Lost Business Value

A damages theory seeking recovery for the total diminution in the going-concern or enterprise value of a business caused by the defendant's wrongful conduct, as distinct from lost profits in a defined period. Lost business value claims arise frequently in cases involving destruction of a business, wrongful termination of a franchise or key contract, or tortious interference that ends a company's operations. This theory often produces larger damage figures than incremental lost profits, but also faces heightened scrutiny from courts that require reliable valuation methodology and a clear causal link to the defendant's conduct. For funders, lost business value claims in smaller companies can be difficult to price precisely due to limited audited financial history.

Because lost business value claims often exceed what an incremental lost-profits theory would produce, funders scrutinize them more skeptically — courts require a defensible enterprise valuation methodology and a clean causal link between the defendant's conduct and the business's destruction. Funders underwriting smaller companies with limited audited history discount this theory further, since the valuation inputs a going-concern analysis depends on are frequently unavailable or unreliable in that context.