SaaS Quick Ratio
A growth efficiency metric that compares revenue gains (new + expansion MRR) against revenue losses (churned + contraction MRR).
The SaaS quick ratio tells you how efficiently your business grows. It was coined by Mamoon Hamid at Social Capital and it captures something simple: for every dollar of MRR you lose, how many dollars are you adding? A high ratio means growth is outpacing loss. A low one means you're filling a leaky bucket.
SaaS quick ratio formula
Quick Ratio = (New MRR + Expansion MRR) / (Contraction MRR + Churned MRR)
Say you added $12,000 in new MRR and $4,000 in expansion, while losing $2,000 to downgrades and $2,000 to churn. Your quick ratio is ($12,000 + $4,000) / ($2,000 + $2,000) = 4.0. For every dollar lost, you gained four.
Benchmarks
Below 1.0 means you're shrinking. You're losing more MRR than you're gaining, regardless of how many new customers you sign. Between 1 and 4, you're growing but inefficiently. The losses are eating into your gains. Above 4 is the target for a healthy SaaS business. Bessemer Venture Partners has used 4 as the benchmark for cloud companies showing efficient growth.
Put simply, the quick ratio separates businesses that are genuinely scaling from those that are running to stand still.
Why the denominator matters
Most growth conversations focus on the numerator: sell more, upsell more, expand more. But shrinking the denominator, the revenue you lose each month, has an outsized effect on the ratio.
Consider two businesses both adding $16,000 in monthly MRR. Business A loses $4,000 (ratio: 4.0). Business B loses $8,000 (ratio: 2.0). Same growth effort, very different efficiency. Reducing revenue churn by even a small amount moves the ratio meaningfully.
Involuntary churn from failed payments sits in that denominator. Recovering it through dunning directly shrinks churned MRR without needing to close a single extra deal. Across ChurnWard customers, we've seen quick ratios improve by 0.5 to 1.0 points just from better payment recovery.
Quick ratio vs magic number
Both measure efficiency, but from different angles. The SaaS magic number focuses specifically on sales and marketing efficiency: how well your go-to-market spend converts into net new ARR. The quick ratio is broader. It looks at all MRR movements regardless of where they came from. Use the magic number to evaluate your sales engine. Use the quick ratio to evaluate your overall business health.
Reduce your churn, protect your revenue
ChurnWard recovers failed payments automatically for $29/month. No percentage fees, no complexity.