Terminology Translation: What are ‘but for’ profits in business damages cases?

Lost business profits are relevant when a business alleges financial harm caused by the wrongful actions of another. A crucial ‘ingredient’ in assessing damages claims are ‘but for’ profits. Simply put, ‘but for’ profits are the amount the business argues it would have earned ‘but for’ the actions of the defendant.

In order to calculate ‘but for’ profits, an economic expert will rely in part on financial, historical and industry data. Business records will help inform the expert’s analysis and projection of what the business would have earned ‘but for’ the defendant’s actions. Performing an industry analysis may shed light on if the business’ losses are unique, or a symptom of an industry-wide trend.

An important factor considered alongside the ‘but for’ profits are the actual profits. Lost profits are not equal to ‘but for’ profits, but instead are calculated by subtracting actual profits from the ‘but for’ profits. The resulting lost profits are calculated in present day value.

EmployStats wrote a brief introduction to calculating lost profits in business damages cases, including a discussion of the three most common methodologies used in these types of analyses, which you can read here.