If you run or invest in a SaaS business, you’ve likely heard terms like MRR, churn, LTV, and CAC thrown around. But there’s one metric that offers a powerful glimpse into your company’s financial health and momentum—the SaaS Quick Ratio.
It’s a number that can tell you if your business is growing efficiently or merely treading water. And in a world where SaaS valuations hinge on scalable, sustainable growth, understanding this ratio can make all the difference.
Let’s break it all down—what the SaaS quick ratio means, how to calculate it, what makes a good one, and how you can use it to guide smarter decisions for your company.
What Is the SaaS Quick Ratio?
The SaaS Quick Ratio is a growth efficiency metric that compares your new revenue to revenue losses during a given period. It helps determine how efficiently your SaaS company is growing in the face of churn and contraction.
Formula:
SaaS Quick Ratio = (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)
In simpler terms, it’s:
- Top half: Revenue added
- Bottom half: Revenue lost
This ratio gives you a high-level view of whether your growth engine is firing or struggling to overcome revenue leaks.
Why Is the SaaS Quick Ratio Important?
It tells a bigger story than growth alone. Revenue growth can look impressive on the surface, but if you’re losing almost as much as you’re gaining, your growth isn’t sustainable. The SaaS Quick Ratio brings that context forward.
Here’s what it helps you understand:
- Growth quality: Are you growing because you’re retaining and expanding customers—or just signing new ones while losing others?
- Retention strength: High churn will tank your ratio. This metric quickly reveals customer satisfaction and stickiness.
- Investor insight: Investors use this metric to assess how durable and scalable your revenue is.
- Operational focus: The quick ratio highlights whether you need to double down on customer success or go full throttle on acquisition.
Breaking Down the Components
Let’s look at the four key components involved in the calculation:
1. New MRR (Monthly Recurring Revenue)
This is the revenue you gain from new customer subscriptions within a specific period.
2. Expansion MRR
Revenue gained from existing customers who upgrade or expand their services—think plan upgrades, additional users, add-ons, etc.
3. Churned MRR
Revenue lost when customers cancel their subscriptions.
4. Contraction MRR
Revenue lost due to downgrades—customers stay, but pay less.
When these four are added into the formula, you get a single number that reflects your revenue efficiency.
SaaS Quick Ratio Benchmarks: What’s a Good Ratio?
Now that you know how to calculate it, you might be asking: what’s a good quick ratio?
Here’s a rough breakdown:
| SaaS Quick Ratio | Interpretation |
| < 1 | Losing more revenue than you gain—red flag |
| 1 – 2 | Growing, but inefficiently—high churn problem |
| 2 – 4 | Healthy—moderate churn, strong new revenue |
| > 4 | Very strong—excellent retention and/or expansion |
Top-performing SaaS companies often have quick ratios of 4 or higher. But even 3 is considered a solid benchmark for healthy growth, especially in the early to mid stages of a SaaS business.
Example: How to Calculate It
Let’s say your company’s MRR changes like this in one month:
- New MRR: $50,000
- Expansion MRR: $20,000
- Churned MRR: $15,000
- Contraction MRR: $5,000
SaaS Quick Ratio = (50K + 20K) / (15K + 5K) = 70K / 20K = 3.5
A ratio of 3.5 is strong. It means for every dollar of MRR you’re losing, you’re adding $3.50. That’s a solid signal of sustainable growth.
SaaS Quick Ratio vs Traditional Quick Ratio
Don’t confuse the SaaS quick ratio with the traditional accounting Quick Ratio (also called Acid Test Ratio), which measures a company’s short-term liquidity.
- Traditional Quick Ratio = (Current Assets – Inventory) / Current Liabilities
- SaaS Quick Ratio = (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)
While both aim to assess financial health, the SaaS quick ratio is focused on revenue efficiency, not liquidity.
Why Startups Love the Quick Ratio
Early-stage SaaS startups often obsess over growth. But traditional metrics like revenue and churn can feel scattered or misleading in isolation.
That’s why the quick ratio is so powerful:
- It’s fast to calculate: You don’t need a CFO or complex dashboard—just MRR movement.
- It’s holistic: Combines both growth and churn in one number.
- It scales: Works at any stage, whether you’re at $10K MRR or $10M.
