How to calculate the SaaS quick ratio
The SaaS quick ratio (distinct from the accounting quick ratio) captures growth quality in one number by pitting your revenue gains against your revenue losses. It reveals whether growth is efficient or a leaky bucket you keep refilling.
A company can post strong net new MRR while a high quick-ratio denominator warns that churn is quietly large. The ratio surfaces that hidden churn before it catches up with you.
- (New+Exp)/(Churn+Contraction) The formula
- 4+ Healthy, efficient growth
- Under 1 Shrinking
Short answer
The SaaS quick ratio measures growth efficiency by comparing gains to losses. Divide new MRR plus expansion MRR by churned MRR plus contraction MRR. A quick ratio of 4 means you add four dollars of recurring revenue for every dollar you lose. Above 4 is healthy; below 1 means you are shrinking.
Step by step
Sum your MRR gains
Add new MRR (from new customers) and expansion MRR (upsell from existing customers) for the period.
Sum your MRR losses
Add churned MRR (from lost customers) and contraction MRR (from downgrades) for the same period.
Divide gains by losses
The quick ratio equals gains divided by losses. A result of 4 means four dollars gained per dollar lost.
Interpret the result
Above 4 is healthy and efficient. Between 1 and 4 means growth is real but leaky. Below 1 means losses exceed gains and the base is shrinking.
Worked example
In the quarter you added 200,000 dollars of new MRR and 80,000 dollars of expansion, for 280,000 dollars of gains. You lost 50,000 dollars to churn and 20,000 dollars to contraction, for 70,000 dollars of losses.
Quick ratio = 280,000 / 70,000 = 4.0, right at the healthy line. Net new MRR is 210,000 dollars, but the ratio reveals you are losing 70,000 dollars a quarter, worth watching even as you grow.
How Ardovo handles it
Ardovo computes the quick ratio from its live MRR components, so you see growth efficiency, not just net change. Rook flags when the denominator (churn plus contraction) is climbing, catching a leaky bucket before net new MRR turns negative.
Frequently asked questions
What is the SaaS quick ratio formula?
New MRR plus expansion MRR, divided by churned MRR plus contraction MRR. It compares total recurring-revenue gains to losses in a period, revealing how efficient your growth really is.
What is a good SaaS quick ratio?
Around 4 or higher is healthy, meaning you add four dollars of recurring revenue for every dollar lost. Between 1 and 4 is growing but leaky; below 1 means your revenue base is shrinking.
Is the SaaS quick ratio the same as the accounting quick ratio?
No. The accounting quick ratio measures liquidity (liquid assets over liabilities). The SaaS quick ratio measures growth efficiency by comparing recurring-revenue gains to losses. They share a name but nothing else.
Why look at the quick ratio if I already track net new MRR?
Because net new MRR can look healthy while churn is quietly large. The quick ratio exposes the size of your losses relative to gains, catching a leaky bucket that a single net figure hides.