Can You Predict a Financial Crash?

A key component in selling your business is deciding when the right time to do so is. This means you need to know when the economic climate is right to sell. Saying this, is it possible to predict a financial crash?

The 2008 financial crash was devastating; markets plunged, companies went bust, loans were called in. It’s a nightmare that we’re only now just recovering from, and most people didn’t really see it coming. It was pretty bad for business acquisition.

This was simply because nobody wanted to buy a business after the crash; everybody knew a recession was coming and that it would do them more harm than good to buy a business at that point. This is why it’s useful to be able to predict a financial crash; if you don’t then you might leave it too late to sell.

So is it possible to predict a financial crash? Not really; there are too many variables and too many opinions out there that could lead you to make a fatal misstep. However there are several steps that you can take to make yourself aware of trends that could lead to a financial crash.

To begin with, you have to keep track of markets. Obviously, the world’s economy depends on the markets. When we talk about a crash we talk about the markets crashing, so when they do, if you don’t know about it you’re going to be caught off guard, which could disadvantage you in a number of ways.

It’s also essential that you keep track of current affairs. What’s happening in the world effects market prices. For example, the current Ukraine crisis is affecting Russian stocks. Therefore if you have business dealings with Russian companies, it could affect your profit margins. It’s useful to know what the ramifications of current affairs may be ahead of time so that you can act to limit the damage.

It’s also useful to keep market bubble and bursts- when a product saturates the market and ends up losing value - in mind. Take the tech boom early last decade as an example. So many people were buying into tech that it flooded the market, no one needed it anymore and it lost value almost overnight. If you trade in a product that is part of a bubble market trend, keep track of when that bubble might burst.

At RTA Business we realise that predicting financial crashes is an inexact science at best, a nightmare at worst. However it is possible to at least recognise common trends that may lead to a market crash; it’s all about keeping yourself informed; a key principle in any business model.