The SaaS Quick Ratio measures growth efficiency: for every $1 of revenue lost to churn and contraction, how many dollars of new and expansion revenue you generate. It's (New MRR + Expansion MRR) ÷ (Contraction MRR + Churned MRR), a ratio of 4+ signals excellent, efficient growth.
What is SaaS Quick Ratio?
SaaS Quick Ratio measures how much a company’s revenue is growing compared to its losses.
It answers the question: “For every dollar of lost revenue, how many dollars of new revenue are we generating?”
How to Calculate SaaS Quick Ratio?
The Formula for SaaS Quick Ratio
SaaS Quick Ratio = (New MRR + Expansion MRR) ÷ (Contraction MRR + Churned MRR)Dollars gained per dollar lost
Where:
New MRR = Revenue from new customers
Expansion MRR = Additional revenue from existing customers
Contraction MRR = Lost revenue from downgrades
Churned MRR = Lost revenue from cancellations
Example Time! ✨
Let’s say for a month:
- New MRR = $50,000
- Expansion MRR = $20,000
- Contraction MRR = $5,000
- Churned MRR = $10,000
Calculation:
($50,000 + $20,000) ÷ ($5,000 + $10,000) = 4.67$4.67 gained per $1 lost
This means for every $1 lost, the company generates $4.67 in new revenue!
What is a Good SaaS Quick Ratio?
The magic numbers to know: 🎯
- Less than 1: 😟 Red flag! Losing more than gaining
- 1-2: 😐 Okay, but needs improvement
- 2-4: 😊 Healthy growth
- 4+: 🤩 Excellent growth!
Why is SaaS Quick Ratio Important?
It’s your growth health checker! 🏥
Growth Quality 📈
- Shows sustainable vs unsustainable growth
- Indicates sales efficiency
- Reveals customer satisfaction
Investment Decisions 💰
- Helps evaluate business health
- Guides resource allocation
- Informs fundraising timing
Strategic Planning 🎯
- Identifies areas for improvement
- Guides marketing spend
- Helps set realistic goals
SaaS Quick Ratio FAQ
What is the SaaS Quick Ratio?
A growth-efficiency metric that compares revenue gained (new + expansion MRR) against revenue lost (contraction + churned MRR), answering "for every $1 lost, how many dollars do we add?"
How do you calculate it?
(New MRR + Expansion MRR) ÷ (Contraction MRR + Churned MRR). For example, ($50K + $20K) ÷ ($5K + $10K) = 4.67.
What is a good SaaS Quick Ratio?
Below 1 is a red flag (losing more than gaining), 1–2 needs work, 2–4 is healthy, and 4+ is excellent. Benchmark of 4 is the common target for efficient SaaS growth.
Why does the SaaS Quick Ratio matter?
It reveals the quality of growth, whether new and expansion revenue are outpacing churn, guiding investment decisions, fundraising timing, and where to improve.
