Lost profits equal the sum of money a business would have made, minus the expenses it would have incurred in making that income. This amount must be established with reasonable certainty, by competent evidence. White v. Southwestern Bell Tel. Co., 651 S.W.2d 260, 262 (Tex. 1983), citing Southwest Battery Corp. v. Owen, 115 S.W.2d 1097, 1098 (Tex. 1938). “[O]pinions or estimates of lost profits must be based on objective facts, figures, or data from which the amount of lost profits may be ascertained.” Szczepanik v. First S. Trust Co., 883 S.W.2d 648,649 (Tex. 1994).
Lost profits cannot be awarded on new, speculative, or unestablished business activities, on the basis of uncertain or changing market conditions, chancy business opportunities, or entry into unknown or unviable markets. See Texas Instruments v. Teletron, 877 S.W.2d 276, 279 (Tex. 1994). What is a new enterprise? If a product or service is already established, a new business entering that market could recover a lost profit. See Texas Instruments, 877 S.W.2d at 280. But a business manufacturing a new product that has never been sold to anyone before, is a new enterprise. Such an entity would probably not be able to establish lost profits. Id at 280–81. A venture that would need to overcome several obstacles before realizing its first profits would have similar issues. Profits in both of those scenarios were not lost. They were instead never earned in the first place.
An injured plaintiff does not need an expert in order to establish lost profits with reasonable certainty. A business owner or key employee need only establish the gross revenue and expenses during a time predating, but recent to, the loss. White, 651 S.W.2d at 262, citing Atomic Fuel Extraction Corp. v. Estate of Tom Slick, 386 S.W.2d 180, 188 (Tex. Civ. App.—San Antonio 1964, writ ref’d n.r.e. per curiam, 403 S.W.2d 784 (Tex. 1965). Comparing those figures to the amount of income earned during the period of and after loss establishes the lost profits. Texas Instruments, 877 S.W.2d at 279. Plaintiffs may take into account the usual increase in business one might expect from ongoing development or other supporting circumstances. White, 651 S.W.2d at 262.
Lost profits should only be awarded for the time period it would reasonably take to restore the business to its earlier profitability. Community Pub. Serv. Co. v. Gray, 107 S.W.2d 495, 499 (Tex. Civ. App.—El Paso 1937, no writ), citing Halcomb v. Stubblefield, 76 Tex. 310 (1890). If the business or property is totally destroyed, the plaintiff should seek profits lost during any attempted recovery, and fair market value for the loss thereafter. San Antonio v. Guidry, 801 S.W.2d 142, 150 (Tex.App.—San Antonio 1990, no writ).
If you have lost profits and believe you may have a cause of action against someone or an entity, we may be able to help. Please give us a call at 713-961-7770 or contact us by email to discuss your potential case.