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Open to buy answers one question: how much can you still buy without ending the month with too much stock? This page explains the formula, walks through one worked example and shows where people usually go wrong.
Open to buy explained in one sentence
Open to buy (OTB) is the budget that is still free for new purchases in a period. It is what remains after you plan sales, plan the stock you want at the end of the month, and subtract what you already hold and what is already on order.
The open to buy formula
At retail value, for one month:
OTB = planned sales + planned markdowns + planned end-of-month stock - beginning-of-month stock - stock on order
Each part has a plain meaning:
- Planned sales: what you expect to sell in the month, at retail price.
- Planned markdowns: the value you expect to give away through price reductions. Stock sold cheaper uses up more retail value than it brings in.
- Planned end-of-month stock: how much you want on the shelf when the month closes. Many buyers set this from a target number of weeks of cover.
- Beginning-of-month stock: what you hold on day one.
- Stock on order: purchase orders placed and not yet delivered for this month.
The first three parts are what you need to have available. The last two are what you already have. The gap is your open to buy.
Worked example (invented numbers)
These figures are made up to show the arithmetic. They are not market data. One month, all values at retail in EUR:
| Line | Value |
|---|---|
| Planned sales | 40,000 |
| Planned markdowns | 4,000 |
| Planned end-of-month stock | 60,000 |
| Beginning-of-month stock | 55,000 |
| Stock on order | 12,000 |
OTB at retail = 40,000 + 4,000 + 60,000 - 55,000 - 12,000 = 37,000.
Suppliers invoice at cost, so convert the result. In this example, cost is 50% of retail price, so OTB at cost = 37,000 x 0.50 = 18,500. That is the most you should commit to for delivery in this month. If your cost share differs by category, convert each category with its own share.
Step by step
- Set the sales plan for the month from last year's sales and what you know has changed, such as new stores, range changes or campaigns.
- Plan markdowns for the same month. Leave them out and your OTB looks bigger than it really is.
- Choose end-of-month stock. A weeks-of-cover target keeps this consistent from month to month.
- Pull current stock and open orders from your system or your latest count.
- Calculate OTB at retail, then convert to cost.
- Split by category if you buy by category, so one department cannot use up the whole budget.
- Update every month with actuals. OTB is a running number, not a one-off figure.
Common mistakes
- Forgetting stock on order. Orders placed months ago still count against this month's budget if they land in it.
- Mixing retail and cost. Subtracting a cost figure from a retail plan gives a wrong answer in either direction.
- Ignoring markdowns. Planned reductions change how much retail value you need to buy.
- Treating the result as a target to spend. OTB is a ceiling. Buying less is fine if your range is complete.
- Skipping the check on a negative result. An overbought month needs a decision, not a rounding fix.
A quick sanity check
Compare your OTB with the previous month. If it jumped, find the line that moved. A large change usually traces back to one assumption, such as a new sales plan or a delivery that slipped into the next month. If you cannot explain the movement in one sentence, review the inputs before placing orders.
Run open to buy in a spreadsheet
The Open-to-Buy Planner in the Buying & Wholesale Kit calculates open to buy per month at retail and at cost for a six-month season, flags overbought months and can split the budget across up to eight categories. It ships with labelled example data that you replace with your own figures. It is a planning aid and does not forecast demand for you.
The Kit is a paid product and also contains a Sell-Through Tracker, a Size-Curve Planner, a Wholesale Line Sheet with margin calculator and a Tech Pack template. You can build everything above in any spreadsheet for free, and the planner simply saves you the setup.
See the Buying & Wholesale Kit
Frequently asked questions
What does open to buy mean?
Open to buy (OTB) is the part of a merchandise budget that is still free to spend on new stock for a period, after sales plans, stock on hand and orders already placed are taken into account.
Is open to buy calculated at retail or at cost?
Planners usually work at retail and then convert to cost, because sales and stock plans are set in retail value. You pay suppliers at cost, so the cost figure is the one that limits orders.
What if open to buy comes out negative?
A negative result means you are overbought for that month. Options are to move deliveries, cancel or reduce open orders, or plan extra markdowns. It is a signal to act.
Are the numbers in the example real?
No. They are invented to show the arithmetic and are not market data.
