Ever seen a job posting for a sales or business development role with a jaw-dropping salary listed as "OTE"? If you've wondered what those three letters mean and how they translate to your actual paycheck, you're in the right place. Understanding "On-Target Earnings" is one of the most crucial steps to navigating and succeeding in a high-potential, performance-driven career.
On-Target Earnings, or OTE, is a compensation structure common in roles that directly generate revenue, like tech sales, recruiting, and account management. For high-achievers, an OTE plan is not just a salary; it's a launchpad for significant earning potential, often reaching well into the six figures even for mid-level professionals.
What is OTE (On-Target Earnings)?
At its core, OTE (On-Target Earnings) represents your total potential compensation if you meet 100% of your specified performance goals for a given period (usually a year). It is not a guaranteed salary. Instead, it’s a simple but powerful formula:
Base Salary + Variable Pay (Commission/Bonus) = On-Target Earnings (OTE)
- Base Salary: This is the fixed, guaranteed amount you receive, regardless of your performance. It provides stability and covers your regular living expenses.
- Variable Pay: This is the performance-based component, most often a commission. It's the money you earn by hitting sales quotas, closing deals, or achieving other key performance indicators (KPIs).
Let's use a common example: a tech salesperson. A job description might list an OTE of $140,000. This is typically broken down into a "pay mix." A common mix is 50/50.
- Base Salary: $70,000 (guaranteed annual salary)
- Variable Pay (On-Target Commission): $70,000 (earned by hitting 100% of the sales quota)
- Total OTE: $140,000
If this salesperson achieves 100% of their sales goal for the year, they will earn $140,000. If they only achieve 80% of their goal, their total compensation would be $70,000 (base) + $56,000 (80% of commission) = $126,000. Conversely, if they are a top performer and achieve 150% of their goal, many plans include "accelerators" that could push their total earnings well past the $140,000 OTE.
Typical OTE in Key Sales Roles
While OTE varies dramatically, it's helpful to see a snapshot of what you might expect in common OTE-based roles in the United States.
According to a 2023 report from recruiting firm Betts, the average OTE for key tech sales roles are as follows:
- Sales Development Representative (SDR): Typically an entry-level role, the average OTE ranges from $75,000 to $90,000.
- Account Executive (AE): This role focuses on closing deals. For AEs in the small-to-midsize business (SMB) segment, OTE averages between $120,000 and $150,000. For those selling to larger, "enterprise" clients, OTE can range from $200,000 to over $300,000.
- Sales Manager: Leading a team of sales reps, a Sales Manager's OTE often falls between $180,000 and $250,000, with a portion of their variable pay tied to their team's overall performance.
*(Source: Betts 2023 Compensation Guide)*
Key Factors That Influence Your OTE
Your On-Target Earnings are not a static figure. They are influenced by a combination of your personal background, where you work, and the specifics of your role.
### Level of Education
While many high-earning sales professionals succeed without a specific degree, a bachelor's degree in business, marketing, or communications is often preferred by employers and can give you a competitive edge. For highly technical sales roles, such as selling complex software or medical devices, a degree in a relevant field (like engineering or biology) can be a significant advantage and lead to a higher starting OTE. However, in the world of OTE, proven performance and experience often outweigh educational credentials.
### Years of Experience
This is one of the most significant drivers of OTE. Earning potential grows substantially as you build a track record of success.
- Entry-Level (0-2 years): As an SDR or junior Account Executive, you're learning the ropes. Your OTE will be on the lower end, with a typical pay mix of 60/40 or 70/30 (a higher percentage of your pay is guaranteed base). Payscale reports that an entry-level Sales Representative has an average base salary around $51,000, with total OTE being higher.
- Mid-Career (3-8 years): As an experienced Account Executive, you have a history of meeting or exceeding quota. Your base salary and overall OTE increase significantly. Your pay mix may shift closer to 50/50, reflecting the company's confidence in your ability to close deals.
- Senior/Enterprise Level (8+ years): At this stage, you are likely an Enterprise Account Executive or a senior sales leader. You handle the largest, most complex deals. Base salaries can easily exceed $150,000, and OTEs can reach $300,000 or more. Glassdoor data for "Enterprise Account Executive" frequently shows total pay estimates in this range.
### Geographic Location
Where you work matters. Major tech and business hubs have a higher cost of living, and OTE packages are adjusted accordingly. A role in San Francisco, New York City, or Boston will almost always have a higher OTE than an identical role in a smaller Midwestern city.
For example, using Salary.com's calculator, an Account Executive in Boston, MA, can expect to earn around 11% more than the national average, directly impacting both the base and OTE offered.
### Company Type and Industry
The company you work for plays a massive role in your earning potential.
- Industry: Selling high-margin products like enterprise software (SaaS) or specialized medical devices typically comes with a much higher OTE than selling lower-margin goods.
- Company Size:
- Startups: May offer a lower base salary and OTE but compensate with potentially lucrative stock options. The risk is higher, but so is the potential reward if the company succeeds.
- Mid-Market & Enterprise: Larger, established companies (like Salesforce, Oracle, or Microsoft) offer highly structured and often very high OTE packages. They have the resources and established client base to support large deals.
### Area of Specialization
Within sales, what you sell dictates your value. An Account Executive selling a simple, transactional product with a $5,000 deal size will have a lower OTE than an Enterprise AE who navigates a 12-month sales cycle to close a $1.5 million contract. Specializing in a complex, in-demand field like cybersecurity, artificial intelligence (AI) software, or FinTech will lead to the most competitive OTE packages.
Job Outlook for OTE-Based Roles
If you're considering a career built on an OTE structure, the future is bright. While technology and AI are changing the nature of sales, they are not eliminating the need for skilled professionals who can build relationships, understand complex customer needs, and close deals.
The U.S. Bureau of Labor Statistics (BLS) projects that employment for Sales Representatives in technical and scientific products will grow by 4% from 2022 to 2032, which is as fast as the average for all occupations. Furthermore, employment for Sales Managers is projected to grow by 4% as well.
This steady demand underscores a fundamental business truth: companies always need to generate revenue, and they are willing to pay top dollar for the talent that can make it happen.
Conclusion: Is a Career with OTE Right for You?
Understanding OTE is about more than just decoding a job description; it's about embracing a mindset of performance and reward.
Here are the key takeaways:
- OTE is Potential, Not a Promise: Your On-Target Earnings are achievable if you meet 100% of your goals.
- The Formula is Key: Always understand the breakdown: Base Salary (your security) + Variable Pay (your opportunity).
- Ask the Right Questions: When interviewing for an OTE-based role, ask critical follow-up questions:
- "What is the pay mix (base vs. commission)?"
- "What percentage of the sales team achieved their quota last year?"
- "Are there accelerators for over-performance?"
- You're in Control: For self-motivated, driven individuals, an OTE structure offers a direct path to high earnings and career advancement that is unmatched by most other professions.
A career in a field with On-Target Earnings puts you in the driver's seat of your financial future. If you thrive on challenge and are motivated by clear goals, it can be an incredibly rewarding and lucrative path.