Open-to-buy for hardware stores and garden centers

There is a particular kind of stomachache that only store owners know, and it usually shows up in March. The truck from your distributor pulls around back with the spring load, and your crew starts breaking down pallets while you are still staring at a statement that shows February's order is not paid for yet. You needed the grass seed and the garden soil and the fertilizer, you always need it, but somewhere between the fall buy and now the cash got thin, and you cannot point to the one order that did it. There was no one order. There were forty small ones, each defensible, none budgeted.

If you run a hardware store, a garden center, a farm and feed store or a paint store, you almost certainly carry your buying plan in your head, and your head is pretty good at it. You know your seasons cold. But "we always buy heavy in March" is not a number, and a number is the only thing that can tell you to stop. Open-to-buy, usually shortened to OTB, is the amount of inventory, in retail dollars or at cost, that you can buy for a period while still landing on your planned ending inventory.

The open-to-buy formula

The formula is one line, and every term in it is something you already track or can pull from your current system:

OTB = planned sales + planned markdowns + planned end-of-month inventory − planned beginning-of-month inventory − inventory already on order

Run it per department, per month. Here is what each term means:

• Planned sales. What you expect to sell that month, in that department, at retail. Usually last year's same month, adjusted for anything you know has changed.
• Planned markdowns. What you intend to clear at a discount that month. Only what you intend. If there is no clearance event planned, this can be zero.
• Planned end-of-month inventory. The stock level you want to be standing on when the month closes, built backwards from next month's sales.
• Planned beginning-of-month inventory. What you are standing on now. Last month's ending number, if you ran this last month.
• Inventory already on order. Open purchase orders due to land in the month. Not everything you have ever ordered, just what is coming.

One rule sits above all of it, and every retail planning guide, Shopify's included, hammers it: keep every term in the same dollars. Retail dollars or cost dollars, never mixed. If your planned sales are at retail and your inventory value is at cost, the formula will happily hand you a nonsense number and you will not notice until the truck shows up.

Here is the shape of it with round numbers, before we get to a department you actually run:

So the store can spend $21,500 at retail, or the cost equivalent, on new inventory that month and still end the month exactly where it planned. One more thing worth knowing before you build your own: a negative result is not a broken formula. It means you are overstocked for your plan, and the right move is to hold off buying, or to push something out. Some guides, Faire's among them, use a simpler version that drops the on-order term and only adds markdowns when a sale is planned. If you are just starting, the simpler version is fine. The full version is better once you are ordering weekly, because it keeps you from double ordering what is already on a truck somewhere.

Why a seasonal store needs it more than a mall store

A gift shop at the mall sells roughly the same amount every month with a bump in December. You do not have that life. A garden center does a huge share of its year in eight spring weeks. A feed store's fall is its spring, when the calf and horse people stock up. A hardware store's lawn and garden department swings with the weather, and a cold, wet April can shove two weeks of sales into May whether you like it or not.

When your year is lumpy, your inventory gets lumpy too, and lumps are where cash goes to sit quietly for months. The 2025 Cost of Doing Business Study from the North American Hardware and Paint Association, covering fiscal year 2024 across 1,082 independent home improvement stores, found home centers turning inventory just 2.0 times a year, with sales per inventory dollar of 2.9. Both are the lowest levels the study has ever recorded, as Hardware Retailing's highlights put it. That is the industry telling you, with a median, that stores are sitting on more stock than their sales justify. Meanwhile the same study found hardware stores posting $39 in sales per customer, an all-time high, and gross margin after rebate of 42.6%, the highest since 2016, against profit before taxes of 4.7%. People are spending, margins are decent, and yet the money is parked on shelves instead of in the bank.

That is the exact gap OTB closes. It takes the buying you were going to do anyway and gives it a ceiling per department per month, so the busy season gets funded and the slow season does not quietly absorb the difference.

Building the five inputs

The formula is the easy part. The inputs are where the judgment lives, and you are the expert here, not the spreadsheet. Here is where each number comes from.

Planned sales

Start with last year's same month, per department. Then adjust for what you know is different this year. A new competitor opened across the highway, so maybe trim lawn and garden. You raised prices in January, so dollars go up even if units hold. You lost a contractor account to the yard in the next town, so knock that out of paint or lumber. Do not chase precision. A reasonable plan you actually write down beats a perfect plan you never finish.

Planned markdowns

Only what you intend to clear. If you run an end-of-April clearance on seed-starting supplies every year, that amount goes in. If you are not planning a markdown event, use zero and move on. Padding this number "just in case" inflates your buying budget and defeats the whole exercise.

Planned ending inventory

Work backwards from next month. Think in turns, which is the metric the trade actually uses: how many times a year a department sells through and replaces its stock. A department that should turn four times a year needs roughly three months of sales on hand at any moment. Your fastener wall turning 1.5 times is a different animal, slower by nature, and it should not be held to the garden department's standard. If next month is bigger than this month, as May usually is after April, your ending inventory target should be bigger too. That is not overstocking, that is staging.

