BONN, Germany – When people or the media discuss profit, it’s often unclear what exactly they mean. The world of profit is overflowing with ambiguities, deceptions and even deliberate attempts to mislead – in fact 84% of U.S. companies that have gone public in recent years do not make a profit. Made up terms companies report on—such as earnings before interest and taxes (EBIT); earnings before interest, taxes, depreciation and amortization (EBITDA); “Core Platform Contribution Profit” (as reported by Uber); “Community-Adjusted EBITDA” (used by WeWork); and “Adjusted Consolidated Segment Operating Income” (Groupon)—are not true profit, but deceptions or fogging.
The everyman on the street has a totally distorted perception of true profits, i.e. net profit margins. Consumers estimate the following net profit margins: USA 31%, actual margin 4.9-6%; Germany 22.8%, actual margin 3.2-3.4%; Italy 38%, actual margin 5.1%. The United States is also contradictory case when it comes to profit. On the one hand, the U.S. has many global profit stars, but on the other hand, very many U.S. companies show low profitability. The profit margin of the industrialized countries is higher than the U.S. average.
With all the contradictions, fogging and confusion — it’s no surprise profit is so misunderstood. World-renowned management thinker, consultant and pricing expert Hermann Simon, Ph.D., aims to demystify profit in his latest book, True Profit!: No Company Ever Went Broke Turning a Profit (Springer, 2021). In True Profit! Simon brings clarity to the jungle of profits and balance sheets, shedding light on the performance of numerous companies and industries in an international comparison.
“The ultimate indicator of the success of each business is profit, like it or not,” says Simon. “Profit is the condition for survival. No company ever failed from making a profit, but many, many companies failed from not making a profit and from having the wrong goals and the wrong measurements.”
In True Profit! Simon also explores critics of capitalism and the ethics of profit, questioning modern concepts such as purpose, the stakeholder concept and more. Simon does not hold back in taking a stance on decisive profit orientation, stating that profits must be earned in a decent way—i.e., not by exploiting monopoly positions or emergency situations. In a time of rising inflation in the U.S., this is an important topic.
In True Profit!, readers will learn:
- What profit actually is and a strategic outlook on profit relevant for large and small companies
- Causes of profit weakness, including incorrect incentives and overstretched diversification
- Why profit maximization is simply the antithesis of waste
- The role of profit drivers, price, sales, volume and cost
True Profit! is published in German, English, Polish, Russian and Turkish. Korean, Chinese, French, Italian and Spanish editions are forthcoming.
About Hermann Simon
Hermann Simon is the founder and honorary chairman of Simon-Kucher & Partners, the world’s leading price consultancy, with 43 offices in 28 countries. Ranked on the Thinkers50 list of the most influential international management thinkers, he is considered the world’s foremost authority on pricing strategy. Simon has published over 40 books, translated in 30 languages, including the worldwide bestsellers Hidden Champions, Confessions of the Pricing Man, Price Management and True Profit! No Company Ever Went Broke from Turning a Profit, and recently published his autobiography, Many Worlds, One Life: A Remarkable Journey from Farmhouse to the Global Stage
Simon studied economics and business administration at the Universities of Cologne and Bonn, where he graduated in economics and earned his Ph.D. in management science. Before founding Simon-Kucher & Partners, Simon was a professor of business administration and marketing at the Universities of Mainz and Bielefeld. During his academic career, he was a visiting professor at Harvard Business School, Stanford University and the Massachusetts Institute of Technology. He is honorary professor at the University of International Business and Economics in Beijing and the Hermann Simon Business School in Shouguang, China, has been named in his honor. For more information, please visit https://www.hermannsimon.com/.