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.
