Definition
SaaS quick ratio measures growth quality by comparing positive MRR movements to negative movements in a period.
Formula
Quick ratio = (new MRR + expansion MRR) / (contraction MRR + churned MRR)
Example
If new MRR is $40k and expansion is $10k, while contraction is $5k and churn is $15k, quick ratio = ($40k+$10k)/($5k+$15k) = 2.5.
How to use it
- Use it to assess whether growth is healthy vs leaky.
- Track by segment; blended ratios can hide churn pockets.
Common mistakes
- Comparing periods with different definitions of MRR movements.
- Using quick ratio alone without checking margin and payback.
Measured as
Quick ratio = (new MRR + expansion MRR) / (contraction MRR + churned MRR)
Misused when
- Comparing periods with different definitions of MRR movements.
- Using quick ratio alone without checking margin and payback.
Operator takeaway
- Use it to assess whether growth is healthy vs leaky.
- Track by segment; blended ratios can hide churn pockets.
- Keep SaaS Quick Ratio consistent by cohort, segment, and period before you use it as a decision signal in planning or reporting.
- Interpret the metric alongside retention, margin, or payback so one ratio does not hide the real operating trade-off.
Next decision
- Quantify the impact with SaaS Quick Ratio Calculator if you need to turn the definition into an operating assumption.
- Read SaaS Quick Ratio: definition, formula, and how to use it if the decision depends on interpretation, policy, or trade-offs beyond the raw formula.
Where to use this on MetricKit
Calculators
- SaaS Quick Ratio Calculator: Calculate the SaaS quick ratio: (new + expansion) / (contraction + churn).
- MRR Waterfall Calculator: Build an MRR waterfall: starting MRR + new + expansion - contraction - churn = ending MRR.
Guides
- SaaS Quick Ratio: definition, formula, and how to use it: SaaS quick ratio explained: (new + expansion) / (contraction + churn). Learn how to compute it and what it tells you about growth quality.
- MRR waterfall: reconcile starting MRR to ending MRR: A practical MRR waterfall guide: starting MRR + new + expansion - contraction - churn = ending MRR, with an example and pitfalls.
- Retention & churn hub: cohorts, GRR/NRR, and retention curves: A practical hub for retention measurement: churn rate, GRR/NRR, cohort retention curves, and how to set retention targets without getting misled by noise.
- MRR: what it means (and how to track it cleanly): A guide to MRR: definitions, what to include/exclude, and how to decompose MRR changes over time.