How to Calculate a Reorder Point for a Small Shop

Running out of a best seller costs sales and search ranking; overstocking ties up cash. A reorder point tells you when to restock.

The formula

Reorder point = average daily sales × lead time (days) + safety stock

• Average daily sales: units sold in the last 30–90 days ÷ number of days.
• Lead time: days from placing an order (or starting a batch) until the stock is ready to sell.
• Safety stock: a buffer for busy weeks and slow suppliers. A simple version is (max daily sales − average daily sales) × lead time.

Example

You sell about 4 mugs a day, the supplier takes 10 days, and on busy days you sell up to 5. Safety stock = (5 − 4) × 10 = 10. Reorder point = 4 × 10 + 10 = 50 mugs. When stock on hand drops to 50, reorder.

Tips

• Recalculate before seasonal peaks (Q4 for most gift shops).
• Track stock from a single in/out log so "on hand" is never a guess.
• Check margin as well as volume. A fast seller with a 10% margin may not deserve the most cash.

In our kit you set a reorder point for each product, and it flags anything at or below it, alongside margin and stock value.

Small Business Inventory Kit: do this math automatically in Excel or Google Sheets.

See the Small Business Inventory Kit