How Quick Ratio works
The formula:
Quick Ratio Formula
Four numbers, split into what you're adding and what you're losing:
- New MRR is revenue from brand-new customers who signed up this period.
- Expansion MRR is extra revenue from existing customers who upgraded, added seats, or bought more.
- Contraction MRR is revenue lost to existing customers who downgraded or scaled back.
- Churned MRR is revenue lost to customers who cancelled entirely.
The numerator captures growth. The denominator captures losses. Divide one by the other and you get a single number that tells you how many dollars of growth you're generating for every dollar you lose.
Why Quick Ratio matters more than your growth rate
A company can post 20% year-over-year growth and still be in real trouble — if most of that growth is just backfilling what walked out the door. Quick Ratio makes that visible in one number. Pair it with churn rate and net revenue retention to understand why the ratio landed where it did, not just what it is.
New and expansion MRR make up the top half of the formula. Monthly Recurring Revenue is the base everything else gets measured against, so it's worth having that definition locked down before tracking Quick Ratio month over month.
Two examples, same revenue, different story
Example 1: Efficient growth
A mid-market SaaS company in a strong quarter:
- New MRR: $80,000
- Expansion MRR: $30,000
- Contraction MRR: $8,000
- Churned MRR: $12,000
Quick Ratio = (80,000 + 30,000) / (8,000 + 12,000) = 5.5×
For every dollar lost, this company added $5.50. Growth is doing real work here, not just treading water.
Example 2: Growth that's mostly backfill
Same company, different quarter:
- New MRR: $40,000
- Expansion MRR: $10,000
- Contraction MRR: $15,000
- Churned MRR: $20,000
Quick Ratio = (40,000 + 10,000) / (15,000 + 20,000) = 1.4×
The top-line numbers might still look like growth. But $50K in new revenue is barely outpacing $35K in losses. Most of the sales effort is going to stand still.
What counts as a good Quick Ratio
Rough ranges that hold up across most benchmarking frameworks:
- 4× and above: healthy, efficient growth. The range most investors and operators consider genuinely strong.
- 2× to 4×: acceptable, but worth watching. You're growing, but working harder for it than you'd like.
- Below 2×: churn is eating your growth. New bookings are mostly backfilling a leaky base instead of driving real expansion.
Context matters. Early-stage companies with high new logo growth and low churn naturally post higher ratios. Mature companies with a large install base may sit lower because the denominator grows with the customer count, even when retention is healthy.
A low ratio is a symptom, not the diagnosis
Quick Ratio tells you revenue is leaking. It won't tell you which accounts are causing it — that's a job for account-level health scoring, not a top-line formula. See how a customer health score surfaces which accounts actually move the number.
The usual culprits when the ratio drops:
- A few large churns. Two or three big accounts leaving can tank the ratio for a full quarter. Segment the denominator by account to see if it's concentrated or broad.
- Quiet contraction across many accounts. Lots of small downgrades add up. This is usually an adoption or onboarding gap, not a single-account problem.
- New logo growth slowing. If the numerator shrinks while the denominator stays flat, the ratio drops even though retention hasn't changed.
Quick Ratio vs. NRR
Both measure the health of your revenue engine, but from different angles. NRR looks at existing customers only and expresses the result as a percentage of starting revenue. Quick Ratio includes new customer revenue in the numerator and expresses the result as a multiple.
NRR answers: “Is my existing base growing or shrinking?” Quick Ratio answers: “How efficiently is my total revenue machine working?” Run both. They catch different problems. You can calculate your NRR here.
Frequently asked questions
What is the SaaS Quick Ratio?
Quick Ratio measures how efficiently a SaaS company grows by comparing revenue added (new + expansion MRR) to revenue lost (contraction + churned MRR). A higher ratio means growth is outpacing losses.
What is a good Quick Ratio for SaaS?
A Quick Ratio of 4× or above is generally considered healthy and efficient. Between 2× and 4× is acceptable but worth watching. Below 2× means churn is consuming most of your new revenue.
How is Quick Ratio different from NRR?
NRR measures net retention as a percentage of starting revenue from existing customers only. Quick Ratio includes new customer revenue in the numerator and expresses the result as a multiple, not a percentage. They answer related but different questions.
Should I track Quick Ratio monthly or quarterly?
Monthly gives you an earlier signal, but a single month can be noisy. Most teams track monthly and report quarterly or as a rolling average to smooth out lumpy renewals or seasonal patterns.