The SaaS quick ratio measures growth efficiency by dividing revenue added (new MRR plus expansion MRR) by revenue lost (churned MRR plus contraction MRR). A higher quick ratio means the company is adding revenue faster than losing it. It provides a single number that captures both growth and retention health, making it easy to compare across periods and companies.
Shows if you are adding revenue faster than losing it. Higher = healthier growth.
Investors use the SaaS quick ratio as a single-number health check. A company growing 10% monthly but losing 8% to churn is fundamentally different from one growing 10% and losing 2%.
Add up all new MRR from new customers plus expansion MRR from existing customers (upgrades, seat additions, cross-sells).
Add up all churned MRR from lost customers plus contraction MRR from downgrades.
Divide the first number by the second. That is your quick ratio for the period.
Early-stage (pre-Series A): Quick ratio above 4.0 is strong. At this stage, high churn is common, so focus on new customer acquisition outpacing losses.
Growth stage (Series A-B): 3.0-4.0 is healthy. Expansion revenue should start contributing meaningfully. If quick ratio drops below 3, investigate whether churn is accelerating.
Scale stage (Series C+): 2.5-3.5 is typical. Absolute MRR numbers are larger, so even a lower ratio represents significant net growth. Expansion revenue often exceeds new customer revenue at this stage.
Example 1 (healthy): New MRR $20k; Expansion $8k; Churn $5k; Contraction $3k → Quick ratio = (20+8)/(5+3) = 3.5.
Example 2 (warning): New MRR $15k; Expansion $2k; Churn $10k; Contraction $4k → Quick ratio = (15+2)/(10+4) = 1.2. Growth is barely outpacing losses.
Example 3 (strong): New MRR $30k; Expansion $20k; Churn $8k; Contraction $2k → Quick ratio = (30+20)/(8+2) = 5.0. Expansion revenue is a growth engine.
Quick ratio and NDR measure related but different things. NDR focuses only on existing customers (retention + expansion), while quick ratio includes new customer acquisition too.
A company can have great NDR (120%) but a poor quick ratio if new customer acquisition is slow. Conversely, strong new sales can mask retention problems in the quick ratio.
Use both: NDR for retention health, quick ratio for overall growth efficiency.
Ignoring contraction; comparing across different growth stages; not normalizing for seasonality.
Calculating monthly quick ratio with noisy data. Use a 3-month rolling average for a more stable signal.
Conflating logo churn with revenue churn. A few large customers churning can tank the quick ratio even if most customers stay.
Financials slide: quick ratio alongside NDR and churn, ideally as a trend over the past 6-12 months.
A chart showing quick ratio improving over time is more compelling than a single number.
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