Lost Profits May Not Be Lost

Lost profits are net gains made from sales, after deducting expenses. They are recoverable in California if there is sufficient evidence to show with reasonable certainty that, but for the defendant's conduct, the plaintiff would have earned such profits. However, the plaintiff does not have to prove the exact amount of its lost profits.

For an established business, lost profits may be proven from the past volume of business and other provable data relevant to the probable future sales. It is more difficult to prove lost profits for an unestablished business. Courts frequently decline to award lost profits for such new businesses because the absence of income and expense experience renders anticipated profits too speculative to meet the standard of reasonable certainty.

Nonetheless, lost profits for an unestablished business can be proven in various ways, including with expert testimony, economic and financial data, market surveys and analyses, business records of similar enterprises, and the like. Other evidence relevant to proving lost profits for new businesses includes: (i) whether the business is in an established market; (ii) the plaintiff’s experience in the business he or she is seeking to establish; (iii) the defendant’s own pre-dispute projections (if, for example, the dispute involves the sale of a business); and (iv) the experience of others in a similar business.

If evidence of lost profits includes a comparison to other businesses, those businesses must be sufficiently similar. The comparable businesses must operate under similar conditions, such as the same area and with the same equipment. 

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