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Considerations for calculating damages in business lawsuits

On Behalf of | Nov 11, 2021 | Business & Commercial Law

Business and commercial law protects businesses of all sizes in New York. However, figuring out damages in business lawsuits can be a daunting task.

Measuring lost profits

A person needs to think about how to measure the damages of an early business during lawsuits. Startup companies can’t use traditional damage analyses that rely on the company’s track record. It’s hard to measure profit losses without an operating history.

Legal requirements

Under business and commercial law, a company needs accepted evidence for damage analysis from reliable factual bases. The law heightens the requirements with new businesses. Reasons to seek business damages include patent infringement, unfair competition, breach of contract and negligence. Monetary damage measurements include lost profits, reasonable royalty and the ruined value of the entire business. Lost profits are the more common business damages claims.

Factors for assessing new businesses

There are more factors that experts use to determine damages of new businesses. These may include:

  • Threat of new entrants
  • Threat of substitute products
  • Bargaining power of customers
  • Bargaining power of suppliers
  • Competition within the industry
  • Capital adequacy
  • Prior business experience
  • Experience of the management team
  • External economic conditions
  • A formal business plan

Proving lost profits for new businesses

Experts measure the lost profits of businesses with reasonable certainty. They look through the evidence available to find the story of the business damages. Courts allow some levels of speculation with new businesses, but there needs to be as much evidence as possible for the court. Experts tend to gather a mosaic of data on new businesses to gather enough evidence to prove the business damages. Startup businesses have more issues with general competitive pressures because they don’t have time to establish brand loyalty customers.

Damages lawsuits for lost business value are more common than lost profits with new businesses. A new business has more problems that can arise and cause the business to fail. There are many techniques that professional use to check new businesses with a loss of profits claim depending on the circumstances around the business.