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Revenue metrics

SaaS quick ratio

New plus expansion MRR divided by contraction plus churned MRR. How much growth survives the leak.

The SaaS quick ratio measures growth against loss:

Quick ratio = (new + expansion) รท (contraction + churn)

A ratio of 4 means you add four pounds of recurring revenue for every one you lose. Above 4 is generally considered efficient growth; around 1 means you are running to stand still.

It is a useful single number precisely because it refuses to let a large new-business month cover for a large churn month. Two businesses with identical net new MRR can have quick ratios of 5 and 1.2, and they are not equally healthy.

Related terms

  • Net new MRR The month-over-month change in MRR, built from new, expansion, contraction and churned MRR. The single number that says whether the business grew.
  • Expansion MRR Additional recurring revenue from existing customers: upgrades, added seats, add-ons and contracted usage growth, excluding anything from new customers.
  • Churned MRR Recurring revenue lost from customers who cancelled outright in the period, whether they chose to leave or their payments stopped working.