SaaS Quick Ratio

The SaaS Quick Ratio compares the recurring revenue you gain in a period with the recurring revenue you lose. It tells you how many dollars of MRR you add for each dollar you lose. A high ratio means efficient growth. A low ratio means new sales are mostly replacing lost revenue.

How it's calculated

Divide new plus expansion MRR by churned plus contraction MRR.

Say that in one month you add $8,000 of new MRR and $4,000 of expansion. You lose $2,000 to churn and $1,000 to contraction. The ratio is $12,000 ÷ $3,000, which is 4.0.

How to read it

• 4 or higher. The common benchmark for efficient growth, about $4 gained for every $1 lost.
• Between 1 and 4. You are growing, but losses eat a large share of new revenue.
• Below 1. You lose more than you gain, so recurring revenue is shrinking.

Mamoon Hamid, who popularized the ratio, set 4 as the benchmark.

Why it matters

The ratio sums up your MRR movements in one number. Two companies can add the same net new MRR while one has low churn and the other hides heavy churn behind strong sales. The ratio shows the difference. Pair it with net revenue retention, which looks only at your existing customers.