Lost profits are typically measured utilizing a "But-For" approach, typically consisting of anyone or a combination of the following methodologies, depending on the facts and circumstances involved: Before-and-after method Yardstick method Revenue Projections Before-and-After Method This approach is based on what the damaged business was able to achieve both before and after the damaging act occurred. Yardstick Method Using industry metrics, comparisons to similar companies, and/or market data, yardstick (Benchmark) methodologies are modeled to present the levels of operating performance that could have been achieved if the damaged entity could have grown as its industry peers. Revenue Projections Under this methodology limiting conditions and assumptions are prepared to indicate, under current (sometimes hypothetical) market conditions, what the damaged company could have achieved, were it not for the damaging act that took place. Regardless of the methodologies chosen, Lost Profit Calculations also require that:

1)   Accounting records, business tax returns, financial statements issued to third parties such as creditors, and internal   
       business records can support the loss of profits claimed
 
2)   The loss period be clearly established

3)   In most cases, a business must also establish that it was profitable before the loss period

4)   The lost profits were not caused by market forces, changes in consumer trends, industry trends, changes in economic    
      conditions, and similar causes

5)   A careful analysis of expenses be made to isolate incremental revenues, variable expenses, fixed expenses as well as any
      expenses that could have been avoided or "saved" during the loss period

6)   The lost profits were unequivocally lost. In addition, any make up possibilities must be considered, accounted and 
      quantified

7)   The cause for the lost profits must be established. This requires that legal counsel be consulted early on to determine the
       legal facts connecting the wrongful acts, or events, causing any alleged lost profits and the effects of any contractual
       considerations on the way the methodology is to be construed

8)   Usually, unreported revenues and expenses cannot be used to establish lost profits
 
9)   In many instances, mitigation must be established that clearly indicates the efforts undertaken by a damaged party to 
       reduce or diminish, as reasonably as possible, the effects of the claimed loss

In some instances, a loss may also be determined by comparing the value of a business before versus the value of the business immediately after the occurrence of an alleged event

In the courtroom, the determination of commercial damages may also involve additional forensic services entailing the application of various analytical methodologies, presented in a way that the results obtained can be replicated by other experts, utilizing techniques, methods and or procedures generally accepted by experts, which are probative to a trier of fact, and which meet judicial requirements regarding admissibility of evidence.

Many times this may involve a combination of disciplines such as accounting, finance, economics and the ability to work with members of the judicial system in an objective and disciplined fashion.

Different methods can be utilized by a damages expert depending on the type of damage incident, the parties involved and the reliability of financial data.

Valuation analysts are often engaged to estimate monetary losses suffered by individuals or businesses.

To do so, a forensic investigation of accounting records and underlying transactions is often conducted, resulting in preparing an assessment of business damges, if any, that may have been sustained

Typical forensic services involving damages  mortgage fraud investigations, breach of contract actions, embezzlements, and financial statement fraud.

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