In commercial litigation, it’s common for business valuation experts to measure damages based on lost profits or diminished business value — or both. Here’s an introduction to these concepts. The basics Generally, it’s appropriate to estimate lost profits when a plaintiff suffers an economic loss for a discrete period and then returns to normal. On the other hand, diminished business value is typically reserved for businesses that are completely destroyed or otherwise suffer a permanent loss, such as destruction of an entire division or product line. In rare situations, lost profits may fail to adequately capture a plaintiff’s damages. For example, suppose a defendant’s wrongful conduct damages a plaintiff’s reputation, but it doesn’t directly affect the plaintiff’s expected profits. Nevertheless, the defendant’s actions have rendered the plaintiff’s business...
