The coronavirus pandemic caused unprecedented challenges that few entrepreneurs could have ever predicted or planned. As society moves toward re-opening, some economic experts are worried about an impending recession and what that might mean for US businesses. Business owners who survived the 2008 financial crisis have some experience with operating during a recession that could certainly come in handy. If you launched your business sometime after then, it doesn’t mean you have to face the economic downturn alone. While you can’t recession-proof a business, you can take steps to increase your company’s financial stability and adjust to changes in consumer behavior. As you start to prepare your business for a recession, consider tracking these invaluable business metrics. Global and Regional Trends Global trends can give you a macroeconomic view of consumer and industry behavior. However, it is also important to look at regional trends—as not all parts of the US are affected equally. \tUnemployment: The COVID-19 pandemic drove unemployment rates to their highest since the Great Depression. While states worked to provide unemployment benefits and Congress approved stimulus checks through the CARES Act, many people will be permanently unemployed because of the pandemic. When unemployment is high, customers spend less, which hurts the entire economy. \tConsumer Confidence: The Consumer Confidence Report gauges how comfortable people feel about the economy. When consumer confidence is high, customers spend more and feel more financially stable. When it is low, consumers spend less. This metric can be an indicator of the estimated demand for your products now and in the immediate future. \tConsumer Spending: The Department of Commerce releases a monthly report that accounts for 66% of the US economic activity. This report assesses personal wealth and how much disposable personal income people have. When people have higher disposable income, they are more likely to spend. Your Business’s Financial Metrics Along with global trends, you should keep an eye on certain financial metrics within your business. These can alert you to any potential problems with your operations. Below are a few key metrics to monitor. \tSales Revenue: Sales revenue is arguably the most important and telling business metric because it can indicate whether you’re running a successful business. If your sales totals are declining month-over-month, you likely have an issue that needs addressing. If your sales totals are increasing, you’re doing something right. \tCash Flow: Your cash flow refers to the amount of money that comes in and out of your business each day, week, or month. Ideally, you want to maintain positive cash flow, meaning the amount you receive exceeds the amount you spend. \tNet Profit Margin: Your net profit margin is another important business metric to track while dealing with a recession because it tells you how much actual profit you made on sales by removing expenses associated with revenue. If you are lowering your price or increasing marketing expenses during the recession, your profit margin will shrink. \tUnpaid invoices: During a recession, you would be wise to mitigate your monthly expenses. However, if you have vendor and creditor commitments, do your best to stay on top of those so as not to put your business in a larger financial hole than it already is in. Track your unpaid invoices regularly and be diligent with your expenses. Customer Behavior Metrics The smallest metric to track within your business is customer behavior. Your target audience can give you warning signs about your business even before the economy goes south. Use these metrics to make adjustments based on your customers’ activities. \tAverage Order Value (AOV): How much do customers spend when they visit your store or website? If the AOV starts to drop, customers may be treating themselves to fewer impulse buys or opting for less expensive items, signs that they want to save their money. \tCustomer Frequency: How often do customers visit your business on average? When customers want to save, they eat out less, travel less, and shop less.—which means you need to make every visit count. \tTop Products: Which items are most in-demand? Along with your staple offerings, you may notice customers opting for lower-price or smaller items in your store. You can also track the percentage of sale and clearance items customers buy compared to full-price items. \tCoupon Use: Is there a significant increase in the percent of customers who use coupons? (Be careful with this: Bed Bath and Beyond has struggled with a customer coupon dependency for years. You don’t want to create one for your business.) \tFinancing: Rent-to-own businesses and financing companies thrive during recessions. You will likely notice an increased demand for customers who want to finance their purchases and pay them off over time. While these business metrics can guide your decision-making in the lead-up to a recession, they should not cause you to panic or dramatically change your business model. Make sure you have a strong financial backbone and adapt to market changes so you can withstand any upcoming economic stress.