You and your business partner own a chain of restaurants in the Midwest.You started out with one restaurant over twenty years ago,and thru smart acquisitions,you now own 35 establishments in the area.You are currently in discussions to buy a profitable steakhouse in the Chicago area from an owner who is getting ready to retire.One of the most important things you focus on when considering an acquisition is the customer base of the acquisition target company.You want to make sure that you are buying a business that has a loyal base of customers who have a long-term association with the business.You have instructed your financial advisors to give extra consideration to the quality and quantity of the customer base in their assessment of the business.
Given your acquisition strategy,which of the following metrics should you use to assess the quality of the acquisition target's customer base?
A)The company's gross profit margin
B)The company's return on investment
C)The company's sales growth percent over the last five years
D)The average customer lifetime value
E)The company's net income over the last five years

Question

You and your business partner own a chain of restaurants in the Midwest.You started out with one restaurant over twenty years ago,and thru smart acquisitions,you now own 35 establishments in the area.You are currently in discussions to buy a profitable steakhouse in the Chicago area from an owner who is getting ready to retire.One of the most important things you focus on when considering an acquisition is the customer base of the acquisition target company.You want to make sure that you are buying a business that has a loyal base of customers who have a long-term association with the business.You have instructed your financial advisors to give extra consideration to the quality and quantity of the customer base in their assessment of the business. ​
​Given your acquisition strategy,which of the following metrics should you use to assess the quality of the acquisition target's customer base?
A)​The company's gross profit margin
B)​The company's return on investment
C)​The company's sales growth percent over the last five years
D)​The average customer lifetime value
E)​The company's net income over the last five years

Quizplus · Accepted Answer

The most appropriate metric to assess the quality of the acquisition target's customer base is the average customer lifetime value. This metric will provide insight into how valuable and loyal the customers are to the business, and whether the business has a sustainable revenue stream for the future. The other metrics, such as gross profit margin, return on investment, sales growth percent, and net income, are important but they do not directly measure the quality of the customer base.

You and Your Business Partner Own a Chain of Restaurants