About the Open-to-Buy Calculator
This open-to-buy calculator tells a retail buyer how much merchandise can still be ordered for a period without overshooting the inventory plan. Enter planned sales, planned markdowns and shrink, the planned end-of-month (EOM) inventory, the beginning-of-month (BOM) inventory and what is already on order, and it returns planned purchases and the remaining open-to-buy (OTB).
Boutique owners, merchandise planners and category buyers use OTB to keep cash from being tied up in excess stock while still having enough on the floor to hit the sales plan. A negative result means the department is overbought: orders should be delayed, cancelled or offset with promotions.
Enter all inventory and sales figures at retail value, as is standard in the retail inventory method. The initial markup percentage converts the retail OTB into the cost dollars you can actually commit on purchase orders.
With the default inputs, the open-to-buy at retail is $105,000.00. Change any value above to recalculate instantly.
How to use the open-to-buy calculator
- 1Enter planned sales for the month or season at retail.
- 2Add planned markdowns, employee discounts and shrink.
- 3Enter the planned end-of-month and actual beginning-of-month inventory at retail.
- 4Enter the retail value of orders already placed for the period.
- 5Read OTB at retail and at cost to set your remaining buying budget.
Formula and method
Planned purchases are the merchandise you need to receive during the period: enough to cover what you plan to sell, what will be lost to markdowns, discounts and shrink, and the stock you want left at the end of the month, minus the stock you already have at the beginning. Subtracting orders already placed gives the open-to-buy.
All figures are at retail value. To convert to cost, multiply by the cost complement (1 − initial markup on retail). A negative OTB means existing inventory plus orders already exceed the plan.
- EOM
- Planned end-of-month inventory at retail
- BOM
- Beginning-of-month inventory at retail
- On order
- Orders due this period not yet received
- IMU
- Initial markup as a percentage of retail price
Worked examples
Monthly plan with $45k on order
$120,000 sales + $10,000 reductions + $220,000 EOM − $200,000 BOM = $150,000 of planned purchases. Subtract $45,000 on order to leave $105,000 OTB at retail, or $47,250 at cost with a 55% markup.
Overbought department
The plan needs only $45,000 of receipts, but $60,000 is already on order, so the department is overbought by $15,000 at retail ($7,500 at cost).
Holiday season plan
$300,000 + $36,000 + $520,000 − $480,000 = $376,000 of planned receipts. With $150,000 on order the buyer has $226,000 OTB at retail, which at a 52% markup is $108,480 at cost.
Frequently asked questions
What is the open-to-buy formula?+
OTB = planned sales + planned markdowns (and shrink) + planned end-of-month inventory − beginning-of-month inventory − merchandise on order. The first four terms give planned purchases.
Should open-to-buy be calculated at cost or retail?+
Most retailers plan at retail using the retail inventory method, then convert to cost by multiplying by (1 − initial markup %) because purchase orders are written at cost.
What does a negative open-to-buy mean?+
It means you are overbought: inventory on hand plus orders already exceed what the plan needs. Options include pushing back deliveries, cancelling orders or lifting sales with promotions.
How often should OTB be updated?+
Many retailers update it weekly or monthly as actual sales, receipts and markdowns come in, then roll the difference into the next period’s plan.
How is planned EOM inventory set?+
Often from the next month’s planned sales multiplied by a target stock-to-sales ratio, or from a weeks-of-supply target. It is usually the next month’s BOM.