Net new MRR tells you how much recurring revenue grew. It doesn't tell you how hard the business worked to get there. A company that wins $10,000 and loses $3,000 is in a very different position from one that wins $30,000 and loses $23,000, even though both added $7,000.
The formula
The quick ratio divides what you gained by what you lost: (new MRR + expansion MRR) ÷ (churned MRR + contraction MRR).
Gained
$8,000 + $2,000equals$10,000
Lost
$2,500 + $500equals$3,000
Quick ratio
$10,000 ÷ $3,000equals3.33x
A ratio of 3.33 means the company added $3.33 for every dollar that leaked away through cancellations and downgrades.
What a good ratio looks like
A quick ratio of 4 or more is widely cited as a sign of efficient growth for early-stage SaaS. Below 1, MRR is shrinking. Between 1 and 4, the business is growing, but churn is eating a large share of what sales brings in.
Mature companies often run lower ratios. As the customer base grows, churn in dollars grows with it, so the same percentage churn produces a bigger denominator.
Using it well
- Calculate it quarterly or as a three-month rolling average; single months are noisy.
- Look at the parts, not just the ratio. A falling ratio caused by rising contraction calls for a different fix than one caused by slower sales.
- Pair it with net revenue retention, which ignores new customers and shows the health of the existing base.