum.
Stress-Test Your Plan
Before you offer: Run the math.
Question 1: Can I afford this if the AE hits 80% quota month 7?
- 80% of $500K = $400K. Commission cost: $40K.
- That's $40K earned + $75K base = $115K total cost
- Can you afford $115K? If not, quota is too high or OTE is too high.
Question 2: What if I hire 2 more AEs?
- 3 AEs × $125K average = $375K comp cost
- If each hits $350K quota (70% attainment), that's $1.05M ARR
- Total team cost: ~$510K | Revenue: $1.05M | Comp ratio: 48%
- High for scale, but acceptable for early-stage with ramp.
Once your first AE is crushing quota, layer in commission accelerators and SPIFs to push them past 100%.