Economics experts use a variety of methods to analyze commercial damages. Two of the most common methods are the before and after method (also referred to as but for analysis) and the yardstick approach.
When using the before and after method, Business Valuation, Inc. first analyzes the performance of a business before the event that gave rise to the litigation. Next, we develop a forecast of what the business would have done, had the event not occurred. Then, the forecasted performance is compared to the business’s actual performance after the event, and the difference is measured. Finally, we determine an appropriate discount rate and compute the present value of the difference.
The yardstick approach compares the performance of the damaged business to the performance of comparable businesses, measuring the difference. Here, the main focus is on finding businesses that are comparable to the damaged business and developing support for the comparison.
Although the documents we will need are specific to the case at hand, for commercial cases, financial statements, tax returns, and copies of any formal business projections or plans are almost always requested. Having an established practice of formally documenting your business plans and projections is not only good practice, but also can help support your case in the event your business is damaged or interrupted.