SaaS Quick Ratio Calculator Formula
Understand the math behind the saas quick ratio calculator. Each variable explained with a worked example.
Formulas Used
SaaS Quick Ratio
quick_ratio = (churned_mrr + contraction_mrr) > 0 ? (new_mrr + expansion_mrr) / (churned_mrr + contraction_mrr) : 0Net MRR Change
net_mrr_change = (new_mrr + expansion_mrr) - (churned_mrr + contraction_mrr)Variables
| Variable | Description | Default |
|---|---|---|
new_mrr | New MRR (new customers)(USD) | 25000 |
expansion_mrr | Expansion MRR (upgrades)(USD) | 10000 |
churned_mrr | Churned MRR (cancellations)(USD) | 8000 |
contraction_mrr | Contraction MRR (downgrades)(USD) | 4000 |
How It Works
How to Calculate the SaaS Quick Ratio
Formula
SaaS Quick Ratio = (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)
Not to be confused with the accounting quick ratio, the SaaS Quick Ratio (coined by Mamoon Hamid) measures the quality of your revenue growth. A ratio of 4.0 means you add $4 for every $1 lost. Higher ratios indicate sustainable, high-quality growth because you are not just adding revenue to replace what leaks out.
Worked Example
A company adds $25,000 in new MRR and $10,000 in expansion, while losing $8,000 to churn and $4,000 to contraction.
- 01MRR Gains = $25,000 + $10,000 = $35,000
- 02MRR Losses = $8,000 + $4,000 = $12,000
- 03SaaS Quick Ratio = $35,000 / $12,000 = 2.92
- 04Net MRR Change = $35,000 - $12,000 = +$23,000
Frequently Asked Questions
What is a good SaaS Quick Ratio?
A ratio above 4.0 is considered excellent and signals efficient, durable growth. Between 2.0 and 4.0 is acceptable. Below 2.0 suggests too much revenue is leaking through churn and contraction relative to what you add.
How does the SaaS Quick Ratio help with planning?
It reveals whether growth is sustainable. A company growing 10% monthly with a quick ratio of 1.5 is in a precarious position: if new customer growth slows, net growth could quickly turn negative.
Ready to run the numbers?
Open SaaS Quick Ratio Calculator