Definition
SaaS quick ratio is a growth quality metric that compares positive MRR movements (new + expansion) to negative movements (contraction + churn) in a period.
Formula
Quick ratio = (new MRR + expansion MRR) / (contraction MRR + churned MRR)
Example interpretation
If new + expansion is $200k and contraction + churn is $100k, the quick ratio is 2.0. That means growth is twice the losses for the period.
How to calculate it
- Use the same time window for all movements (monthly or quarterly).
- Use MRR movements (not billings/cash) so the metric is consistent.
- Compute the quick ratio and track it over time by segment.
How to interpret quick ratio
- Higher quick ratio means positive growth outweighs losses.
- A falling quick ratio often signals increasing churn or contraction.
- Segment-level quick ratio is more actionable than a blended number.
What is a good quick ratio-
- There is no universal target, but higher is better for growth quality.
- Early-stage teams often tolerate lower ratios while building product-market fit.
- At scale, quick ratio should improve if churn is controlled and expansion is real.
How to improve quick ratio
- Reduce churn and contraction with onboarding and customer success work.
- Increase expansion by improving core value and packaging upsell paths.
- Fix lead quality issues that create weak cohorts with high churn.
Use with other metrics
- Pair quick ratio with net burn or burn multiple for efficiency context.
- Check NRR or GRR to separate expansion from churn dynamics.
- Track pipeline health so growth does not rely on unsustainable sales push.
Quick ratio troubleshooting
- If quick ratio falls, check churn and contraction before scaling spend.
- If quick ratio spikes, validate that new MRR is not one-time or promo-driven.
- Segment by plan to see where expansion or churn is concentrated.
Quick ratio and expansion
- Expansion-heavy growth can mask churn; monitor GRR and logo retention.
- Use expansion rate by cohort to confirm durability.
- Avoid relying on one-time price increases to inflate expansion.
Common mistakes
- Treating quick ratio as a standalone goal without payback and cash context.
- Using different definitions for movements across months.
- Comparing across segments without normalizing contract terms.