Quick Ratio (SaaS)
The ratio of revenue growth to revenue loss, calculated as (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR). Measures the efficiency of your growth engine.
Also known as: SaaS quick ratio
Formula
(New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)
Why It Matters
Quick ratio captures the balance between revenue you are adding and revenue you are losing in a single number. A quick ratio above 4 means for every dollar you lose, you add four - indicating healthy, efficient growth.
This metric is more nuanced than raw MRR growth because it reveals the quality of growth. Two companies growing MRR at 10% monthly could have very different quick ratios if one has high churn offset by aggressive acquisition.
How to Calculate
Add New MRR and Expansion MRR, then divide by the sum of Churned MRR and Contraction MRR. A ratio above 4 is considered healthy for growth-stage companies. Below 1 means you are shrinking.
SaaS Quick Ratio Calculator
(New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)
Industry Benchmarks
A quick ratio above 4 indicates healthy growth. Between 2-4 is acceptable but suggests churn needs attention. Below 2 signals a leaky bucket that will be hard to fill. Best-in-class companies achieve 5+.
Common Mistakes
- -Not breaking MRR into all four components (new, expansion, churn, contraction)
- -Using the ratio in isolation without understanding absolute numbers
- -Ignoring seasonal variations that can temporarily skew the ratio
Pro Tips
- +Track quick ratio monthly and quarterly to spot trends
- +If your ratio is below 4, focus on reducing churn before increasing acquisition
- +Use the ratio to evaluate the impact of pricing changes - price increases may improve revenue but worsen churn
Related Terms
Monthly Recurring Revenue (MRR)
The predictable revenue a subscription business earns every month from all active subscriptions, normalized to a monthly amount.
Churn Rate
The percentage of customers or revenue lost over a given period. Customer churn measures account losses; revenue churn measures dollar losses.
Expansion Revenue
Expansion revenue is additional recurring revenue generated from existing customers through upsells, cross-sells, seat additions, or increased usage. It is the primary driver of net revenue retention above 100%.
Net Dollar Retention (NDR)
The percentage of recurring revenue retained from existing customers after accounting for expansion, contraction, and churn. Above 100% means existing customers generate more revenue over time.
See Quick Ratio (SaaS) in action
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