Investors often ask for this number during fundraising because it instantly reveals if your growth is leaky or strong.
Interpreting the SaaS Quick Ratio
A High Ratio (4 or above)
- Indicates strong new business and/or upsells
- Suggests customers are finding value and sticking around
- Shows potential for compounding growth
A Mid-Range Ratio (2–3.5)
- Generally healthy, but churn might need work
- Common in fast-growing startups still stabilizing retention
A Low Ratio (1–2)
- Churn is too high
- Revenue engine is burning more than it’s earning
- Needs urgent focus on product-market fit, onboarding, support, or customer success
Below 1
- The business is shrinking
- Even new revenue can’t cover losses
- Likely unsustainable without a strategic shift
How to Improve Your SaaS Quick Ratio
If your quick ratio is lower than you’d like, here are specific strategies to improve it:
1. Reduce Churn
- Improve onboarding
- Offer more self-service resources
- Check in proactively with at-risk customers
- Use in-product prompts and surveys to catch issues early
2. Drive Expansion Revenue
- Introduce tiered pricing or usage-based models
- Upsell during customer success calls
- Offer add-ons or integrations with real value
3. Get More from Existing Customers
- Educate users on underused features
- Host webinars to show how to get more ROI
- Implement account-based growth campaigns
4. Improve Product Stickiness
- Analyze time-to-value and simplify it
- Personalize user experiences
- Build habits through usage nudges and triggers
5. Align Sales and Success Teams
- Sales should not just close deals—they should close right-fit customers
- Success teams must be equipped with the right tools and data to retain and grow accounts
Limitations of the SaaS Quick Ratio
While it’s a valuable metric, the quick ratio isn’t perfect.
Here are a few caveats:
- It ignores absolute revenue scale: A quick ratio of 4 at $20K MRR is different from 4 at $2M.
- Doesn’t consider CAC or profitability: You could be growing fast but burning cash unsustainably.
- Misses seasonality or one-time spikes: A big upsell can distort a single month’s ratio.
- Not a replacement for LTV/CAC or net dollar retention (NDR): It’s best used alongside other KPIs.
SaaS Quick Ratio vs Net Dollar Retention (NDR)
Both metrics are about customer revenue efficiency—but they’re different.
| Metric | Focus | Includes New Customers? | Formula |
| SaaS Quick Ratio | Efficiency of added vs lost MRR | Yes | (New + Expansion) / (Churn + Contraction) |
| NDR | Expansion of existing customer revenue | No | (Starting MRR + Expansion – Churn – Contraction) / Starting MRR |
Use Quick Ratio when evaluating a total growth engine.
Use NDR when focusing on retention and upsells alone.
Tools That Help Track SaaS Quick Ratio
Modern SaaS companies no longer need to calculate the SaaS Quick Ratio manually. Several tools simplify the process by providing real-time metrics and insights:
- ChartMogul – Offers detailed MRR analytics and tracks Quick Ratio trends.
- Baremetrics – Visualizes revenue movements and key SaaS metrics with ease.
- ProfitWell – Provides free financial metrics and growth analytics for SaaS companies.
- Stripe Sigma – Enables custom SQL queries to analyze revenue and churn data.
- Metronome – Helps monitor revenue and growth dynamics with historical context.
These platforms not only automate Quick Ratio tracking but also give a clear picture of how monthly recurring revenue (MRR) is growing or shrinking over time. They allow teams to make data-driven decisions and understand business health at a glance.
Final Thoughts: Why It Should Be on Every SaaS Dashboard
The SaaS Quick Ratio is a crystal-clear signal of revenue health. It forces you to balance offense (growth) with defense (retention), making it an essential metric for founders, operators, and investors alike.
If your quick ratio is strong, it means your revenue is compounding. If it’s weak, it shows where the holes are. Either way, it’s actionable—and that’s what makes it so powerful.
Whether you’re in the early stages of product-market fit or scaling toward IPO, make the SaaS Quick Ratio a permanent fixture in your metrics stack.
Looking to boost your SaaS Quick Ratio through better marketing?
Sustainable growth isn’t just about retention—it’s also about acquiring the right customers through effective marketing. Explore proven SaaS marketing strategies, channels, and playbooks in our complete SaaS marketing guide to strengthen both your top-line revenue and retention.