The SaaS quick ratio measures growth efficiency by dividing revenue added (new MRR plus expansion MRR) by revenue lost (churned MRR plus contraction MRR) over the same period. A higher quick ratio means the company is adding revenue faster than it is losing it. It compresses both growth and retention health into a single number, which makes it easy to compare across periods and against other companies.
Investors use the SaaS quick ratio as a single-number health check on growth quality. A company growing 10% a month while losing 8% to churn is fundamentally different from one growing 10% while losing only 2%, even though both show the same headline growth rate.
Add up all new MRR from new customers plus expansion MRR from existing customers, such as upgrades, seat additions, and cross-sells.
Add up all churned MRR from lost customers plus contraction MRR from downgrades.
Divide the first number by the second. That result is your quick ratio for the period.
Early-stage companies before Series A should aim above 4.0, since high churn is common at this stage and new customer acquisition needs to outpace losses by a wide margin. Growth-stage companies from Series A to B typically see 3.0 to 4.0 as healthy, with expansion revenue starting to contribute meaningfully; a drop below 3.0 is worth investigating for accelerating churn. At scale, from Series C onward, 2.5 to 3.5 is typical, since larger absolute MRR means even a lower ratio still represents significant net growth, and expansion revenue often exceeds new customer revenue entirely.
Healthy: new MRR $20,000, expansion $8,000, churn $5,000, contraction $3,000. Quick ratio equals (20,000 + 8,000) divided by (5,000 + 3,000), which is 3.5.
Warning sign: new MRR $15,000, expansion $2,000, churn $10,000, contraction $4,000. Quick ratio equals (15,000 + 2,000) divided by (10,000 + 4,000), which is 1.2: growth is barely outpacing losses.
Strong: new MRR $30,000, expansion $20,000, churn $8,000, contraction $2,000. Quick ratio equals (30,000 + 20,000) divided by (8,000 + 2,000), which is 5.0, with expansion revenue acting as a real growth engine on its own.
Quick ratio and net dollar retention measure related but different things. NDR looks only at existing customers, capturing retention plus expansion, while quick ratio also folds in new customer acquisition. A company can post a strong NDR of 120% while still showing a weak quick ratio if new customer acquisition has slowed to a crawl. Use NDR to judge retention health and quick ratio to judge overall growth efficiency, side by side.
Calculating a monthly quick ratio off noisy, low-volume data; a 3-month rolling average gives a far more stable signal, especially for early-stage companies with few customers.
Conflating logo churn with revenue churn. A handful of large accounts churning can tank the quick ratio even when most customers by count are staying, so look at both figures together rather than one in isolation.
On the financials slide, show quick ratio alongside NDR and churn, ideally as a trend over the past six to twelve months. A chart showing the ratio improving over time is more convincing to an investor than a single current-period number.
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