SaaS Quick Ratio
Definition
The SaaS Quick Ratio measures revenue growth efficiency by comparing the total MRR added (new + expansion + reactivation) to the total MRR lost (contraction + churn). A quick ratio above 4 is considered excellent, meaning the company adds four dollars of revenue for every dollar lost, indicating strong and sustainable growth.
Formula
Overview
The SaaS Quick Ratio provides a single number that captures the quality of revenue growth by examining the relationship between revenue additions and revenue losses. It goes beyond net MRR growth to reveal how much "leakage" the company is experiencing underneath the top-line number.
A quick ratio of 4 or higher is considered excellent: for every dollar of MRR lost, four or more dollars are added. A ratio of 2–4 is healthy for most stages. Below 2 suggests the company is fighting hard just to maintain growth, and any slowdown in new customer acquisition could quickly turn net growth negative.
The quick ratio is particularly useful for early-stage companies because it highlights retention quality before the absolute numbers are large enough to draw conclusions from NRR alone. A company adding $20K MRR monthly but losing $15K has a quick ratio of only 1.33, which is a warning sign despite the positive net growth of $5K.
Example
A company adds $30K in new MRR, $10K in expansion, and $2K in reactivation, while losing $5K to churn and $3K to contraction. Quick Ratio = ($30K + $10K + $2K) ÷ ($5K + $3K) = 5.25.
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