Quick Ratio (SaaS)
Revenue growth efficiency: how much you gain versus lose. The health check for scaling.
Quick Ratio = (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)
What it measures
The ratio of revenue added to revenue lost in a period. A Quick Ratio of 4 means you add $4 for every $1 lost. This single number captures growth efficiency better than growth rate alone, which can mask underlying churn problems.
What to watch
- Above 4: Excellent. This is the VC benchmark for healthy early-stage companies. You're adding revenue much faster than losing it.
- 2-4: Healthy growth. Sustainable for most stages, though later-stage companies should trend higher.
- Below 2: Barely sustainable. You're working hard just to replace lost revenue. Below 1 means you're shrinking.
In practice
A startup celebrated 40% YoY growth but had a Quick Ratio of 1.8. For every $1.80 they added, $1 churned out. When they reduced churn by 20%, Quick Ratio jumped to 2.9 with the same sales effort. They realized churn reduction was higher-leverage than acquisition.
Related: NRR — related efficiency measure.; MRR — the revenue being measured.; Churn Rate — the denominator in Quick Ratio.