Open-to-buy (OTB)

Open-to-buy means the budget a buyer has left to commit to new merchandise for a given month or season. When a buyer says they are out of open-to-buy, the money for that period is already spoken for.

Open-to-buy equals planned sales plus planned markdowns plus planned end-of-period inventory, minus beginning-of-period inventory and stock already on order. Use the same basis, cost or retail, for every figure.

A buyer's open-to-buy caps how much they can order from you in a period, whatever they think of the collection. Brands with strong sell-through and flexible delivery windows make it easier for a buyer to give them part of that budget.

A boutique plans $40,000 of March sales and $4,000 of markdowns, and wants to end March with $60,000 of stock. It starts with $55,000 and has $30,000 already on order, so its March open-to-buy is $19,000 at retail.

Buyers set open-to-buy by month and category before market, spend it across brands during appointments, and adjust it every few weeks as actual sales come in.

If a category sells faster than planned, budget opens up for reorders; if it sells slower, the buyer cuts orders or pushes deliveries back. That is why a buyer may ask a brand for a later delivery window rather than a smaller order.

• Mixing cost and retail

  Adding inventory at cost to sales at retail gives a meaningless number. Keep every figure on the same basis.

• Forgetting orders already placed

  Stock on order is money already committed. Leaving it out makes the budget look bigger than it is.

• Treating the budget as fixed

  Open-to-buy moves with sales. Recalculate it as each month closes, rather than spending the whole season's budget at the first market.

Open-to-buy is the buyer's budget, so ModaFlow helps your orders fit inside it: buyers see prices, packs and minimums before they order, and can request a ship window that matches the month their budget opens.

To work out an open-to-buy budget, use the free open-to-buy calculator.