What Is Open-to-Buy (OTB)? A Plain-English Guide

Open-to-buy (OTB) is a merchandise budgeting method that tells a retailer how much new inventory it can purchase in a given period without overbuying. It reconciles planned sales, planned markdowns, and target end-of-period inventory against what you already own and have on order, leaving you with the dollar (or unit) amount still “open” to buy. For consumer and DTC brands, Plan + Pivot Collective offers inventory planning consulting and merchandise planning consulting, from a single Smart Start session to embedded fractional leadership.

Why open-to-buy matters

Too much inventory ties up cash and forces margin-killing markdowns. Too little creates stockouts and lost sales. OTB is the control system that keeps you in the middle: buying enough to meet demand without drowning in stock. For growing consumer brands, it is often the difference between a healthy cash position and a warehouse full of money you cannot move.

How open-to-buy is calculated

The core formula is: OTB = Planned Sales + Planned Markdowns + Planned End-of-Period Inventory, minus Beginning Inventory, minus Merchandise On Order. In practice you build it by month or season, by category, so each part of the assortment gets its own budget rather than one blunt number.

Common open-to-buy mistakes

Planning OTB at the total level instead of by category, so winners get starved and losers get overbought. Forgetting on-order inventory, which quietly blows the budget. Treating OTB as a one-time spreadsheet instead of a living plan you reforecast as sales come in. Skipping a markdown plan, so the budget assumes everything sells at full price.

Who needs open-to-buy planning

Any brand carrying physical inventory past roughly $1M in annual sales, especially DTC and wholesale brands scaling into more SKUs, channels, or seasons.

Frequently asked questions

What is open-to-buy in simple terms? It is your inventory purchasing budget: how much new product you can buy without overstocking, based on planned sales and the stock you already have.

What is the difference between OTB and a sales forecast? A forecast predicts demand; OTB translates that forecast into how many purchasing dollars you can actually commit.

Do small brands need OTB? Yes. Once you carry inventory and reorder, OTB prevents the cash crunch that sinks growing brands.

Need an open-to-buy plan built for your brand? Plan + Pivot Collective builds OTB and inventory plans as part of our Focused Growth engagements. Book a call.