What is Quick Ratio?
Definition
A SaaS metric measuring growth efficiency by comparing new and expansion revenue to lost revenue from churn and contraction.
Understanding Quick Ratio
The SaaS Quick Ratio is calculated as (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR). A quick ratio above 4 indicates efficient growth — the business adds revenue much faster than it loses it. A ratio below 1 means the business is shrinking.
This metric helps evaluate the long-term viability of subscription services you rely on. Companies with strong quick ratios are more likely to invest in product improvements and less likely to resort to aggressive price increases. Bessemer Venture Partners recommends a quick ratio of 4x or higher for healthy growth.
Related Terms
MRR
Monthly Recurring Revenue — the predictable total revenue a subscription business expects to earn each month from all active subscriptions.
Churn Rate
The percentage of subscribers who cancel their subscription during a given time period, typically measured monthly or annually.
Expansion Revenue
Additional revenue generated from existing subscribers through upgrades, add-ons, or increased usage beyond their initial plan.
Net Revenue Retention
A metric measuring the percentage of recurring revenue retained from existing customers, including expansions, contractions, and churn.