Open to buy: how much you can still order this period

OTB, short for open-to-buy, is the merchandise budget a retailer still has available to spend for a period after counting the stock already on hand and the orders already placed. It answers one question before a supplier call. If I buy this, will I end the month with more stock than my sales plan supports?

The figure is usually worked out per month and per category at retail value. Use the free OTB calculator to run the arithmetic; this guide explains the inputs and the habits that keep the number honest. Numbers below are fictional worked examples.

What is open to buy in retail?

A buyer starts a month with stock on the shelf, has more arriving from suppliers, expects to sell a certain amount and wants to finish the month holding a chosen level of stock for the month after. The gap between what those plans require and what is already committed is the OTB. Shopify's open-to-buy guide describes it as the value of inventory a retailer can purchase during a set period and still meet sales and stock targets.

The otb meaning is therefore a remaining budget, not a sales forecast and not a target. A positive OTB says there is room to order. A zero or negative OTB says the orders already placed will deliver as much as, or more than, the plan allows.

Open to buy formula

Planned purchases = planned sales + planned end-of-period inventory − stock at the start of the period

OTB = planned purchases − stock already on order

All four inputs use the same basis, normally retail value, and the same period. Planned sales is the sales plan for the month. Planned end-of-period inventory is the stock you want to carry into the next month, often set from a stock to sales ratio for that month. Stock on order means purchase orders placed but not yet received that will arrive inside the period.

How to calculate open to buy

1. Pick the period and the category. A month and one department is the usual unit.
2. Write down the stock you are starting the period with, at retail value.
3. Write down planned sales for the period at retail.
4. Decide the stock you want to end the period with, at retail.
5. Add the retail value of orders already placed that will arrive during the period.
6. Add planned sales to the planned ending stock, subtract the starting stock, then subtract what is on order.

Open to buy example

This buyer can place $25,000 of orders, at ticket price, and still expect to end the month at the planned $30,000. If a supplier offers a $30,000 deal, the plan says decline part of it, delay delivery into next month, or accept ending $5,000 heavier than planned. The calculator uses the same figures and flags a negative result as orders already exceeding the plan.

Open to buy at retail vs cost

Larger chains often run the plan at cost, because their accounting values stock at cost. Small retailers tend to use retail value for three reasons. Sales are recorded at retail, so planned sales need no conversion. Shelf stock can be valued by walking the floor with the ticket prices. And an end-of-month stock target is easier to picture as a sales multiple when both sides are retail.

Either basis works if every line uses it. If you need the cost view, convert the retail OTB once using your average markup; the initial markup guide covers that conversion.

How OTB connects to sell-through and turnover

The plan sits between two measures you may already track. Sell-through tells you how much of what you bought went out the door, so a product with a low result needs a smaller purchase next time; the sell-through guide explains how to read it. Turnover compares the cost of what sold with average stock held across a year; the turnover guide covers the inputs.

Both feed the planned end-of-month inventory. A category that turns four times a year holds about three months of sales, so a planned stock of three times next month's planned sales is consistent with it. A category turning twelve times holds about one month. Set the ending stock from the turnover you want, and the OTB keeps purchases in line with it.

Markdowns reduce the retail value of stock without a sale, so a month with a clearance event needs its planned reductions added to the sales line. The markdown strategy guide covers planning those reductions.

Keeping an open to buy plan in a spreadsheet

One sheet per category is enough. Use one row per month with columns for opening stock, planned sales, planned markdowns, planned closing stock, planned purchases, on order, OTB, actual sales and actual closing stock. The closing stock of one month is the opening stock of the next, so the rows chain together.

Update three cells each month: actual sales, actual closing stock and any new orders. When sales come in under plan, closing stock rises above plan and the next month's OTB shrinks. That chain is the point of the plan. The purchase order generator can produce the order documents once you know the budget.

When open to buy software is worth it

A spreadsheet handles one store and a handful of categories. The case for dedicated software grows when several stores need separate plans, when orders span months and receipts arrive in parts, or when more than one person edits the plan. Software tracks the chain of opening and closing stock for you and shows committed orders by delivery month.

headoffis does not do OTB planning or budgeting. Its Analytics page shows recorded sales value, units sold and a current stock snapshot, which supply the actual sales figure for the sheet, but it does not value stock. The free calculator works without an account, uses only the numbers entered and saves nothing.

Open to buy mistakes

• Ignoring stock on order. Orders placed last month that arrive this month are already part of this month's inventory. Leaving them out overstates the budget by their full value.
• One annual number. A yearly budget divided by twelve ignores seasons. Plan each month with its own sales figure and its own closing stock.
• Not revising after a slow month. Unsold stock carries forward. A plan that keeps buying to the original figure after a weak month builds excess by year end.
• Mixing retail and cost. Pick one basis for every line.
• Treating the number as a target. OTB is a ceiling. Leaving some unspent gives room for a mid-month reorder of whatever sells best.

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