Two companies can add the same net new revenue in very different ways. One wins a little and loses almost nothing; the other wins a lot and loses nearly as much. The quick ratio separates them: it divides the revenue you gained by the revenue you lost.
How it works
Add new MRR and expansion MRR to get everything gained this month. Add churned MRR and contraction MRR to get everything lost.
Divide gained by lost. A ratio of 1 means you are running to stand still. A ratio of 4 means you add $4 for every $1 that leaks out.
A ratio of 4 or more is widely cited as a sign of efficient growth for early-stage SaaS. Mature companies with large bases often run lower, because churn in dollars grows with the base.
A worked example
Gaining $8,000 of new MRR and $2,000 of expansion is $10,000 gained. Losing $2,500 to churn and $500 to downgrades is $3,000 lost. The quick ratio is $10,000 ÷ $3,000 = 3.33, and net new MRR is $7,000.
Questions people ask
What does a quick ratio below 1 mean?
You lost more recurring revenue than you gained this month, so MRR shrank. Look at churn and contraction first; winning more new customers only refills a leaking bucket.
Should I calculate it monthly or quarterly?
Monthly figures are noisy, especially for small companies where one large cancellation swings the result. A quarterly figure, or a three-month rolling average, is more reliable.
Is the quick ratio the same as net revenue retention?
No. Net revenue retention ignores new customers and only looks at the existing base. The quick ratio includes new customers, so it measures overall growth efficiency.
Guides
- The SaaS Quick Ratio: Measuring Growth EfficiencyTwo companies can add the same net new MRR in very different ways. The quick ratio shows how much you gain for every dollar you lose.
- The SaaS Magic Number: Is It Time to Spend More on Growth?The magic number measures how much new annual revenue each dollar of sales and marketing produces. Here's how to calculate and read it.
- Customer Churn vs Revenue Churn: Which One Should You Watch?Losing 3% of customers can mean losing less than 3% of revenue, or growing anyway. Here's how customer, gross revenue and net revenue churn differ.
- Net Revenue Retention (NRR): Growing Without New CustomersNRR shows whether the customers you already have are worth more or less than a year ago. Above 100% means growth is built in.