Beginning inventory

This is the one input that is not a judgment call. It is last month's ending number, or a pull from your inventory valuation report if you are just starting. Pick one valuation method and stay with it, because switching between average cost, landed cost and retail from month to month will make the formula wander.

Already on order

Open purchase orders due to arrive in the month, and only those. The trap here is counting the spring preseason order you placed in October as if it has not already been spoken for. If it is due in April, subtract it from April. This is the term that stops the double buy, which is how most overstocks actually happen. Nobody buys the same pallet twice on purpose.

A worked month: lawn and garden in April

Say you run the hardware store and you are planning April for the lawn and garden department. Your inputs look like this:

The arithmetic: 18,000 + 600 + 22,000 − 19,500 − 6,000 = $15,100 at retail.

If you buy that department at roughly a 40% margin, the cost side of the same number is about $9,060. So when your distributor rep asks what you need this month, the honest answer is "about nine grand at cost, and here is the list." Not a guess, not a full cart, a number with a reason behind it.

Notice what the formula just did for you. It told you that even though April is a big month, you are already carrying $19,500 and you have $6,000 on the way, so you only have room for a fraction of what the spring excitement suggests. It also told you to end the month $2,500 heavier than you started, because May is coming. That is the whole value of the exercise, both the gas pedal and the brake in one number.

Running it monthly without a spreadsheet war

The point of OTB is the habit, not the first number. Your first month will be wrong, and that is fine, because you will re-run it next month with better inputs. A useful accuracy check: if your actual month-end inventory lands within 5% of what you planned, the plan is working. If you keep missing by more, the problem is almost always one of the inputs, usually planned sales set from optimism instead of last year.

When the formula goes negative, it is not scolding you. It is telling you the department is overstocked against plan, and the correct response is boring: hold off on the order, or push a purchase order out a few weeks, or move the overage through a planned markdown so next month's number comes in cleaner.

There are also legitimate times to override your own OTB. A one-time closeout buy, a vendor show deal too good to leave on the table, a special order a good customer is waiting on. Override away, it is your store, but write it down. Note the amount, the reason and the month, right on the worksheet. When October rolls around and you are wondering why the plan and reality parted ways in April, that note is the difference between "I made a bet and here is how it paid off" and "no idea, must have been the truck." Budgets, like shelves, work better when everything has a labeled spot.

Filling the worksheet from Rundoo

A straight disclaimer first, because you deserve it: Rundoo does not have a built-in open-to-buy or budgeting feature. What it has is the reports that feed the worksheet, and if you run the habit monthly, the pulls below take minutes rather than an evening.

Beginning and ending inventory by department. The Inventory by Department and Inventory by Product reports both show Total Inventory Value. Rundoo exposes three valuation figures, on-hand value (average cost times on hand), stock value (which includes committed units) and ledger valuation. They answer slightly different questions, so the advice from the formula section applies hard here: pick one and use it consistently, month after month.

Planned sales. The Summary dashboard (POS > Analytics > Summary) shows revenue, cost of goods sold and gross profit with a product departments table and date presets, per location. Pull last April by department, click into a department for the underlying Product Sales Report, and you have your starting point before you layer on your own adjustments. The Sold products report can be filtered and grouped by department as well, and if you want the whole year at once, custom reports with layered grouping can lay out a department-by-month grid.

Already on order. Each product record shows On hand, On order, Committed, Min and Max per location, and On order counts units on open purchase orders, in Draft or Ordered status. For the dollar view, the Orders and Order Products datasets in the Report Builder list your purchases by vendor with received cost, so you can total what is due in April against the worksheet.

Turns, for your ending-inventory targets. The Inventory dataset in the Report Builder carries on hand, on-hand value, annual turns and last sale date per product. That tells you which departments deserve the four-turns treatment and which are naturally slower, so your ending inventory targets reflect the store you actually run.

Reordering against the plan. Once the worksheet says $9,060 at cost for the department, Min and Max per product per location keep the reorder list honest, and the purchase order builder's Generate order offers three methods per vendor: Replenishment, Min & Max, and Predictive, a year-over-year forecast. Dooey, Rundoo's AI, drafts reorders and answers questions across all your locations, while the dashboard itself is per location, so a two-store operation should plan one location at a time.

Rundoo runs in 500+ independent stores across the US and Canada. If you want to go deeper on the surrounding math, we have guides on reorder points and safety stock, inventory turns and GMROI, finding and clearing dead stock and cycle counting, plus a look at the purchasing side of the product.

Open-to-buy will not make the March truck any smaller, but it will make sure the truck is carrying what you planned, at a price the plan can absorb, while February's invoice gets paid on time. That is the whole trick, and it fits on one page.