Lost Profits (Commercial)

Damages representing the net income a business would have earned but for the defendant's wrongful conduct, calculated by projecting reasonable revenue expectations and deducting avoided costs. Proving lost profits in commercial litigation requires expert economic testimony supported by historical financials, market data, and reliable projections — courts consistently reject speculative models that lack a reasonable basis. Funders treat lost profits analysis as one of the most scrutinized elements of commercial damages, because defendants typically attack both the causation link and the financial modeling. The strength of the lost profits case — including whether profits were established at the time of breach and whether causation is clean — materially affects the funder's recovery model.

Funders discount a lost-profits claim heavily unless the plaintiff has a clean pre-breach financial track record, because courts consistently reject projections that lack a reasonable historical basis. A funder's diligence typically includes an independent review of the claimant's audited financials and market comparables before accepting the plaintiff's expert model, since a damages theory that collapses on causation or reliability grounds at trial destroys the investment even where liability is clear.