How to Calculate Quick Ratio for SaaS

The SaaS Quick Ratio measures growth efficiency by comparing how much revenue you add to how much you lose. It reveals whether your business is growing efficiently or struggling to replace lost revenue - a critical distinction for sustainable growth.

A high Quick Ratio means growth is efficient: you add much more than you lose. A low Quick Ratio means you're running hard just to stay in place, with much of your new revenue simply replacing churn.

Basic Quick Ratio Formula

Quick Ratio = (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)

Or more simply:

Quick Ratio = Revenue Added / Revenue Lost

Step-by-Step Calculation

Step 1: Calculate New MRR

Revenue from new customers acquired during the period:

New MRR = Sum of first-month MRR from new customers

Step 2: Calculate Expansion MRR

Revenue increases from existing customers:

Expansion MRR = Sum of MRR increases from upgrades, add-ons, price increases

Step 3: Calculate Churned MRR

Revenue lost from customers who cancelled:

Churned MRR = Sum of MRR from customers who cancelled

Step 4: Calculate Contraction MRR

Revenue decreases from customers who downgraded:

Contraction MRR = Sum of MRR decreases from customers who didn't cancel

Step 5: Calculate Quick Ratio

Quick Ratio = (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)

Example Calculation

Monthly Quick Ratio

January MRR movement:

Component	Amount
New MRR	$15,000
Expansion MRR	$8,000
Churned MRR	$4,000
Contraction MRR	$1,000

Quick Ratio = ($15,000 + $8,000) / ($4,000 + $1,000)
Quick Ratio = $23,000 / $5,000
Quick Ratio = 4.6

A Quick Ratio of 4.6 means for every $1 lost, the business adds $4.60 - healthy growth efficiency.

Net New MRR Context

Using the same numbers:

Net New MRR = $15,000 + $8,000 - $4,000 - $1,000 = $18,000

The $18,000 net growth required $23,000 in additions to overcome $5,000 in losses.

Quick Ratio Benchmarks

Quick Ratio	Interpretation
> 4	Excellent - efficient growth
3-4	Good - healthy growth dynamics
2-3	Moderate - room for improvement
1-2	Concerning - growth is inefficient
< 1	Critical - shrinking (losses exceed gains)

Benchmarks by Stage

Company Stage	Target Quick Ratio
Early Stage (< $1M ARR)	> 4
Growth Stage ($1-10M ARR)	> 3
Scale Stage ($10M+ ARR)	> 2.5
Mature (> $100M ARR)	> 2

Larger companies typically have lower Quick Ratios as growth rates moderate.

Quick Ratio Components

Breaking Down the Ratio

Scenario	New	Expansion	Churn	Contraction	QR
Balanced Growth	$20K	$10K	$5K	$2K	4.3
Expansion Heavy	$15K	$15K	$5K	$2K	4.3
Acquisition Heavy	$25K	$5K	$5K	$2K	4.3
High Churn	$30K	$10K	$15K	$5K	2.0

Same Quick Ratio can come from different growth profiles - understand the components.

Healthy vs. Unhealthy Patterns

Healthy patterns:

• High expansion relative to new (strong product value)
• Low churn and contraction (good retention)
• Balanced acquisition and expansion

Warning signs:

• High churn offsetting strong acquisition
• Declining Quick Ratio over time
• Heavy reliance on new to offset losses

Quick Ratio Over Time

Track trends to understand growth health:

Month	New	Expansion	Churn	Contraction	QR	Trend
Jan	$15K	$8K	$4K	$1K	4.6	-
Feb	$18K	$9K	$5K	$2K	3.9	Declining
Mar	$20K	$10K	$8K	$3K	2.7	Declining
Apr	$22K	$12K	$6K	$2K	4.3	Improving

A declining Quick Ratio even while growing signals emerging retention issues.

Quick Ratio vs. Related Metrics

Metric	What It Measures	Includes New?
Quick Ratio	Growth efficiency	Yes
NRR	Existing customer value change	No
GRR	Pure retention	No
Net New MRR	Absolute growth	Yes

Quick Ratio uniquely combines acquisition and retention into one efficiency metric.

Common Quick Ratio Mistakes

Mistake 1: Using Revenue Instead of MRR

Quick Ratio should use MRR components, not total revenue. One-time fees and services distort the ratio.

Mistake 2: Inconsistent Categorization

Ensure MRR movements are categorized consistently. Is a reactivation "new" or separate? Define and apply consistently.

Mistake 3: Monthly vs. Annual Confusion

Monthly and annual Quick Ratios behave differently. Annual smooths volatility but may miss emerging trends.

Mistake 4: Ignoring Denominator Size

A Quick Ratio of 10 with $1K losses is very different from 10 with $100K losses. Consider absolute amounts alongside the ratio.

Mistake 5: Over-Optimizing the Ratio

Don't sacrifice growth to improve Quick Ratio. A Quick Ratio of 10 with $2K net growth is worse than 3 with $50K net growth.

Improving Quick Ratio

Increase Numerator

Improve new customer acquisition:

• Better targeting and qualification
• Improved conversion rates
• Expanded market reach

Increase expansion revenue:

• Upsell and cross-sell motions
• Usage-based pricing
• Feature adoption programs

Decrease Denominator

Reduce churn:

• Improved onboarding
• Customer success programs
• Product improvements

Reduce contraction:

• Value demonstration
• Right-sizing at purchase
• Proactive engagement

Quick Ratio in Context-Aware Analytics

metric:
  name: Quick Ratio
  description: Growth efficiency - revenue added divided by revenue lost
  calculation: |
    (new_mrr + expansion_mrr) / (churned_mrr + contraction_mrr)
  components:
    numerator:
      - new_mrr: First MRR from new customers
      - expansion_mrr: MRR increases from existing customers
    denominator:
      - churned_mrr: MRR from cancelled customers
      - contraction_mrr: MRR decreases from retained customers
  time_period: Monthly
  dimensions: [segment, product, region]
  owner: finance_team
  certified: true

With explicit component definitions, Quick Ratio calculations are consistent - enabling accurate trend analysis and growth efficiency tracking.